In the lap(top) luxury realm

Dior techE-commerce historically has been of little interest to luxury retailers, who believed discerning customers would never spend small fortunes on items without feeling the quality and fit of the material in person, or receiving superior customer service in bricks-and-mortar stores.

How wrong they were. Recent years have seen major luxury groups investing millions in digital platforms and players to fast-track their e-commerce capabilities.

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Louis Vuitton owner LVMH was recently the lead investor in fashion search platform Lyst’s latest funding round, which closed somewhere between US$67 and US$134 million, according to Reuters. This follows its launch last year of 24 Sèvres, an online platform for more than 150 luxury womenswear brands, including Louis Vuitton, Christian Dior, Chloé and Valentino.

Meanwhile, Cartier parent Richemont in May completed its takeover of online-only luxury fashion company Yoox Net-A-Porter (YNAP) after offering US$3.32 billion to increase its stake in the company from 25 per cent to nearly 95 per cent. YNAP will de-list from the Milan Stock Exchange on June 20.

Analysts say these deals are paying off. In a presentation to investors earlier this year, LVMH CFO Jean-Jacques Guiony said the group’s digital sales increased by 30 per cent in 2017 to around US$3 billion. This presumably includes revenue from 24 Sèvres as well as sites for individual brands.

Kering-owned Gucci recently saw online sales more than double in the first quarter of FY 2018.

“That’s a pretty clear statement that there is a pay-off here,” Gartner analyst Thomas O’Connor told IRW.

According to O’Connor, who previously led the Australia/New Zealand supply chain department for Louis Vuitton, e-commerce now accounts for around 9 per cent of luxury sales globally. McKinsey & Company predicts online sales could account for as much as 20 per cent of the overall luxury market by 2025.

Much of this growth is being driven by millennials, who are driving the growth of e-commerce across categories. Australia Post’s annual Inside Australian Online Shopping Report on Monday showed that younger consumers were largely responsible for the 18.7 per cent jump in online spending in Australian last year.

According to Australia Post’s report, Australians spent $21.3 billion online last year, with fashion the top-selling category, increasing 27.2 per cent in the past year, health and beauty products growing 13.2 per cent and homewares and appliances growing 10.9 per cent.

How to deliver luxury experiences online

But even as luxury retailers see an opportunity to profit from e-commerce, they face many of the same challenges around data quality and software integrations that traditional retailers do, as well as unique challenges, such as how to convey that high-end feel online.

A sort of shorthand exists that signals to customers they have entered a luxury store. There may be marble floors, brass fixtures, designer furniture, incredibly attentive and knowledgeable staff. It is harder for luxury retailers to differentiate themselves in similar ways online. Can they use higher-end fonts? Can they ensure better uptime?

At the end of the day, luxury goods purchased online likely arrive in the same brown cardboard box as an Amazon order. In fact, as O’Connor points out, luxury retailers are far less likely than other retailers to put their branding on the outside of packages due to the increased risk of theft.

“The problem luxury retailers have when it comes to online as a standalone channel is that differentiation only goes up so many levels. You can’t go as far as you can in a store environment. It’s really about taking away friction,” O’Connor said.

Still, he suggests there are “small touches” where luxury retailers can set themselves apart.  

“It’s more around the reveal…what happens inside the box. Some retailers include the shopping bag you would get if you went to a bricks-and-mortar store to be as close to the in-store experience as possible. You may see the brand name on the inside of the box. These touches are where we’re seeing retailers differentiating,” he said.

One place where luxury retailers may have a head start over their mid-market counterparts is around customer data. O’Connor said luxury players have traditionally done a much better job at capturing that data at the point of sale. The challenge now lies in matching that data up with online shoppers.

“They typically have good data already…that’s where they’ll likely be able to move faster. But the data quality issue is still a challenge,” he said.



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