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Tap Into the Growing Luxury Market By Understanding the Buyers

People who can easily afford full price look just as hard for a deal as those who can’t.

Oren Levy

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The high-fashion industry is growing steadily: In the past 15 years, the overall number of luxury consumers has increased from 140 million worldwide to over 350 million.

According to the leading management consulting firm, Bain & Co., the global personal luxury goods market reached $251 billion in revenue in 2014, constituting a 3% increase when compared to 2013. This upward trend continued in the first quarter of 2015, and the market’s full-year performance is expected to increase 2-4 percent.

Related: 6 Ways to Make Your Customer Service Better

Most retail industry experts agree that the ability to operate on several marketing channels (including in-store, online and mobile) is a key factor which merchants cannot afford to ignore. This is especially true of high fashion customers that are very mobile and can transition among various purchasing channels and across countries with ease.

One thing is clear – no matter where or how these savvy customers choose to seal the deal, they want to be wooed and courted with an elevated and personally customised shopping experience.

Understanding local luxury purchasing

On the local level, it is important to understand the principles of show-rooming and web-rooming (or reverse show-rooming) within the luxury industry. Show-rooming refers to the practice of examining merchandise in a physical retail store and then buying it online, while web-rooming refers to customers who do their research online but ultimately buy products in-store.

Luxury consumers use both of these shopping methods. Due to the fact that they often purchase expensive items, after viewing a product online they may prefer to complete the actual transaction at a physical store. Whether it is an expensive article of clothing, a couture handbag or a top-priced watch, the customer wants to feel the texture or try the item on personally before closing the high-cost deal.

The fact that the luxury sector is going strong doesn’t necessarily mean that couture buyers are willing to hang the cost. Bain & Co. notes that price awareness and consciousness among consumers have increased significantly, leading to a rise in the off-price luxury market, which now represents more than 30% of total luxury sales.

When shopping abroad, luxury customers often come with a shopping list expressly to find cheaper deals in foreign countries. Bearing all this in mind, the high-fashion buyer may well choose to visit a local luxury store, check out a high-end item and then buy it online or off-price.

The appeal of free delivery and free returns

Many of today’s luxury buyers were not born with a silver spoon in their mouth. In fact, people who rose from rags to riches have a healthy appreciation of the rand and its value. They like special offers and enjoy attractive perks such as free returns and free deliveries as much as any other consumer.

While some luxury retailers are dragging their feet when it comes to free returns and free deliveries, these practices are fast becoming the norm.

A growing trend is same-day deliveries, which is proving to be quite a challenge for luxury retailers. When free delivery is offered, buyers tend to order much more than they would when charged for delivery.

Related: 8 Keys to Award-Winning Startup Customer Service

The combination of free returns and free delivery appears to be irresistible to buyers. Laura Morroll, a Managing Consultant of LCP Consulting, notes that a retailer who is sure enough of the quality of its products to offer free returns, inspires customer confidence and loyalty.

In addition, many luxury retailers have discovered that when there is no charge for delivery, there are far fewer returns. As aspirational buyers, consumers might knowingly order an item in the wrong size and keep it for another season (or the next diet, depending upon which comes first).

Luxury purchasing habits at home and abroadluxury-home

In order to attract foreign luxury buyers, retailers must create brand awareness in their home countries. Even if buyers decide to purchase luxury goods abroad, they carefully study the various brands and products before leaving home.

Top-end brand retailers need to monitor where the luxury buyers are heading and provide signage and other assistance in the tourists’ native languages at the vacation destinations.

But luxury retailers also cannot afford to ignore consumers who decide to buy at home because they prefer luxury products crafted according to their specific culture. Some luxury brands are already creating lines for local buyers in China and India.

Global purchasing pitfalls

Bain & Co. states that tourism is the major driver of the global luxury industry’s performance. While touristic spending may be widespread, there are pitfalls that retailers must be aware of.

Imagine a tourist purchasing luxury goods in a SA branch of a luxury store and then returning to his or her home in London (or any other city outside of South Africa) only to discover that their return cannot be completed at the local branch of the same luxury retailer due to company policy, often driven by legislative reasons.

Related: Tips To Go Above And Beyond With Customer Service

This is because luxury returns can only be processed via the same gateway used for the initial purchase, and many retailers use different gateways around the world to optimise payments by region.

While some merchants use a single gateway for all markets, mitigating the problem of international returns, these merchants face other cross-border challenges, such as steep cross-border and currency conversion fees, higher decline rates, and greater fraud risk.

Let’s take a look at some growing luxury markets.

China

Today, Chinese consumers constitute over 30% of global luxury spending. They are considered the main cause of the shift from local consumption to touristic spending, which now accounts for about 50% of all luxury spending.

The total amount of money the Chinese are spending on their shopping trips is surging, from $18 billion in 2002 to $154 billion in 2014.

Most luxury retail brands already have a presence in China. The exposure to leading luxury brands at home and on the Internet have made wealthy Chinese consumers knowledgeable about luxury brands and differences in pricing at various locations.

Gifting has been identified as an important motive for Chinese luxury product buying. In addition, many members of the growing middle class in China purchase high-end goods to mark themselves as part of the higher social class. At the same time, these luxury goods serve to differentiate them from members of the lower social class.

Some luxury retailers are already selling high-end products designed especially for the Chinese market, which incorporate Chinese designs and imagery.

IndiaHermes-sari

India’s gems and jewelry sector contributes around 6-7% of the country’s GDP. The domestic gems and jewelry industry has the potential to grow to $85 billion by 2018. The latest Gold Demand Trends report from the World Gold Council indicates that the total consumer demand for gold in India last year exceeded that of China.

India’s marriage market is huge. It is estimated at nearly $35 billion and is growing at about 25 percent per year. Due to the fact that jewelry signifies a woman’s married status in Indian culture, finely crafted gold jewelry is in high demand. Rather than using a wedding ring as Western cultures do, Indians wear a variety of ornaments according to regions.

Women often wear special jewelry just for their wedding ceremonies. Thus, the love for high-end jewelry comes naturally to wealthy Indian consumers, who are known to pour many thousands of dollars into their weddings to pay for jewelry, designer clothes, cars, gifts and more.

According to Karoline Huber of luxury watchmaker IWC Shaffhausen, in India it is common practice to invite a brand representative to one’s home to provide hospitality and view luxury items in a domestic environment, rather than visit a boutique or shopping mall.

Here, too, luxury brands are seeking to cooperate with local relationship experts in order to customise luxury goods to local holidays, customs and festivities. Some brands are already customising their products; for example, Hermès has created its sari collection in India.

Nevertheless, many Indian consumers prefer to travel abroad to do their luxury shopping, perhaps because they do not want to appear ostentatious in a country where there is widespread poverty.

DubaiDubai

When discussing the connection between the Middle East and luxury consumption, it is important to understand that it is a “two-way street.” Dubai serves as a major hub for luxury buyers from all over the world, but many Middle Eastern buyers also migrate to Europe for their luxury shopping.

The Middle East is one of the ten largest luxury goods markets, with sales exceeding $6.74 billion, according to a market study of the Middle East published by Bain & Co. After conducting price comparisons for high-end items worldwide, many consumers from all over the world are looking for new shopping destinations, such as Dubai, South East Asia and Australia. The report indicates that Dubai accounts for 30 percent of the luxury market in the Middle East region.

Whether the location of luxury shopping is in the Dubai or London, religion is an important guiding source for decision making among 71 percent of the consumers as compared to a global average of 32 percent.

Every year prior to the holy month of Ramadan, Middle Eastern shoppers arrive in London, and purchase an array of luxury gifts before flying home for a month of daily fasting. Another shopping surge occurs during the Eid al-Fitr holiday, which marks the end of Ramadan.

Despite the fact that no male outside of their household will ever see Arab women in haute couture dresses, Arab women buy high-priced designer clothing from the world’s leading fashion houses.

Although tourists from the oil-rich United Arab Emirates, Kuwait, Saudi Arabia and Qatar make up only a small percentage of total visits to Britain in comparison to U.S. and European luxury consumers, they are generally more lavish spenders. Official figures indicate that Middle Eastern tourists came second in total spending for luxury goods last year, reaching $1.5 billion.

In order to gain an edge, today’s high-end brands must craft a specialised shopping experience for luxury buyers at every physical and online channel, both domestically and globally. This includes understanding cultural and religious nuances, and speaking the foreign customer’s language both literally and figuratively to address the pitfalls standing in the way of truly frictionless luxury customer experiences globally.

This article was originally posted here on Entrepreneur.com.

Oren Levy is CEO of Zooz and an experienced professional with over 15 years of experience in payments, commerce, and global business. Prior to Zooz, Oren was an executive director at Brookline (USA) for 11 years, managing its worldwide sales efforts and strategic partnerships initiatives. Before Brookline, Oren held marketing, business development and technical positions at BATM, Fundtech and L.G.E.S.

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Business Landscape

Customer Control For Entrepreneurs

How can small companies exert a degree of control over their customer base and help ‘guide’ them in such a way that they remain loyal and continue purchasing from them?

Gary Harwood

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No organisation, irrespective its size, industry, and geographic location, can succeed without customers. And given how the digital environment has made it easier for competitors across sectors to emerge, entrepreneurs are especially under pressure to balance customer needs and desires, with value propositions that still make them money.

There is clearly a fine balancing act to manage.

On the one hand, you have people who (thanks to technology) are aware of the power they have over product development and pricing. After all, if a competitor sells a product or service at a lower price, who is the customer going to go with? Add to this, the ability to customise solutions according to data analysis of specific end user needs, then you have a situation where many entrepreneurs feel they are facing a never-ending struggle.

On the other, small to medium businesses must be able to produce products and services in such a way that cash flow is maintained. As any entrepreneur can attest to, not having a reliable cash flow is tantamount to business failure. So, how can small companies exert a degree of control over their customer base and help ‘guide’ them in such a way that they remain loyal and continue purchasing from them?

Related: How English Language Skills Play An Essential Role In Building Trust With Your Customers

Managing expectations

One of the most important elements in this regard is managing customer expectations. The emergence of social media and the power it has to influence people’s buying decisions, cannot be overestimated. Today, more than ever before, the likes of word of mouth, marketing, and public relations as a direct result of social networking can often grow or sink a burgeoning business.

It has also created a dynamic where customers feel that if they leave a negative comment or ask a question, they expect a response almost immediately. For entrepreneurs already trying to do everything themselves while managing the business, this can often be a major cause of frustration. But it does not have to be the case.

By setting parameters up front with customers in terms of response times, queries, and even experiences, small businesses can start leveraging the power of social networking and other digital communication technologies for their benefit.

Being pro-active and taking charge of these expectations puts the organisation in more control than if a hands-off approach is followed.

Being open

Openness and transparency might sound like luxuries no entrepreneur can afford, but these concepts build strongly from managing expectations. Having open discussions with customers on aspects of support, product requirements, and even their (the end user) own expectations can greatly assist a small company to provide a more bespoke approach to products and services.

Related: 5 Techniques To Leave Customers Grinning And Vowing To Return

In addition, by providing customers with various resources (think troubleshooting or ‘self-help’), the entrepreneur is empowering them to take control of their own experiences with the company. It also means they are not as reliant on company resources if they were to phone the organisation or email a complaint. The added benefit to this approach is the customer can manage their own experiences when they have the time to do so irrespective of whether it is 10:00 or 22:00.

Granted, the path to customer control (perceived or otherwise) is not an easy one to take. However, no entrepreneur can afford not to take notice of these requirements and put the customer at the forefront of their thinking.

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Business Landscape

What Can Businesses Expect From The Future Of Work?

While the future of work will always be a constant process of innovation and change, here are a few things that business today can expect in the near future.

Josh Althuser

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The phrase “future of work” is something professionals have been talking about since the birth of the traditional workplace in the late 19th century.

Once defined by cubicles that were arranged neatly side by side with meeting rooms and, of course, the head office with an amazing view of the skyline, today’s offices are strikingly different.

Over the last decade, there has been a surge in the development of open-plan offices, and more and more companies are moving their employees to co-working spaces and experimenting with remote work. For businesses that are still straddling the traditional office, but looking to embrace the future of work, it could be overwhelming at first. While the future of work will always be a constant process of innovation and change, here are a few things that business today can expect in the near future.

Expect flat hierarchies

In 2017, most companies have recognised that employees, especially younger ones are turned off by the conventional hierarchies that once dominated the world place.

Related: 5 Inexpensive Workspace Improvements That Boost Productivity

Start-ups and small businesses often pride themselves on their “flat” workplace culture, which aims to give both leaders and employees the chance to give input on an equal level. In theory, these structures aim to make room for more innovation and also to help workers feel more appreciated in their roles.

Yet, it doesn’t come without its issues. There have been various studies showing that egalitarian workplace structures can be disorienting and can potentially result in higher turnover rates, as employees feel lost in their roles. Thus, it will take time for the workplace to strike a balance between structure and equality, but so far it seems we are well on our way. 

The architecture of the office space is changing rapidly

Chances are you’ve heard of open-plan offices. With corporate giants like Facebook and Google companioning the flexible workspace, company around the world are breaking down literal walls to create airy and open offices that encourage collaboration.

Again, much like the flat workspace, open-plan offices need to be considerate of individual needs. While many workers appreciate the chance to work in a more informal setting, the open office has also faced criticism for introducing new distractions by not including enough private areas, which can lead to a downturn in productivity. As a result, more companies are turning to co-working spaces, which offer both workspace and community space.

Co-working spaces differ from open-offices in the way that they provide community management, structure, and flexibility, ensuring that workers have their needs met, whether that means a private office for the whole company or a hot desk for workers who just want to come in a couple of times during the week. 

Related: Workplace Evolution 2.0: Are You Ready For The New Era?

Remote work will be commonplace

Allowing employees to work remotely has proven to be successful. Companies have been introducing remote days over the last five years, and some even allow their staff to telecommute on a full-time basis. In the early days of the freelance ecosystem, remote work was considered to be unprofessional, but we have learned over the years the allowing employees to telecommute, even on a part-time basis can make them more productive and satisfied in their roles.

There’s no doubt that advancements in communication tools, such as Slack, have allowed workers more freedom, but there are also enormous benefits for businesses as well.

Companies can save on overhead costs by moving teams into a co-working space, or take out a flexible lease in combination with allowing workers to work outside of the office, even if it’s just a few days a week. By saving on rent and utilities, leaders can make room in their budget to invest in employees, by offering educational workspaces or purchasing new equipment.

Overall, these changes have a long way to go before they become permanent fixtures in the workplace. In fact, many businesses are now experimenting with various workplaces trends to find what works best for them and their employees.

Yet, even if you are not ready to grant your staff remote days or turn your office into a single shared space, it’s vital that your business is aware of these trends so you can keep up with the rapidly changing future workplace.

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Business Landscape

How Investors Can Take Advantage Of The Rand’s Currency Trading Rates

Negative sentiment is likely to be pervasive with the SA economy, and it will take more than a new figurehead in government to right the wrongs of a mismanaged economy.

Harald Merckel

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The USD/ZAR currency pair is trading in the 13.65 range heading into mid-December 2017. Over the past year, the 52-week low was 12.3126, and the 52-week high was 14.5742. As one of the more volatile currencies in the trading spectrum, the ZAR is closely associated with the political shenanigans taking place in South Africa.

The year to date return for the currency pair is -0.50%, after having started 2017 at 13.7351. Much of the activity taking place with the ZAR is speculative. Futures contracts are largely responsible for the whipsaw movements in prices.

Wilkins Finance strategists stress the importance of credit ratings agencies on currencies:

‘Whenever credit ratings agencies such as Moody’s and Fitch downgrade their assessments of the South African economy, this has a negative impact on the ZAR. The impact is not always predictable however – towards the end of November 2017, the USD/ZAR had appreciated after the recent ratings downgrade of the economy.’

Moody’s Investors Service downgraded South Africa’s economy to a rating of Baa3. This is the lowest rating level for Moody’s. Further ratings will be announced in February next year. Fitch has already downgraded the foreign currency and local currency to BB +, but has offered a stable Outlook for the ZAR.

Related: The Business Of Anxiety In Business: Giving Heroes Permission To Feel Vulnerable

That S&P also downgraded the South African economy to sub-investment grade is an important decision, and one that will have negative ramifications for the South African bonds market. Now, the Barclays Global Bond Index will no longer feature South African bonds. That South Africa’s bond market will be excluded from the World Government Bond Index will also be a bugbear to any hopes of the ZAR appreciating.

Interest Rates in the South African Economy

The South African interest rate is highly attractive to foreign investors, given that the UK, US, Canada, Japan, and European bank rates are at historic lows. There is little to be gained by investing cash in fixed-interest-bearing securities in these economies. The current interest rate in South Africa is 6.75% (as at November 23, 2017). The interest rate has dropped to expand economic activity in the country.

Overall, South Africa’s inflation rate for the year is expected to remain at 5.3% dropping to 5.2% in 2018 and rising to 5.5% by 2019. Global investors remain concerned about the risk/reward environment in South Africa. The country has experienced significant capital outflows in recent years, driven in large part by uncertainty regarding future prospects. The USD/ZAR was trading at 14.60 in late November, and current ZAR strength is being attributed to USD weakness.

Related: Offshore Business Opportunities Abound For South African ‘Oldpreneurs’

Factors on Both Sides of the Atlantic

One of the major economic events affecting exchange rates will be the reconciliation of the House and Senate bills on US tax legislation. Any major overhaul of the US tax code will invariably result in a dramatically boosted USD, and a weakened ZAR. For traders, it appears to be short-term call options on the local currency and long-term call options on the USD.

It is evident that currency traders are hedging against the ZAR over the long-term. The fundamentals of the economy are structurally unstable. The power grid infrastructure, water supply problems, and political instability at the highest echelons are but a few of the many problems plaguing South African growth prospects.

However, the ZAR will draw strength from the election of a credible leader, and this will be particularly noteworthy with Cyril Ramaphosa’s appointment. Overall, negative sentiment is likely to be pervasive with the SA economy, and it will take more than a new figurehead in government to right the wrongs of a mismanaged economy.

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