What can wealth management firms learn from luxury fashion brands about digital transformation?
There are some striking similarities between the worlds of luxury fashion and wealth management when it comes to their efforts at digital transformation. Our industries face many of the same challenges – and there’s much we can learn from each other in the search for solutions.
I recently had the pleasure of taking part in a CREALOGIX discussion panel on digital transformation in private banking and wealth management. It was fascinating to be surrounded by people from a completely different industry, yet to see that many of the high-level digital challenges they face are very similar to those we’ve seen in luxury fashion and high-end retail.
Of course, this is partly because we’re both targeting a similar high net worth audience, and both business models have a concierge-style service ethos – so it follows that we share some of the same strengths and weaknesses. One of those shared weaknesses has arguably been a resistance to adopt digital channels.
Twenty years ago, the concept of e-commerce seemed completely irrelevant to luxury fashion brands, and similarly, I imagine, to many wealth managers and private banks. Like many established wealth managers, some of the largest fashion players including Cartier, Dior and Prada have been slow to adapt to e-commerce, in part due to a reluctance to erode the exclusivity and service associated with their brands. Initially, digital channels were seen as a threat, as opposed to an opportunity – retailers feared they would be unable to replicate the personalised, luxury experience delivered offline to a mass-market of consumers online.
But like it or not, we’re living in a digital world where customers are driven by convenience. Brands like Amazon and Netflix have set a precedent for on-demand products and services, while smartphones and tablets have changed the way customers work, shop and interact with brands. The high net worth customer profile is changing too as purchasing power rapidly shifts from the Baby Boomer generation to Millennials, who tend to be digital natives and expect a different type of luxury experience to that of their parents and grandparents.
Early entrants, such as Net-A-Porter, were quick to recognise the opportunity digital channels were able to offer to customers, both in terms of engagement and convenience. Today, digital adoption in luxury retail is widespread and even the most resistant players have started to develop their online offerings to remain competitive.
In a similar vein, it’s becoming increasingly clear that wealth management brands built on exclusivity could be under threat from the new breed of digital-native investment platforms if they don’t react to a changing market in good time.
But how can wealth management brands be successful in the online space? Lessons from luxury retail suggest focusing on three areas: building trust and credibility with your customers online, identifying ways to replicate the offline experience online, and leveraging your human capital.
Trust and credibility
Like wealth management, luxury retail is about far more than the products themselves. It’s about a holistic customer experience – the level of personal service, expertise and the overall quality of the interaction are all important in these transactions.
Trust is also crucial and can determine a brand’s value in the marketplace. The same idea of long-term brand value should apply in how high net worth investors feel about their relationship with a financial services firm.
How can you build trust online without interacting with your customer face to face? High-quality customer service is the foundation of any online offering – whether this is 24/7 online and over-the-phone customer service, strict data security policies, or simply the reassurance that your customers’ money is protected, a clear customer service strategy should be the first step to building credibility with your customers.
Trust and brand loyalty are also hugely influenced by word-of-mouth discussions with friends and family. Nowadays much of this takes place online, so the links, visuals, offers, and online reviews used to discover and share are just as important as in-store discovery and expert recommendations. Digital channels offer new ways to get the in-person expertise of designers and brand advocates out to customers. I can certainly see this being the case in wealth management and private banking too – why keep all your firm’s experts behind closed doors when they could have a global audience, building trust and driving sales?
Finally, information should be accessible and informative – moving online may open up your customer base to investors with varying levels of experience. You could choose to narrowly define your customer base, or to capture as much of the market as you can. The latter will require you to speak to and influence different customer groups in different ways.
Building trust with new investors may require you to describe your offer in simpler terms, outlining how your financial instruments are a good ‘fit’ for that customer. However, you’ll simultaneously need to build trust with more experienced investors, requiring accurate and detailed information to give these individuals confidence in your expertise and knowledge. Striking the right balance is key.
Redefining the offline experience, online
It’s understandable that both brands and customers feel it’s hard to replicate the traditional customer experience online. From a customer’s point of view there may be a resistance to buying online given the high price points involved, a lack of physical interaction with products or a lack of trust. Brands themselves often feel that going digital contradicts their brand heritage and threatens their exclusivity.
However, my experience suggests that it is possible for brands to recreate a luxury experience online. Success lies in taking the key elements of your offline offering – strong customer service, personalisation, expert guidance and quality – and finding ways to re-create them online. Developing a strategy where your digital channels complement your offline channels, rather than replace them, is paramount.
How does this work in practice? Luxury retailers aim to plan their in-store activity to match what’s happening online, which gives customers much more transparency. They can use the digital platform to learn about products and prices first before they visit a store, or visit a store first and then learn more – and make purchasing decisions – online at their leisure.
These types of businesses also rely on strong, individual relationships with their customers, based on years of working together and getting to know them and their preferences. Digital services can be impersonal but equally, used well, data can be the key to creating a personalised customer experience. This is especially important where the customer is being dealt with by multiple people within a business – whether through a customer support team or an online portal.
But offering personalised services to your entire customer base is most probably unsustainable, costly and would result in a low return on investment. Instead, consider focusing on your top tier of clients, offering a dedicated account manager with access to their assigned customers’ data and knows their preferences inside and out. Net-a-Porter’s team of 50+ personal shoppers have done just this, which has been key to the company’s success and to maintaining the ‘human’ element of the brand.
Leveraging your human capital
The decision to embrace digital is not without its technical challenges of course – brands built on personal relationships and human interactions don’t necessarily have all the necessary resources, skillsets or capabilities in place when they set out to adopt a digital strategy. Developing a strong online offering will only work if your whole organisation is signed up to it – starting with your leadership teams.
Digital transformation requires a complete business model shift, and a completely new skill set. However, that’s not to say that every business needs to invest in building up a team of their own software developers in-house or re-inventing the wheel. While the whole organisation needs to own and embrace a digital strategy, it’s possible to work with partners to create a digital experience that matches your brand and your customers’ expectations. Some retailers chose to use external developers to build their own in-house platforms, while others have invested in customised off-the-shelf solutions to get off the ground quickly. Both have their merits and flaws.
From what I can see, no matter whether you’re in high fashion, luxury retail, wealth management or private banking, you’ll come across many of the same barriers to digital – some cultural, and some practical. There’s no single answer, and the most important measure of success is finding ways of enhancing the customer’s mobile and online experience, without losing the reputation for quality and personal touch that our brands are built on.
For me the key to successfully embracing digital is to invest time at the outset to think through your strategy, develop a collective vision, and build relationships with partners you can trust. And, of course, getting there before everyone else catches up.