In 2022 there was an influx of luxury brand activations in Web3 clamouring for a slice of the $50bn metaverse pie. Now, brands are re-strategising to appeal to the crypto-elites, a critical target in the years ahead (20% of purchases made with cryptocurrency in 2022 were for luxury goods).

Longstanding e-commerce challenges continue, from securing inventory from brands to the cost of maintaining logistics and technology platforms, plus fierce price competition and discounting.

The costs of generating traffic from Instagram and Google have gone up and many e-tailers are facing increased competition from the brands they sell, as selling DTC online has ramped up since the pandemic. Brands have also expanded their physical retail networks, diminishing online’s appeal.

Digital marketplaces have been forced to pivot and differentiate, creating tighter edits and branching into lucrative new categories. German e-tailer Mytheresa launched homeware and lifestyle products, while prestige multi-brand sites Farfetch, Shopbop and Moda Operandi have ventured into beauty and skincare, appealing to a broader customer base.

Whether focusing on young consumers in a particular region or the burgeoning demographic of crypto-elites, there are fresh motivations for luxury brands to embrace Web3. Offer exclusive access to experiences or products via partnerships or limited-edition NFTs.

Take inspiration from Ralph Lauren’s new store in Miami’s Design District, which targets the city’s Web3 community with a series of curated offline and online experiences. The first initiative involved gifting members of local leisure community Poolsuite a limited-edition NFT that unlocked access to an exclusive IRL event. The store also accepts cryptocurrency as payment in a first for the brand.

Partner with gaming platforms. In April 2023, Gucci’s Cruise collection in Seoul was metaverse-livestreamed on the South Korean social gaming platform Zepeto. Users could purchase digital renderings of the collection for their avatars via Gucci online and take photos at a branded booth.

Balenciaga takes a hyper-targeted approach to build its reputation among young, sustainably minded Chinese luxury shoppers, launching an educational AR game to promote a limited-edition collection for 520 Day (May 20). Available via its official WeChat, the game involves growing virtual crops using regenerative agricultural methods while wearing items from the 520 range.

Retailers and brands have been trying to replicate the high-touch, personal shopper experience online for years, but it’s often lost in translation. Now, generative AI is ushering in an era of intelligent chatbots that promise more engaging and customised interactions. Global marketplace Farfetch has identified AI as pivotal to its growth strategy, making bold investments in the field of personalisation.

AI will improve customer interaction, creating value through more intimate and engaging shopping experiences. French conglomerate Kering’s new e-commerce platform, KNXT, was soft-launched in April 2023. It’s hosted by a chatbot named /madeline – the only one developed using OpenAI’s ChatGPT technology. It makes personalised recommendations of products by Kering-owned brands based on user prompts and machine learning.

In the years ahead, consider how AI chatbot integration can help you connect with consumers beyond the sale purchase, delivering hyper-customised content in shorter time frames. Italian brand Valentino’s AI-powered chat feature on its app comes in the form of a style icon quiz that uses customers responses to suggest products and match them with a campaign stylist.

Choose AI to enhance a sense of discovery, whether in physical spaces where you can conjure up imaginative, immersive environments, or in search to streamline product discovery.

Playing to the growing demand for unique experiences, Random Studio, based in Amsterdam and Paris, employed AI in the design process for Gucci’s new Chengdu store. The three-storey digital installation visually connects the city with Florence as an evolving immersive landscape.

Use AI-powered search to streamline the online product discovery experience and drive engagement. The tech gives retailers a clear idea of a customer’s order history and preferences, allowing intelligent predictive retail where the brand can anticipate the customer’s next search. Evolutions in AI-powered search can increase sales, loyalty and customer retention without additional staff.

Image search is a whitespace opportunity for innovation. More than 12 billion people now use image search on Google every month, a fourfold increase from two months prior. Google is supporting this shift by adding new features to Google Images, including the ability to identify whether an image is AI-generated.

Luxury brands should indulge shoppers with rich, omnichannel buying opportunities and unique activations to mitigate the preference for tactile in-store experiences with the expectations for more digital integrations; 67% of luxury consumers would like more of these, according to Royalmount. Bring offline customers seamlessly online (and vice versa).

Plein Sport’s new activewear store in New York features digital interfaces that energise the interior while introducing customers to the brand’s Web3 ambitions. Walls showcase projections of its NFT sneaker artworks, while shoe boxes feature digital screens for additional video content. QR codes display product and price information, and customers can pay using cryptocurrency.

The new Armonia Armani Beauty store in Shenzhen encapsulates the brand’s omnichannel ambitions. Shoppers can access a WeChat experience via a QR code, which guides users to sections and products based on their digital profile, where they can engage with (human) sales assistants. Other in-store activations include an Emotion Lab digital screen that invites customers to draw their feelings, matching an Armani Privé fragrance to their mood.

Luxury beauty brand platform S’Young International debuted its first physical concept store in late 2022 in Changsha, China. Omnichannel touchpoints include product QR codes enabling direct online purchase, fusing online convenience with in-store product testing. Shoppers can take an AI-powered skin diagnosis test and be matched to a “beauty butler” who provides product recommendations. These tech-enriched points are blended with high-touch experiences including multisensory exhibitions and digital artworks.

Customer loyalty is fickle as the shopping journey becomes more hybrid. Online luxury players must double down on their VICs (very important clients) services and experiences to retain them.

Mytheresa delivers value to the top 3% of its customers who shop on a weekly basis with Memo. The programme is available to members of its personal shopping service, allowing customers to try on potential purchases before buying.

Dior Beauty’s free My Exclusive Loyalty programme gives shoppers access to special gifts, virtual consultations and event previews. It gamifies the experience through challenges such as collecting lucky charms to win exclusive products. Dior Beauty Masterclasses include discount codes to boost attendance, sales and loyalty. The experiential nature of these strategies is key to winning and keeping customers.

A brand’s VICs make up an enormous chunk of revenue. Expand your digital loyalty scheme to cater to top spenders, whether by enhancing personal styling features, intimate events or making their lives easier, such as white glove delivery services.

Exclusive invitations to join branded loyalty clubs, early access to sales and targeted communications strategies will help consumers feel like the centre of attention. Look to Farfetch, which advises its top spenders on everything from home decor to wedding style, and sources unique items for clients’ gifting occasions and events.

In a 2022 survey by US firm Forerunner Ventures on resale across various categories, 45% of respondents were interested in peer-to-peer resale via a brand’s own website. For luxury labels, owning this channel helps build a revenue stream from secondhand sales while driving community, customer acquisition and loyalty.

New York-based womenswear brand Ulla Johnson introduced an in-house resale programme to promote circularity. Ulla Preloved is a peer-to-peer initiative where customers can sell their pieces to other shoppers, set their price and opt for 70% of that price back in cash, or 100% of in-store credit. It also has a clienteling element; shoppers can request the Ulla Johnson team to source past-season items. The aim is to provide resale customers with an experience usually reserved for personal stylist shopping or VIP services.

French house Chloé is experimenting with digital IDs on its S/S 23 garment labels to enable traceability, repair and instant online resale. Owners of new pieces can scan an NFC tag or QR code on the label to obtain an ownership number, then take and upload images of their item for quick, easy resale via a branded secondhand microsite powered by Vestiaire Collective. Consumers can also access details of the eco-credentials of their clothes and instructions for care and repair.

One of the biggest concerns for luxury brands selling online is that they won’t be able to deliver the same exclusive experience their customers enjoy in-store. AR may be the saving grace as it can offer product discovery that highlights the brand universe and bring the luxury shopping experience home.

When investing in high-value items, consumers want to know if their purchase will match expectations. AR digital try-on solutions can satisfy this need and limit the financial and environmental impact of returns.

Farfetch is seeing commercial success with its new virtual try-on capabilities. Over 1,000 of its more than 100,000 products offer virtual try-on, signalled through a dedicated label on product images. Across 14 weeks in 2023, Farfetch saw a 47% increase in site visits for luxury watches equipped with virtual try-on functionality, compared to watches of a similar price point without the feature. Add-to-bag increased by 22% and add-to-wish list jumped by 81%.

In China, where luxury consumers are comfortable with the idea of digital assets, Tmall’s Luxury Pavilion allows brands to create a customer-focused, bespoke online shopping journey through 3D product displays, virtual try-ons, one-to-one video consultations, livestreaming and product personalisation.

Look to France's Cartier, which worked with Tmall to generate exclusive experiences to customers online. Through the Luxury Pavilion, it offers private video consultations in which professional advisors show clients pre-selected jewellery in a digital VIP room, introduce new products and assist customers as they virtually try on items.