More and more often we are asked by our clients to optimize store traffic for the flagship stores in Asia. Exorbitant rent of the prime location, high cost of personnel, maintenance, decoration, inventory and in-store sales not high enough, doesn’t make the flagship profitable. From the stores come indications that the majority of visitors and buyers who visit are over 40. In short, the store was lacking in millennials and younger Generation-Z consumers. This is typical for many luxury (and non-luxury) brands, so you’re probably reflected in this issue.
What can be done? The classic approach is to question everything about the store, to consider a store redesign, switch out the merchandise, re-train the staff, and other possible options. A lot of hypotheses could be done about “youth traffic” problem, but the management team is unsure about the root cause and remedy.
It’s now that we suggest the AI solution. The objective is to gain fundamental insights about how consumers see the brand instead of merely speculating about what they were thinking. As we all know, millennials and Gen-Zers are digital natives, particularly in China. Their lives are entirely digitally based, their conversations are online, and their first point of access to brands is via their phone. This even applies to ultra-luxury brands. That doesn’t mean that stores are pointless; stores are actually essential in helping customers experience a brand. They need to see and feel materials and try on clothes. And many seek the recommendations and suggestions they get from the sales assistants. But the fundamental decision about which brand to choose is often made before a consumer even enters the store. That “moment of truth” is now almost entirely digital.
Therefore, trying to solve a store traffic issue — or any other brand challenge — without analyzing the digital conversations about the brand means that you’re ignoring consumers’ top decision-making platform. And this is exactly where AI becomes indispensable. What our solution does, is a process all available data points about the brand, including those of all relevant competitors on social media, blogs, forums, and more. This means processing all conversations and mentions about the brand that are happening online on publicly accessible platforms. Then we use our AI solution and machine learning to identify major relationships, interactions, and patterns about how the brand is seen online. This includes filtering out anything that was non-relevant, for example when the brand is mentioned out of context (something that often happens when someone just hashtags a brand to get views but offers no real content). Given this huge amount of data, these processes need to be run in an automated way. And then finally, we use our expertise on luxury strategy to interpret this data and determine how to best solve the issue.
How does it work? We look at the ratio of positive versus negative mentions, compared them with those of competitors, looked in to age-related conversations, and identified which content and which sources are driving conversations, leading to a precise map of how the brand is perceived by target group, regions, gender, age-clusters, buyers of the brand versus competitive buyers, and more. We also identify who the key influencers are, hence who are responsible for how the brand is perceived. This map allows us to gain a precise, unbiased real-time view about the status of the brand within the competitive field including all major influencing factors. Then, once we have the full picture, we apply our proprietary deep luxury strategy insights (for example, our understanding of what drives consumers’ decisions for or against a purchase, including their willingness to pay).
Sometimes the brand’s communication content on social media is not resonating enough with the target group, leading to a competitive disadvantage and poor results. There is a significant opportunity to increase store traffic and revenue while reducing costs by changing the content and the frequency/timing of the brand’s communications. None of this would have come to light by using traditional market research or focusing only on the store in question. AI is a game changer, and its real power is unleashed by combining it with advanced luxury management insights and strategies.
In other cases the cheaper brands applies a specific strategy to piggyback on the luxury brand’s reputaion while also siphoning away consumers by redirecting conversations about the brand. In essence, the brand coulkd be digitally hijacked because of its own fame, and the management is not aware of it. In our experience, this can happen to any luxury brand!
Millennials are disrupting the status quo of brands, and Gen-Zers will do it more as they age. AI-based luxury strategies are the only way to generate actionable insights in real time, yet few companies actually learn how to harness the power of the AI they have at their fingertips — particularly as it pertains to luxury brands. And in China, this is even harder, since a company’s AI technology has to be able to connect to Chinese social media platforms like WeChat.
Artifical Intelligence works because it identifies real drivers or barriers to success — unbiased and in real-time — which reveals important insights and patterns. This powerful method of creating actionable insights and strategies offers the most exciting business acceleration opportunities today when applied in the right way. Our client’s dilemma shows how potent Artificial Intelligence is when directed at down-to-earth business issues like store traffic improvement. That’s why there will be only two types of brands in the near future: luxury brands that don’t master AI and those that do. The former won’t be around for long.