"On Web 3, brands are testing the potential and everyone is looking for their model"

28 September 2022

The NFT allows the creation of  products and collections with unique pieces online or digital doubles. Finally, by offering virtual outfits and accessories in games, the application creates a connection with players who will be the luxury customers of tomorrow. @FNW presents the report “Luxe et technologie: les débuts d'une nouvelle ère” (Bain & Company e Comité Colbert) which estimates that this segment  will represent 5% to 10% of the luxury turnover in 2030. [Luxe: un important potentiel d'accélération dans les technologies – FNW]

 

 

The subject currently seems unavoidable for luxury houses. Between Balenciaga, Tiffany, Ferragamo, Tag Heuer, Dom Pérignon... all luxury sectors are succumbing to the temptation of NFTs (non-fungible tokens) and the unique digital creations associated with them. According to the "Luxury and technology: the beginning of a new era" report, conducted by Bain & Company, which interviewed the luxury houses members of the Comité Colbert (a group of players from 14 luxury branches operating in France), half of the industry is testing or will test by 2025 NFTs and the metaverse.

"On Web 3, brands are testing the potential and everyone is looking for their model", says Charlotte Morizot, senior director of the distribution and luxury pole of Bain & Company. "We are quite convinced of the relevance of these technologies because they provide relevant application cases for the sector. Metaverse allows the creation of virtual stores that are much more in line with the brand's codes than merchant sites, and the organization of events. The NFT allows the creation of  products and collections with unique pieces online or digital doubles. Finally, by offering virtual outfits and accessories in games, the application creates a connection with players who will be the luxury customers of tomorrow. It seems relevant to us to consider that this will represent 5% to 10% of the luxury turnover in 2030."

But if luxury brands are currently showing great interest in these two themes, as well as Blockchain, marked by having missed its chance at the internet in the 2000s, the study reveals that the technology remains a complex subject to access for most houses.

In terms of methodology, Bain & Company and the Comité Colbert asked the teams of the luxury houses about their degree of maturity on a list of 16 technologies: from the most mature such as 3D imaging, to the most advanced such as haptic gloves, through RFID, optical inspection or augmented reality.
The results show that luxury brands have three types of strategic objectives when they invest in technologies. The most important being customer engagement, via augmented experience, seamless experience, in other words consistency in all touch points between the brand and the customer, and hyper-personalization. For all brands, these three points are the main goals when it comes to using technology. 

"For luxury players, what is clearly leading the way is to be able to offer a seamless customer experience where you know your customer perfectly. That's the main mission of technology," says Joëlle de Montgolfier, executive vice president of Bain's consumer, retail and luxury divisions. "The other objective is operational excellence to provide precision and anticipation. This has become much more central in the last two years with the problems in the production and logistics chains. Companies want to know where products are, where they are potentially stuck or out of stock, and where to deploy them. Ultimately, this also avoids the loss of quality of the customer experience."

Another objective associated with technology investments is sustainability. But clearly, this is the poor relation. Although luxury groups communicate quite widely their efforts towards sustainability, according to the feedback collected by Bain, "new technologies are still not perceived as a contributor for eco-responsibility commitment" and are not a driving force behind a company's adherence to a new technology. Limiting overproduction or the transportation of materials and products, and increasing quality control, appear to be options that benefit operational excellence, the optimization of natural resources and, ultimately, customer satisfaction.

But how involved is luxury in technology?

In actual fact, no technology has been adopted by the industry itself. Only 50% of companies use different technologies. The most established is 3D imaging, adopted by 45% of the sector, followed by 3D printing (35%) and RFID technologies (31%).

"We've seen low adoption rates. Even with a technology like RFID, which is a standard for players like Nespresso or Decathlon to streamline the customer experience, we expected it to be more established. It was a surprise," admits Joëlle de Montgolfier. "On the other hand, on more recent topics such as NFT, metaverse and blockchain, everyone is looking at the luxury sector, because it is certainly the one that will find relevance in these technologies."

These, as we have seen, should allow brands in the future to secure the sale and resale of their products (Blockchain, NFT), but also to connect with younger generations of consumers (Metaverse). But overall, when it comes to robotization, product excellence and especially product innovation, the sector is clearly not technology-oriented.

"Mentalities are evolving, but there is a perception of limited relevance of use cases of technologies applied to luxury with a real cultural heritage that opposes the know-how of the hand to the use of machines", underlines de Montgolfier. "The second problematic point is the lack of skills within companies, which means that there is a lack of understanding of the subjects. There is a need for digital engineering profiles. For luxury, we will have to work on this attractiveness for people who do not imagine luxury as their employer. On the other hand, cultural barriers are being removed, and the match between houses and technologies is no longer a problem. And the cost of technology is not perceived as a barrier either. Finally, the quality of the technologies is no longer identified as a barrier to a luxury offer. For example, augmented reality technologies are now at a level of definition that reaches luxury standards."

Nevertheless, on average, out of the 16 technologies identified by the study, the brands surveyed have adopted 2.3. The study highlights the difference between groups that can test a solution and then deploy it in different houses compared to independent houses that must focus their investments. For example, houses in groups have tested more than twice as many technologies on average and have engaged in testing with the latest technologies. The industry as a whole seems aware of the growing importance of integrating new technologies.

"Even though we are a small house compared to others in the luxury industry, we are aware of the potential of new technologies," explains Celine Sanchez, brand director of Saint-Louis, quoted in the report. "We want to accelerate the adoption of these future technologies."

But how do you take it to the next level?

"There are three things to review," says de Montgolfier. "First, there is organizational logic that needs to be made more flexible. In luxury, the organization is sometimes very controlled, with a conservative approach. This can block ideas and information. Organizations need to be decompartmentalized. We need to move to the test and learning process and deploy good ideas. Then, talent and human resources are key. We have to find a way to tell them that it is more interesting to work in luxury than in other sectors identified as more technological. Finally, it would be possible to consider a sector-wide approach. This has been done in Blockchain, why not on other themes? The sector can create an ecosystem of partners, build a consortium with talent management for incubation."

"Themes that are shared and debated within the Comité de Colbert," assures its president Bénédicte Epinay. It remains to be seen what the next technological theme will be that will succeed in bringing together major players, to enable the sector to collectively turn a corner.

 


Paese: France
Tecnologie| lusso| web 3| NFT (non-fungible token)| metaverso| marchi| Marchi| Bain & Company| Comité Colbert

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