There aren’t very many consumer goods that you can’t buy online. That’s because consumer demand and lowered overhead have made e-commerce the preferred sales channel in almost every major industry. Oddly though, there’s a particular sector that has continued to swim against the tide.
Luxury brands are conspicuously absent from the online marketplace. In fact, many are actively fighting to remain so. Now, some have come around in recent years and started their own forays into e-commerce, but the majority have not. There are plenty of reasons for their hesitance, but overcoming the obstacles, perceived and real, could be the key to long-term survival. They can’t remain offline forever; their customers won’t allow it. Here are the challenges that luxury brands face online and what comes next.
Brand Protection and the Amazon Threat
For luxury brands, the biggest obstacle to online sales can be summed up in a single word. Amazon. This is the case for several big reasons. First, Amazon is antithetical to the very idea of high-end luxury brands. Their entire platform is about price and competition, not exclusivity. That means that entering the online marketplace via Amazon would put luxury brands in direct competition with cheaper alternatives. That would not only destroy the brand value that some companies have spent years to create, but would also force price reductions that could make their luxury designations irrelevant. That goes a long way towards explaining why 75% of high-end brands refuse to work with Amazon in any way.
Perception vs. Reality
Another factor that has prevented luxury brands from moving into the e-commerce space is their belief that consumers wouldn’t feel comfortable buying big-ticket items online. That may have been true in the early days of the internet, but that seems to be changing. Online luxury retailers like Farfetch have seen their average purchase prices rise almost every year since their inception. This is partially due to the fact that the average age of those in emerging markets that purchase luxury items is now about 34 years old. That demographic cohort has grown up with the internet and is far more comfortable spending money online than previous generations.
Losing the Expertise War
There was a time when luxury boutiques cultivated a reputation as the ultimate experts in their field. They spent decades positioned as the most trusted source of product knowledge for their well-heeled customer base. Those days are over. Now, as many as 70% of luxury shoppers conduct some or all of their product research online. This has taken away a key sales tactic used in stores, which was to exploit the knowledge gap between staff and customers. One look at the wealth of information and specificity found in online shopping guides illustrates the point that consumers now hold the informational advantage in any luxury item transaction.
The Customer is Always Right
There is one inescapable conclusion that all luxury brand managers must face. It’s that consumers want to be able to shop for anything and everything online. That alone guarantees that the luxury market must embrace online sales or face irrelevance. The market forces will only become stronger with time. The fact is that the target demographic of luxury brands is about to get a whole lot younger, as baby boomers transfer almost $30 trillion in wealth to their children in the coming years. That presents a unique opportunity for whichever brand finds a winning online sales methodology. In a high-margin market, whoever gets it right stands to gain a fortune.