Flourish: Luxury Home Goods

Industry Context

Luxury good brands are embracing the metaverse to diversify revenue streams and elevate their brand image through innovative customer engagement. As shopping habits evolve and digital culture advances, the very definition of luxury is being reimagined. Todays affluent, tech-savvy, and design-conscious consumers demand more than quality products, they seek immersive, creative experiences that emphasize exclusivity, scarcity, and emotional connection. 

In response to these changing expectations, many luxury brands are launching digital assets such as NFTs and exclusive virtual goods. These offerings allow consumers to collect and interact with high-end representations of clothing, accessories, and home décor across both virtual and physical environments. Rather than relying solely on traditional foot traffic, these new showrooms focus on curated, high impact engagements that build long-term brand equity. 

Flourish: Luxury Home Goods

Flourish is celebrated for its exquisite collection of high-end designer furniture and home décor. Flourish managers are contemplating two major strategic opportunities for strengthening brand image:

• entering the metaverse: introducing digital products in a new market to capture the growing market of immersive luxury experiences 

• launch an augmented reality (AR) shopping storefront: empowering customers to visualize Flourish products in their own physical and virtual spaces with cutting-edge AR technology.

Currently, Flourish operates both online and in upscale retail locations, generating approximately $50 million in annual revenue. Flourish is currently seeing conversion rates of around 1% from online and in-store visitors, reflecting the brand's appeal among discerning quality focused consumers. The average order value (AOV) for Flourish's customers is about $2,500. Their solid performance is built on a balanced mix of brick-and-mortar and online sales, positioning the brand well within the luxury home good market.

The brand is already profitable, however they recognize that digital transformation is key to sustainability and long-term growth. Having a strong brand image is essential for luxury companies as it can position them in the competitive space. These new digital ventures not only offer opportunities for additional revenue but also serve to enhance Flourish's overall brand image. By reaching a new generation of luxury consumers, Flourish can further solidify their reputation as innovators who deliver curated, exclusive experiences. 

Flourish leadership has asked us to assist in analyzing their two major investment decisions. Our strategic analyses explore how investments into augmented reality and the metaverse can strengthen the prestige, even in a market where curated engagement and quality interactions outweigh sheer volume. This forward-thinking approach ensures that Flourish remains at the forefront of the luxury industry in both the physical and digital realms. 

Strategic Framework

At the heart of Flourish's metaverse furniture store strategy is a clear hierarchy of fundamental and means objectives. This strategic framework guides every decision made by Flourish's leadership, ensuring that each initiative aligns with their overarching vision while delivering real, measurable impact for the brand. 

Below is our breakdown and analysis.

The team at Flourish need to decide if they should invest in the creation of virtual Flourish products for the metaverse. Flourish managers want to know if entering the metaverse with virtual goods like NFTs will be successful in strengthening brand image and as a result, relevance in the digital luxury space. The challenge lies in the uncertainty related to traffic and customer conversions (i.e., number of visitors versus actual purchases) in the metaverse, given it is a fairly new and evolving commerce space with limited historical data.

Flourish is considering the metaverse as its new investment because the metaverse platforms and spaces are already developed, maintained, and marketed by external companies. The allows Flourish to take advantage of entering an existing space with an already established and growing user base.

To make an informed decision, we will assist Flourish in assessing the potential customer traffic and expected conversion rates to determine if there will be a significant impact on brand image from their designer virtual home goods. Flourish managers indicated they are not interested in moving forward with the investment if it does not reach their brand image benchmarks for new investments. The estimated cost for this investment is $500,000.

Brand Image Impact, BI:

BI = Traffic to Metaverse Shop * Expected Conversion Rate * Brand Image Coefficient (BIC)

Model Assumptions:

• We will estimate traffic at 250,000 to our Flourish metaverse space, based on overall user data from metaverse companies. We will keep this traffic number constant in our analyses.

• We will also predict the conversion rates are slightly lower than Flourish conversion rates from their online shop and in-store given the smaller customer base and lower recognition of purchasing on the metaverse. 

To assist Flourish's team in deciding to invest to grow revenues, we conducted the following analyses.

As part of Flourish's strategy to strengthen its digital brand image, management also wants to consider the development of an augmented reality (AR) shopping experience. However, the decision to invest in this project is contingent on the outcome of Managerial Challenge 1, where we evaluate whether investing in virtual Flourish products for the metaverse will positively impact overall brand image. The AR platform decision is part of Flourish's long-term digital strategy goals to continue to refine and expand its digital presence. So, this decision will be analyzed and decided upon once we have reached a conclusion in the metaverse investment.

In this investment decision, Flourish will be required to build and integrate their own AR platform, unlike the metaverse where Flourish can enter existing digital spaces. This AR store would existed and be branded as a Flourish shopping space. With the AR strategy representing a larger strategic and financial commitment for Flourish leadership, they have asked us to consider it as a second-tier decision that will only be considered if the metaverse initiative proves effective at strengthening the brand's digital presence.

If an AR storefront were to be developed, it would allow customers to explore and interact with Flourish's products in a very personalized and immersive setting while viewing and shopping for products in their physical home. The specific investment and customer conversions will vary based on the product mix best suited to fit the AR space and have the strongest impact on brand image. Three potential AR experiences include offering:

• Physical goods only

• 80/20 mix of physical and virtual goods

• 50/50 mix of physical and virtual goods

Where the expected cost of investments for each offering is 635,000; 700,000; and 680,000 respectively.

Brand Image Impact, BI:

Similarly to the metaverse decision, Flourish managers want to analyze how the AR shopping experience will affect Flourish's overall brand image, with the Brand Image Impact formula remaining the same:

BI = Traffic to AR Shop * Expected Conversion Rate * Modified Brand Image Coefficient (BIC)

Where:

• Traffic to AR shop will be estimated at 10,000, based on estimates of Flourish customer data and industry data on AR shopping experiences. We will keep this traffic consistent in our analysis.

• Expected conversion rates will differ based on what product mix is offered, as consumer behavior may shift depending on the type of products available.

• BIC will change depending on the product mix and the ratio of physical to virtual goods as managers expect and increase in virtual goods to pull down the overall contribution of one conversion to overall brand image. 

A summary of our analyses for this decision are provided below.

Our team developed a strategy to help Flourish, a luxury home décor retailer, elevate its brand image by embracing emerging digital platforms. We explored expansion into the metaverse and proposed the creation of an augmented reality (AR) storefront, showcasing a curated blend of physical and virtual products.

These initiatives position Flourish as a digital innovator, reinforcing its exclusivity and forward-thinking brand identity. We recommend investing in metaverse-based marketing and launching an AR storefront with an 80/20 physical-to-virtual product mix.

Based on our analysis, this approach is expected to generate a brand impact score of 848, exceeding Flourish’s target threshold, and significantly enhancing its visibility among tech-savvy, design-conscious consumers.