Why luxury is finally embracing ecommerce

If retail real­ly is the­atre, then no one puts on a show quite like a high-end store. Giv­en that a card­board box on the doorstep can’t real­ly com­pete with the lux­u­ry bou­tique expe­ri­ence – all exquis­ite­ly taste­ful dis­plays and cour­te­ous­ly atten­tive staff walk­ing the mar­ble floors – it’s hard­ly sur­pris­ing that lux­u­ry brands were ini­tial­ly scep­ti­cal about ecom­merce. 

Estab­lished in Lon­don in 1934, Ettinger is a man­u­fac­tur­er of fine leather goods. The firm start­ed its etail oper­a­tions in 2009. Its chair­man and CEO, Robert Ettinger, recalls that “we – like many oth­er lux­u­ry brands – weren’t sure at first whether we should have a web­site. Back then, it was con­sid­ered wrong to sell lux­u­ry online, because lux­u­ry was also very much about the per­son­al expe­ri­ence. Many of us resist­ed for a few years, because we were all con­cerned about the dam­age that going online might do the brand. But then we start­ed see­ing lux­u­ry brands open­ing their ecom­merce web­sites one by one, so we felt we need­ed to try it too.”

Not every lux­u­ry brand has had such qualms. Cham­pagne Boizel – a busi­ness that’s exact­ly one cen­tu­ry old­er than Ettinger – was an ear­ly adopter of ecom­merce by anyone’s stan­dards. It opened its online store in 1997, becom­ing the first cham­pagne house to take the plunge.

“The chal­lenge then was to con­vince cus­tomers to buy online, which felt inse­cure at the time,” recalls its CEO, Flo­rent Roques-Boizel. “Ecom­merce has grown for us in recent years and then the pan­dem­ic had a big effect on sales through this chan­nel. They increased by more than 50% in 2020.”

And, just over two decades ago, Net-a-Porter proved that the lux­u­ry sec­tor could not only do ecom­merce, but also do it very well. The company’s pres­i­dent, Ali­son Loeh­nis, says: “We’ve always worked on the idea that we bring the store to you, wher­ev­er you are in the world, on your terms and when­ev­er you need it.” 

The pre­vi­ous time this tra­di­tion­al­ly staid sec­tor had expe­ri­enced such dis­rup­tion was in the late 1980s, with the emer­gence of the lux­u­ry con­glom­er­ates LVMH, Ker­ing and Richemont, which owns what is now known as YOOX Net-a-Porter Group. Today these behe­moths, which have swal­lowed sev­er­al long-estab­lished lux­u­ry hous­es, are putting their con­sid­er­able weight behind an ecom­merce rev­o­lu­tion. Along­side them is Far­fetch, which has used cut­ting-edge tech to increase its sales by 46% in the first quar­ter of 2021.  

Chi­na, whose con­sumers will spend £178bn a year on lux­u­ry goods by 2025, accord­ing to McK­in­sey, is dri­ving much of the sector’s growth – and col­lab­o­ra­tion – in ecom­merce. In Novem­ber 2020, for instance, Richemont and Aliba­ba announced that they were joint­ly invest­ing £780m in Far­fetch to devel­op the Chi­nese mar­ket.  

Ker­ing, mean­while, has increased its stake in Far­fetch by £35m through its invest­ment vehi­cle, Groupe Artémis. This move may lead to a con­nec­tion between two of the biggest lux­u­ry ecom­merce plat­forms – Far­fetch and YOOX Net-a-Porter – that could give them Ama­zon-lev­el dom­i­nance in their sec­tor.

For its part, Ama­zon is launch­ing Lux­u­ry Stores. But, despite the offer of spe­cial­ly cre­at­ed store­fronts and addi­tion­al con­trols for lux­u­ry brands, the con­cept has attract­ed lit­tle enthu­si­asm from them so far. LVMH, for instance, has already declared that it will not get involved. 

As a senior man­ag­er at one lux­u­ry brand says: “Ama­zon is great at what it does, but it’s seen very much as ‘pile it high; sell it cheap’, while our sec­tor is all about exclu­siv­i­ty and pro­tect­ing the brand image.”

The biggest etail chal­lenge for most lux­u­ry brands is to align their prices online with those in phys­i­cal stores, observes Luca Sol­ca, MD, lux­u­ry goods, at Bern­stein Research in Switzer­land.

“The risk is not the brands direct­ly offer­ing low­er prices online for their prod­ucts. Rather, it is the brands’ whole­sale cus­tomers,” he explains. “This is the rea­son you saw such a sig­nif­i­cant reduc­tion in whole­sale expo­sure, with brands such as Guc­ci, Pra­da, Burber­ry and Dolce & Gab­bana cut­ting their whole­sale.”

Lux­u­ry shoe­mak­er Crock­ett & Jones is well aware of this fac­tor, says its ecom­merce and mar­ket­ing direc­tor, James Fox. “We don’t want to enter a dis­count­ing war by dis­count­ing prod­ucts to entice a cus­tomer to a web­site,” he stress­es. “This would have a neg­a­tive impact on our rep­u­ta­tion. We work hard on not becom­ing anoth­er dis­count brand.”

Fox con­tin­ues: “Embrac­ing ecom­merce draws us, and oth­er com­pa­nies, into a faster-paced sales envi­ron­ment all around the world. It’s hard­er to con­trol – and at Crock­ett & Jones we have a very strong pric­ing strat­e­gy.”

Pric­ing issues aside, main­tain­ing the lux­u­ry expe­ri­ence is essen­tial for brands as they devel­op their etail oper­a­tions. 

Loeh­nis explains: “At Net-a-Porter’s high-tech dis­tri­b­u­tion cen­tre, a crane selects your prod­uct and puts it on a con­vey­or belt with­out a human in sight. But then your prod­uct is painstak­ing­ly wrapped by hand and tied with a rib­bon. That com­bi­na­tion of ana­logue and dig­i­tal works real­ly well for the lux­u­ry sec­tor. Tech­nol­o­gy pro­vides speed and pre­ci­sion, but it must allow for a human to add that per­son­al touch.”  

She adds Net-a-Porter gives “extreme­ly impor­tant peo­ple” – the 3% of its cus­tomers who account for 40% of its rev­enue – access to new prod­ucts before any­one else. It also offers them style con­sul­ta­tions and a per­son­al shop­ping ser­vice.

Tra­di­tion­al British menswear brands have tend­ed to find ecom­merce a chal­lenge, but they’re work­ing hard to move with the times. Your tai­lor may not be present in per­son to mea­sure you up, but there are now online alter­na­tives to that expe­ri­ence. 

Fred­die Bri­ance is CEO at New & Ling­wood, a gentlemen’s out­fit­ter that’s been in busi­ness since 1865. “The chal­lenge for us has been to build our exper­tise rapid­ly in dig­i­tal while mak­ing the sig­nif­i­cant changes to our prod­uct mix and oper­a­tional mod­el that enable us to be suc­cess­ful online,” he says. “For us, per­son­al­i­sa­tion is cen­tral to the lux­u­ry expe­ri­ence. Last year we start­ed offer­ing a dig­i­tal ser­vice that allows our cus­tomers to design a cus­tom dress­ing gown from our broad selec­tion of silks. Based on the very pos­i­tive response to that, we will be expand­ing this ser­vice into oth­er cat­e­gories this year.”

Lux­u­ry brands are even start­ing to use advanced tech­nolo­gies to engage with younger, dig­i­tal-native con­sumers. Lelio Gavaz­za, exec­u­tive VP of sales and retail at Bul­gari, explains: “Gen Z loves tech­nol­o­gy but also craves inter­ac­tions. At the end of 2019 we start­ed offer­ing a ‘vir­tu­al try-on’ facil­i­ty, enabling cus­tomers to see our cre­ations in aug­ment­ed real­i­ty. They can per­son­alise select­ed jew­ellery and acces­sories with let­ters and sym­bols, for instance, and see the pre­view in AR. Our group gift­ing ser­vice, with per­son­alised video mes­sages, is also much appre­ci­at­ed by the younger gen­er­a­tion.”

Done well, ecom­merce is not mere­ly anoth­er sales chan­nel; it’s a way of engag­ing more deeply with cus­tomers, curat­ing col­lec­tions, tai­lor­ing prod­ucts and enhanc­ing cus­tomer ser­vice – which is very much what lux­u­ry has always been about. 

“There’s so much more to do,” Loeh­nis says. “Tech­nol­o­gy opens up so many oppor­tu­ni­ties to make the whole lux­u­ry expe­ri­ence even bet­ter.”