As luxury labels expand online, they face tough challenges to their brands
As retailers battle falling foot traffic, e-commerce is becoming increasingly critical for their bottom line.
Now, even luxury brands that have long held off digital sales are getting in the game. Prada announced this week that it’s establishing an online retail store this year, part of an effort to combat falling sales. LVMH Moët Hennessy Louis Vuitton is reportedly in the midst of creating an e-commerce platform to sell goods from across the luxury conglomerate’s portfolio, which includes Dior, Louis Vuitton and Givenchy.
While these brands have previously sold some merchandise online with retail partners such as Neiman Marcus and Bergdorf Goodman, this is the first time consumers can buy nearly all of their new bags, accessories and other items online. This e-commerce expansion means those in flyover country who didn’t have easy access to say, Jeff Koons’ new LV collab, could soon be just clicks away.
Prada and its counterparts are trying to get into a rapidly expanding market that has been dominated by multi-brand retailers like Saks. McKinsey, a consultancy, projects that sales in women’s luxury fashion sector is expected to grow by 17% between 2015 to 2018. The global market for online women’s luxury is also expected to reach $12 billion next year.
A recent report from the Boston Consulting Group found that 58% of all luxury sales are already digitally influenced, meaning that they were researched online, purchased off the internet or both. “Gone are the days when luxury revolved around traditional marketing and face-to-face interactions exclusively at the store,” the report’s authors wrote.
Yet, making it too easy to get your hands on a luxury item isn’t necessarily good for business. “Luxury is about being known by all, but accessible only to a few,” says Audrey Azoulay, a luxury marketing professor at Boston College. “Prada will worry about losing exclusivity, but it can compensate by offering other kinds of exclusivity.” She thinks this likely means Prada and its competitors will have to offer consumers a different experience, setting up VIP clubs and restricting the sale of some items to just its major flagships.
One group that might lose out are customers in cities that currently have sparsely frequented luxury boutiques, since brands will find it harder to justify the cost of setting up shop there when they can reach the consumer online. Coach last year said it would shutter 250 doors in America and while it didn’t detail specifics, Middle American towns with relatively small populations were reportedly slated to bear the most cuts. Indeed, even immensely profitable LVMH has cut its door count in China, while Prada is planning to offset new boutiques by closing older ones.
“Louis Vuitton can never say no to a store on the Champs Élysées because it’s the best advertising, but they might want to close smaller stores in mid-sized cities,” Azoulay says.
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