The number of luxury consumers reached 330 million in 2013, up from 95 million in 1995, according to a study released by Bain and Company earlier this year. That’s a healthy 300% increase over almost 20 years.
The same study predicts that 10 million customers will be joining the segment every year, bringing the total to 400 million luxury consumers by 2020.
Luxury marketing’s goal is to adapt and capture the “new entrants” before they become loyal to a competitive brand.
Luxury Brands’ Reluctance to Sell Online
A decision luxury brands have struggled with is the adoption of eCommerce as an alternative to the traditional distribution channels: company-owned and department stores.
According to Elora Consulting, in 2015 only 20% of luxury brand sales will be generated by the online channel. The relativelly small percentage shows luxury brands’ reluctance to adopt eCommerce.
The question “Should luxury brands sell online?” generated a lot of discussion, with both sides offering some very solid arguments to support their opinion.
Arguments Against Selling Online
One of the biggest supporters of the idea that luxury brands should stick to their traditional offline retail strategy is Jean-Noël Kapferer. Jean-Noël is an expert in luxury branding and the co-author of “The Luxury Strategy”, a comprehensive guide on how to build luxury brands.
In his opinion a luxury brand that is sold online ceases to be luxury, for a few reasons:
- Online channel damages a brand’s elite and exclusive status. Ordinary brands use the online channel to provide customers with instant availability and convenience. Luxury brands on the other hand need to be selective and exclusive, so internet selling is rather a disadvantage.
- Online is often associated with lower prices. Luxury brands that sell online are automatically affected by this consumer perception, thus loosing their prestige and the ability to command a high price.
- Retail experience is part of the luxury brand story. The internet is a very impersonal shopping environment that not able to replicate the true luxury brand experience.
Arguments For Selling Online
The proponents of the online strategy see the luxury brands’ reluctance to embrace eCommerce as a missed opportunity to reach the new, modern luxury shoppers who are very comfortable with online shopping. Some of their arguments include:
- Wealthy individuals spend more time and money online than the average consumer. They feel very comfortable in the online environment and spend large amounts of money shopping for goods from the comfort of their home.
- Inability to target the next generation luxury shopper. The future generations of luxury shoppers grew up and are very comfortable in the online environment.
- Physical luxury retail store can be intimidating. Remember the Oprah incident in the Swiss luxury store, where the sales assistant refused to show her a luxury bag? Just like art galleries, some shoppers are reluctant to enter a luxury store, fearing they might be judged and even refused service.
My Personal Opinion
All statistics show the eCommerce channel is growing in double digits year after year. The nature of the product doesn’t seem to be a barrier, since these days you can buy almost anything online, from shoes to sunglasses, to even automobiles.
From a brand owner’s perspective, online sales means a broader distribution and instant access to a broad geographical market. Luxury brands should consider taking advantage of this opportunity, given the exponential segment growth.
That being said I don’t think the online strategy is suitable for ALL luxury brands. Below are some questions that should help luxury brand managers in their decision:
- Does the purchase decision depend on the client’s ability to touch, feel and try the product?
- Is exclusivity related to limited geographical availability?
- Is the place of purchase (such as specific city, or geographical area) the key driver in the purchase decision?
- Are counterfeit products a big issues in your product category?
- Is the luxury experience provided by the brand’s retail presence impossible to reproduce online?
- Will the online store make the product available to a category of consumers you don’t want associated with your luxury brand?
- Will the online channel cannibalize existing store sales?
If the answer to most questions is “Yes”, the online strategy is not appropriate for your brand. But before you answer, remember to explore all options to go around different obstacles.
For example, the concern that clients need to see and try the product in person might only mean that online availability is relevant to repeat customers, who already had know the brand and feel comfortable buying it online.
Exclusivity might be addressed by a membership store with restricted access based on very selective criteria.
As always, I am interested in your opinion on this topic. Do you think eCommerce is a viable channel for luxury brands?
Brought to you by: The “Brand Positioning 101” Workshop