In countless ways, the COVID pandemic has upended traditional business models across the retail industry. Luxury retail in particular has taken a greater hit than many other areas of the industry, owed largely to a greater reliance on a steady stream of in-store sales and sales from tourists. Businesses in the sector are leveraging a variety of strategic and organizational tactics to meet the disruption 2020 has wrought – none more public than the finalized acquisition of famous global jeweler Tiffany & Co. by LVMH.
Regardless of how your luxury retail businesses pursues recovery, subscription models are a trend seemingly here to stay as they tap into trends that have dominated over recent years and only intensified throughout the course of 2020. These trends include a greater focus on convenience, sustainability, and access, as well as a greater desire for personalization. While there’s an upfront investment in moving to a subscription model in luxury fashion, the benefits are well documented – a 2020 report found that 65% of retailers report that customers enrolled in a subscription model/recurring revenue model provide greater profitability and 87% of brands are seeing growth year over year in subscription models.
For luxury brands, a subscription model that combines both rentals and purchases can increase operating margin and revenue. But, launching a subscription model can be challenging for retail fashion brands that are already struggling with their transition to eCommerce. Establishing and implementing the best practices in supply chain, logistics, and technology systems, including selecting the best cloud solutions, can be complicated for fashion retailers to prioritize. SAP cloud solutions can help fashion retailers manage the complex supply chain, financial and billing, and sales and marketing needs which arise from implementing a subscription model.
The case for change is clear. Shoppers are expecting more brands to provide subscription models in fashion. As the subscription model trend has risen in the food and beauty industries, consumers are becoming accustomed to applying similar conveniences in other areas of their lives. For luxury fashion companies, where sales are often unpredictable, a subscription model provides a much more stable revenue stream that can be used to attract customers while gathering insightful data to better personalize these experiences.
Fashion brands that already have a strong e-commerce presence are at a significant advantage when launching a subscription service when compared to those companies who are still establishing their direct to consumer strategy. Still, by implementing the SAP cloud solutions, luxury fashion companies have an opportunity to invest and accelerate their digital sales channel. Ultimately, a technology platform with the capability to support the complex logistics, financial, and operational needs of a subscription model is critical to a successful launch and operation.
For more information about how we can help your company with the business and technology challenges and opportunities in luxury retail, please contact us. For more information about how SAP cloud solutions can support the e-commerce and the launch of a luxury subscription model, please read this detailed perspective, Adopting a Subscription Model in Luxury Fashion with SAP.