Fashion: Online is the New Black

The Financial Times summarised an Altagamma and McKinsey study on the digital luxury experience in their article Internet channel: Digital use may have boosted sales by surprising amounts. The Altagamma and McKinsey study was a comprehensive scan looking at over 300 luxury brands, including those in the stables of LVMH, PPR and Richemont; as well as brands online and offline presences, their investments in emerging markets and strategic directions.

The Financial Times article highlights the emerging realisation of the importance of effective online/digital presences for luxury brands, something which has historically been poorly constructed and incredibly under-invested in and under-resourced:

…whereas luxury goods groups have ploughed hundreds of millions of euros into expanding into China, Latin America, Russia and other emerging markets of high-spending consumers, spending on the digital luxury shopper has been piecemeal, and it often dislocated from the rest of the marketing budget.

[Financial Times Internet channel: Digital use may have boosted sales by surprising amounts My bolding]

Two key takeaways from the Altagamma and McKinsey study were:

  1. The importance of online sales channels for luxury brands
  2. The influence on digital marketing on online and offline purchases, with:
    1. 3.2% of pure online sales are influenced by digital marketing
    2. 10-11% of offline sales directly generated by online experience
    3. 20% of offline sales influenced by online experience

However, one area the report does highlight is that the social media channels of luxury brands don’t have direct influence on sales.

Although the Facebook Likebase and Twitter Followerbase of these brands may be sizeable, according to the report this does not directly influence or translate into sales for the luxury groups.
[NB – Twitter and Facebook were the only channels mentioned in the article]

For me this observation raises several significant questions:

  1. Is this because the social channels of luxury brands are undercapitalised?
  2. Is this because the funnel between social channels and purchase channels is either non-existent, unclear or undercapitalised?
  3. Does this come back to the lack of usability that appears to be inherent and endemic for the online presences of luxury brands?
  4. Is this the divide between aspirational and purchase oriented consumers of luxury brands?
  5. Where is the consideration of the purchase eco-system that has been evolved around the sale, resale and counterfeiting of luxury goods?

Today’s post is a very pragmatic post, so I will only consider questions 1, 2 and 3 specifically in relation to Facebook. I will consider the latter two questions  separately over the coming week, as they are more abstract ideas and less able to be easily evidenced and quantified.

What we already know about Facebook and Purchases

If we want a model for the value Facebook provides to fashion purchases, we need to look no further than the Return on Investment that fashion retailers like ASOS, H&M, La Redoute, Topshop and Zara are seeing from their Facebook activities in terms of purchases.

In July ComScore and Facebook released a white paper The Power of Like Europe: How Social Marketing Works for Retail Brands looking at how European retailers are using Facebook to increase their profile and brand awareness and drive purchases.

Circle of influence

The whitepaper found that brand posts were amplified when Fans engaged with the message, as in doing so they are sharing the brand’s content into their own streams for the Fan’s own Facebook Friendbase to  see:

Branded marketing messages delivered to Fans can be virally amplified to extend brand reach to Friends of Fans when Fans engage with the message (i.e. “like”, comment, share, check-in, etc.). European retail brands such as ASOS, H&M and Zara have the ability to disseminate marketing messages to up to 44 Friends of Fans for every Fan the brand has on Facebook.

[ComScore & Facebook: The Power of Like Europe: How Social Marketing Works for Retail Brands My bolding]

Studies indicate the average user’s Facebook Friendbase is 190.

If Zara, H&M,  ASOS and other European fashion retailers are able to disseminate their marketing messages to ~44 friends for each member of their Likebase Friendbase simply by sharing engaging content on Facebook, this means they are potentially reaching 23% of each of their fan’s Friendbase (based on the average Facebook user’s friends list being 190).

When you consider the size of the current Likebase for each of these brands, that is a considerable amount of people.

Stylophane data for July 2012 indicates the Likebase of each of these brands is in the million(s):

Zara H&M Topshop ASOS
14,061,290 11,673,008 2,446,254 1,800,848

If each of those fans has 190 friends (based on the average user’s facebook friendbase, on brand messages from these retailers are reaching a significant amount of people.

I have broken this circle of influence down graphically for the two brands who ship to Australia: Topshop and ASOS.

I scaled ASOS’s diagram in line with the Topshop stats so you can see a physical comparison of the different sizes of their Likebase (Fans) and Friends of Fans:

Anecdotally, I have observed that the calculated amount of Friends of Fans, based on the page’s likebase and an average user’s friendbase of 190 is about 60% of the actual figure for Friends of Fans, however I don’t deal with brands as pervasive as ASOS and Topshop.

It is possible that the pool of “unexposed” friend of fan base for ASOS and Topshop is smaller that then average friend’s list, however…if they follow true to my small observations then the stats for Topshop and ASOS’s Friend of Fanbase and the 44 friends per user (or 23% proportion) of that group who they influence are ~60% of what the figures are IRL…

Best customer base

The ComScore & Facebook: The Power of Like Europe: How Social Marketing Works for Retail Brands whitepaper also found that Fans (The Brand’s Likebase) and Friends of Fans represented the brand’s best customers:

Fans of retail brands and across all categories often represent a brand’s best customers. For the retailers studied, both Fans and Friends of Fans were disproportionately more likely to visit the brand websites – where purchases occur – compared to the average internet user.

For example, ASOS fans were 3.6x as likely to visit the ASOS website as non-fans, which may be expected given their stated affinity for the brand. Friends of Fans were 2.7x as likely to visit the site as well.

[ComScore & Facebook: The Power of Like Europe: How Social Marketing Works for Retail Brands My bolding]

Back to Facebook for Luxury Brands and my questions

Now let us consider the Altagamma and McKinsey report and Facebook pages for a group of luxury brands in the light of what we know about the effectiveness of Facebook for European retailers thanks to ComScore and Facebook.

I’ve used a mix of PPR, LVMH, Richemont and Luxury Brands of my own choice in this table. Here are their Likebases and, based on that, their estimated Friends of Fanbase (Stylophane data for July 2012):

Brand Name Likes Estimated Friend of Fanbase
Dior 8962914 My choice 1702953660
Gucci 8758498 PPR 1664114620
Louis Vuitton 8584841 LVMH 1631119790
Chanel 6922313 My choice 1315239470
Dolce Gabbana 5656746 My choice 1074781740
Armani 3312956 My choice 629461640
Prada 1834430 My choice 348541700
Yves Saint Laurent 1092353 PPR 207547070
Alexander McQueen 753305 PPR 143127950
Marc Jacobs Intl 742233 LVMH 141024270
Hermes 680283 My choice 129253770
Chloe 641905 Richemont 121961950
Balenciaga 369413 PPR 70188470
Givenchy 308909 LVMH 58692710
Lanvin 241592 My choice 45902480
Bottega Veneta 234329 PPR 44522510
Stella McCartney 200808 PPR 38153520
Jean Paul Gaultier 198838 My choice 37779220
Donna Karan New York 147048 LVMH 27939120
Kenzo 87867 LVMH 16694730
Sergio Rossi 67178 PPR 12763820
Emilio Pucci 57700 LVMH 10963000

Although the the largest Likebase of this sample group is  just above half the size of Zara’s, there is still a significant population – 8 million is nothing to sneeze at for Dior et al. And Prada’s likebase is a similar size to ASOS’s.

Obviously: It’s not the size that counts, it’s what you do with it.

So back to the original factors I was considering as reasons why social media not an effective channel to drive online/offline purchases for luxury brands:

  1. Are the social channels of luxury brands undercapitalised?
  2. Is the funnel between social channels and purchase channels either non-existent, unclear or undercapitalised?
  3. Does this come back to the lack of usability that appears to be inherent and endemic for the online presences of luxury brands?

1) Is this under-capitalisation of social channels?

I have strong reservations about surmising the capacity of digital and social channels to influence revenue, when those channels are treated as being of secondary or tertiary importance by the brands owning them and under-resourced, under-capitalised and under-optimised.

The Altagamma and McKinsey report did find that digital channels were being treated as the poor cousins by luxury brands in terms of strategic investment:

…whereas luxury goods groups have ploughed hundreds of millions of euros into expanding into China, Latin America, Russia and other emerging markets of high-spending consumers, spending on the digital luxury shopper has been piecemeal, and it often dislocated from the rest of the marketing budget.

Conventional wisdom for Facebook posting rates has been:

  • no less than 2 posts per week but no more than 5 posts per week
  • no more than two posts per day

Newer recommendations by socialfresh, which consider the behaviour patterns for Facebook  users and the Likebase for brand pages, suggest a more intense posting schedule:

  •  Multiple posts each day
  • A distribution interval of 3-4 hours over 18 hours of each day
  • If a page serves fans in different timezones, posts will be required ove 24 hour of the day (you can use Facebook’s filtering tools to geographically target your posts to your Likebase in particular regions)

Considering both the conventional and new post logic, for each Facebook page owned by a luxury brand we should see a minimum/maximum posting rate each month ranging from:

  • Minimum: 8 posts per luxury brand page (2 posts per week, 4 weeks in a month)
  • Maximum: 168 posts per month  (24 hours, 4 hour interval between posts, 7 days a week, 4 weeks in a month)

Based on Stylophane data for July 2012, luxury brands averaged 16.54 posts per month with one brand not posting at all (Hermes) and with the highest post rate being 46 posts (Stella McCartney):

Brand Name Likes Posts Comments Post Likes BlueFuego Engagement Formula %
Dior 8962914 23 7110 426062 0.0483293715
Gucci 8758498 19 4934 269422 0.031324549
Louis Vuitton 8584841 30 12515 664394 0.0788493345
Chanel 6922313 11 5209 179774 0.0267227154
Dolce Gabbana 5656746 23 1879 109265 0.019648045
Armani 3312956 22 1560 83106 0.0255560291
Prada 1834430 6 1239 32481 0.0183817317
Yves Saint Laurent 1092353 4 612 11373 0.010971728
Alexander McQueen 753305 12 706 42269 0.0570486058
Marc Jacobs Intl 742233 26 907 62059 0.0848331993
Hermes 680283 0 0 0 0
Chloe 641905 5 131 14861 0.023355481
Balenciaga 369413 5 143 5893 0.0163394358
Givenchy 308909 13 528 21181 0.0702763597
Lanvin 241592 9 249 11953 0.0505066393
Bottega Veneta 234329 20 259 11669 0.0509027905
Stella McCartney 200808 46 1740 50654 0.2609158998
Jean Paul Gaultier 198838 11 505 13873 0.0723101218
Donna Karan New York 147048 12 138 4583 0.0321051629
Kenzo 87867 23 154 5414 0.0633685001
Sergio Rossi 67178 30 165 5089 0.0782101283
Emilio Pucci 57700 14 151 4971 0.0887694974

Is it a coincidence that the most active page (Stella McCartney) also had the highest engagement score (calculated according to BlueFuego’s formula using the Stylophane data (Comments and Likes only, no shares))? I think not.

Compare the activity of luxury brandson Facebook to the activities of selected fashion retailers, again using  Stylophane data for July 2012: The retailers averaged 60.07 posts in the month, with the smallest amount of posts being 3 (Zara) and the highest post rate of 101 (Topshop).

Here I used 4 retailers plucked from the ComScore whitepaper and a range of others who interest me:

Brand Name Likes Posts Comments Post Likes BlueFuego Engagement Formula %
Zara 14061290 3 357 7425 ComScore 0.0005534343
H and M 11673008 29 2998 151521 ComScore 0.0132372907
Topshop 2446254 101 6496 402987 ComScore 0.1673918571
Asos 1800848 70 1397 18954 ComScore 0.0113007872
Nordstrom 1562499 73 12631 265846 0.1782253941
Net A Porter 815460 87 2922 99359 0.1254273661
Modcloth 605068 53 3368 25522 0.0477466995
J Crew 453118 28 643 16421 0.0376590645
Gilt Groupe 439493 56 1030 11701 0.0289674693
Saks Fifth Avenue 348019 99 3959 86643 0.2603363609
Bloomingdales 201638 72 787 20938 0.1077425882
Bluefly 166233 85 1869 27390 0.1760119832
Bergdorf Goodman 161940 25 371 6758 0.0440224775

Topshop, Nordstrom, Bluefly and Saks all have high engagement scores (calculated according to BlueFuego’s formula using the Stylophane data) and they all made more than 70 posts in July. Again: coincidence? I think not.

2) Is this because the funnel between social channels and purchase channels is either non-existent, unclear or undercapitalised?

Following on from the second class status and poor content resourcing of social channels, we must also recognise that the capacity to purchase directly from the brand is low to non-existent in terms of luxury brands.

Given that most luxury brands still rely either on a offline retail store or concession and/or on a third-party (online or offline) to sell their goods, the brand’s social media channels are disconnected from their purchase channels compared to retailers like ASOS, Bluefly, Net-A-Porter, Modcloth and Topshop who have very strong, very usable online commerce functionality on their websites that profiles their whole range for shipping internationally (in some cases with free shipping).

In relying on offline or third-party purchases and/or limiting online offerings to particular regions, luxury brands are relying on their fans to maintain the energy of the call to action until they find a physical point of purchase…without respect for the fact that the effectiveness/retention rate of the call to action will degrade over time.

When there is functionality, the range of purchases may be limited:

  • Jean-Paul Gaultier’s online boutique only sells perfumes
  • Yves Saint Laurent and Prada only sell handbags, jewellery, footwear online.

A quick poll of luxury brand websites from Australia shows ability to purchase on the brand website as follows:

Brand Name Embedded Online Commerce
Dior My choice No
Gucci PPR Yes
Louis Vuitton LVMH No
Chanel My choice No
Dolce Gabbana My choice Yes
Armani My choice Yes
Prada My choice Yes (Accessories and Footwear)
Yves Saint Laurent PPR Yes (Accessories and Footwear)
Alexander McQueen PPR Yes
Marc Jacobs Intl LVMH Yes (US)
Hermes My choice Yes
Chloe Richemont No
Balenciaga PPR Yes
Givenchy LVMH No (Not from main site, Beauty and Fragrance from another site – Australian official e-boutique)
Lanvin My choice Yes
Bottega Veneta PPR Yes
Stella McCartney PPR Yes
Jean Paul Gaultier My choice Yes (Perfumes Only)
Donna Karan New York LVMH Yes
Kenzo LVMH Yes
Sergio Rossi PPR Yes (US)
Emilio Pucci LVMH Yes

Brands like ASOS and Topshop make it easy for their fans (and their fans friends) to purchase in the same environment (online) they receive the call to action. Retailers differentiate their offerings with an online presence that is assistive and facilitative of immediate purchases, which is an effective space to recruit prospects and sales.

Compared to luxury brands, some of the retailers I have selected are online only:

Brand Name
Zara ComScore Yes (Some Countries)
H&M ComScore Yes (Some Countries)
Topshop ComScore Yes
Asos ComScore Yes
Nordstrom Yes
Net A Porter Yes
Modcloth Yes
J Crew Yes
Gilt Groupe Yes
Saks Fifth Avenue Yes
Bloomingdales Yes
Bluefly Yes
Bergdorf Goodman Yes

3) Does this come back to the lack of usability that appears to be inherent and endemic for the online presences of luxury brands?

Even if there is a online commerce element for a given luxury brand’s site, Forrester Research’s benchmarking exercise, undertaken on on select luxury brand websites, has already indicated that many luxury brand websites have endemic usability issues and their e-commerce offerings are congenitally flawed in terms of facilitating purchases their goods online:

  • While I can buy Givenchy Fragrance and Beauty online, the site is not navigable (or not easily navigable) from the official domain
  • The range of filtering options is idiosyncratic: the default on Alexander McQueen’s site is to filter by colour, with the filter by size option hidden…and no filtering by price
  • The range of filtering options is not complex: what if I am only interested in knee length dresses? (Alexander McQueen again)

Again, there is no clear, easy to use commerce funnel on the sites.

So even if someone does navigate from Facebook to the brand website, there are impediments in their way either preventing or impeding the purchase of goods.

Conclusions

Given the inherent flaws in the online offerings of luxury brands, I am not sure we can write off social channels as not having a direct influence on sales.

I think we should instead study the effectiveness of social media channels owned companies/brands which either have a direct, clear funnel from social media to purchase or which have the purchase channel built in to the social channel to evaluate the relative worth of social in driving online or offline purchases.

If social media is:

  1. not being harnessed effectively by luxury brands
  2. not being supported by online/social commerce functionality/drivers/channels
  3. not being actively nurtured and curated by luxury brands
  4. not being prioritised in channel content

Then how can we position ourselves to assess the impact of social channels on revenue?

With this in mind, if we want to see the capacity and effectiveness of social media channels in influencing sales, we should probably study social media channels owned companies/brands:

  • that do funnel resources into their digital channels
  • that have built their digital and online presences around a core objective of facilitating consumer purchases, and
  • who actively administrate and maintain their digital channels

This will give us a way to guage the effectiveness and capacity of social channels to influence purchases – and perhaps provide the luxury industry with the model and incentive to lift their game, given the undercapitalised potential

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2 Responses to “Fashion: Online is the New Black”
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  1. […] Going back to the Financial Times summary of the Altagamma and McKinsey & Co report which highlighted that the social media channels of luxury brands don’t have direct influence on sales it’s time to consider the more “abstract” queries from my first response to the  Altagamma and McKinsey & Co study. […]

  2. […] Going back to the Financial Times summary of the Altagamma and McKinsey & Co report which highlighted that the social media channels of luxury brands don’t have direct influence on sales it’s time to consider the second of the more “abstract” queries from my first response to the Altagamma and McKinsey & Co study. […]



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