Global consumers want to buy British, and British products are now at their cheapest for years. The retail potential is enormous – and now is a great time to make the most of it.
The fast-growing British luxury market is likely to attract yet more customers with the recent downturn in the value of the pound. The UK was already one of the world’s leading online exporters when the international value of sterling slumped in the summer, and retailers including Jimmy Choo and Burberry went on to report a lift in sales as a result.
Since then, sterling has stayed relatively weak against both the euro and the dollar – presenting shopping opportunities to international luxury customers and, by extension, to international luxury brands. This may prove a short-term spike, but it is an apt illustration of just how attractive British goods are to overseas shoppers.
Luxury shoppers see the decline in sterling as the equivalent of getting a good bargain
UK luxury brands are highly sought after. Google and OC&C Strategy Consultants describe it as the world’s leading online export market. Figures from Google and the British Retail Consortium have shown rapid expansion in the number of searches for UK brands, particularly from emerging markets such as India, China and Mexico. The fastest search growth, the figures found, came via mobile devices – smartphone are playing a growing and important role in international luxury sales of typically British products, from fashion and footwear to food, and beyond.
Before the downturn in the pound’s value, luxury analyst Wealth-X and the Walpole group of luxury retailers forecast that the UK luxury retail market, worth £32bn in 2015, would grow to £51.5bn by 2019. It is not yet clear how fast the market will develop, but what is becoming clear is that many believe there are opportunities amid any disruption.
Luxury is one of the top-selling categories across borders. People who are willing to spend their money on luxury goods are a little less influenced by difficult times because they have more disposable income. However, they are seeing the decline in sterling as the equivalent of getting a good bargain.
International success stories
The many British luxury retailers that have already taken steps to build their international businesses, both online and through a network of stores, are now well placed for a future in the world of global retail that continues to open up. Sometimes relatively simple changes can make an important difference to a merchant’s ability to meet the appetite of global consumers.
London-based luxury clothing and accessories retailer Avenue 32 started to attract international customers to its luxury fashion site, which was enjoying triple-digit growth. It responded by developing a delivery performance that met the expectations of the luxury consumer, using global trade APIs (application programming interfaces) to add a duty calculator that enabled a fully pre-paid duty payment at checkout.
Leather goods and womenswear label Mulberry interacts with shoppers on social media channels around the world to win their attention – and their orders. It has invested in omnichannel to deliver a joined-up experience between its network of shops and its website. It grew sales by 10% to £74.5m during the six months to 30 September, and said digital sales grew 32%, now accounting for 14% of group sales.
The weaker currency presents compelling reasons for UK luxury retailers to sell overseas, but there are challenges. First, it is important to win the trust of international shoppers, especially where they are buying expensive items.
Burberry campaign, september 2016 001
Meeting the export challenge
Luxury retailers are increasingly localising for the markets they sell in and building engaging websites from which it is easy to browse, search and order. They also know how important it is to offer local payment and delivery methods.
Limiting options for payment alienates a significant number of would-be consumers. Research from Pitney Bowes has exposed that credit cards and e-wallets such as PayPal and Alipay are the most preferred method of online payment for cross-border purchases. Taking into account factors such as service fees and purchase protection plans will also go a long way with consumers.
It is likely that many shoppers will want to buy in their own language, if only to ensure that they are buying the item they really want. The same principle applies to currency. Not accepting the local currency means that shoppers will probably incur conversion fees, which ultimately will make merchants’ products more expensive and less competitive with local brands.
Successful luxury brands maintain their relationships with their customers over time, learning about them through their behaviour and buying patterns. It is important to focus beyond the single purchase, and instead on lifetime customer value.
Not accepting the local currency means that shoppers will probably incur conversion fees
Luxury retailers are also making a point of knowing beforehand what requirements they need to comply with in each market, including items that may be restricted or even prohibited. Those who are knowledgeable of the time and costs of local controls and consider these factors when estimating arrival dates and the final price of their products will make for a swifter and easier shopping process for their international customers.
There are always challenges and complications in selling overseas. A range of factors, from currency and payments to logistics and customs duties, vary substantially from country to country. But the opportunities presented by cross-border customers are now so compelling that most luxury retailers will jump at the chance to make the most of their international potential in a new world of globalised retail.
Georges Berzgal is Pitney Bowes vice-president EMEA, global ecommerce