Luxury Marketers Move Online but Most Lack Digital Cunning

NYU Stern Study Shows Recession Pushing Brands to Belatedly Innovate Web Efforts 'Out of Necessity'

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NEW YORK ( -- During the flush years, luxury brands seemingly cemented their exclusive status by shunning one of the ultimate mass mediums, the internet. According to a new study, only 33% of luxury brands were selling online a year ago, but the recession has had a profound effect, as 66% of luxury brands are now peddling their wares on the web.

Ralph Lauren has bested many of its luxury peers in the mobile space with its iPhone app.
Ralph Lauren has bested many of its luxury peers in the mobile space with its iPhone app.
But, despite the increase, most luxury brands lack digital savvy, said Scott Galloway, an associate professor of marketing at NYU Stern School of Business who looked at 109 luxury brands across 11 categories, including fashion, electronics, jewelry, hotels and automobiles.

"It was fine when revenues were growing 11% a year. And then everything changed. They've woken up and said, 'Last holiday season sales were down 34% but traffic to our website was up 61%.' Brands are innovating out of necessity."

In his study, Mr. Galloway awarded brands designations of "Genius," "Gifted," "Average," "Challenged" and "Feeble." He found that the high-end automobile and electronics categories tended to have more digital savvy, while the cruise and tours segment, along with jewelry, were the least savvy.

Luxury marketers' fear of losing control of their brands, when coupled with a lack of digital and social-media skills, has contributed to the dismal state of the category online, Mr. Galloway said. But he expects that will change dramatically over the next 24 months, as brands realize they can't ignore technology. The days of a tightly controlled brand, with beautiful merchandise and flagship stores at tony addresses, along with ads shot by high-profile names in Vogue and Vanity Fair, are over, he said.

Luxe exemplars
But some brands have been rolling with the times, and it's probably no surprise that Apple and Sony have been at the forefront with robust digital presences that utilize search and incorporate video and user-generated content. In the auto category, more than half of the brands in the study are reaching consumers via mobile devices. BMW sends text messages to remind owners to purchase winter tires, while Ferrari's mobile game lets users customize and race vehicles.

There are other bright spots. Ralph Lauren has been aggressive in the mobile space, with the launch of an iPhone app. And Estee Lauder has a makeover widget that allows users to upload a photo and virtually test products on their faces.

When it comes to Twitter and Facebook, luxury brands are making a showing but have not had nearly the same impact as other marketers. The Four Seasons and Fairmont hotels have separate Twitter accounts for each property and post updates with special events and promotions. And Trump Hotels, tweeting via @ivankatrump, boasts the largest number of followers, just shy of 260,000. After Apple, Lamborghini has the highest Facebook fan count, with about 1 million fans.

Still, less than half of the brands included in the study purchase search terms.

Mr. Galloway suggests that the excuse that luxury customers are not online is dated, pointing out that 40- to 55-year-old women, a sweet spot for these brands, is the fastest-growing segment on Facebook. Likewise, Generation Y, a growing group of luxury consumers, is poised to outnumber baby boomers by 2010.

"Luxury has become very complacent, as they've had the curse of being monstrously successful over the past 20 years. There hasn't been a great deal of urgency around innovation," he said. "All of a sudden the model has become very broken."

Breaking down the digital IQs

Automobiles: BMW
Beauty & Skin Care: Clinique
Credit Cards: American Express
Cruises & Tours: Orient Express Hotels
Electronics: Apple
Fashion: Louis Vuitton
Hotels: W Hotels
Home & Design: Viking
Jewelry: Tiffany
Watches: Tag Heuer
Wines & Champagnes: Veuve Clicquot

Automobiles: Audi, BMW, Porsche
Electronics: Apple, Sony
Fashion: Louis Vuitton, Ralph Lauren
Watches:Tag Heuer

Beauty & SkinCare: Stila
Credit Cards: Coutts & Co.
Cruises & Tours: Windstar Cruises, Abercrombie & Kent, Travcoa
Fashion: Bottega Veneta
Hotels: Waldorf Astoria, Trump
Home & Design: La Cornue
Jewelry: Buccellati, Faberge, Graff
Watches: Franck Muller, Bulova
Wines & Champagnes: Korbel

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