Luxury brands have been reluctant to adopt digital commerce
For years, prestige goods companies have looked down on online sales channels, which they have perceived as inappropriate for an industry which is all about high-quality and exclusivity.
“We think for luxury it’s not right. It’s good in countries that don’t have the shop nearby.”
Many preferred keeping luxury in the rarefied world of high-end boutiques and department store glossy storefronts. They have mostly been using the online channel to showcase the brand, through institutional websites with limited product content and information.
Whilst many retailers have hesitated to adopt e-commerce for fear of store sales cannibalization, the reluctance of premium brands seems to have been mainly driven by a somewhat conservative view of the luxury shopping experience. This view has been largely supported by the stereotype of e-commerce as a discount channel on which it is difficult to perceive and experience the product quality.
Late 2013, Amazon decided to step out of the mass market and launched The Luxury Beauty Store, a beauty products sales site to attract prestige brands. This site competes directly with luxury cosmetics brands and leverages the marketplace’s muscle power (e.g. free shipping for orders above 35$ and free 48h-delivery for Prime customers).
Many premium brands initially refused to join Amazon’s new site, which they perceived as a grey market and low-price channel. They hoped to continue controlling their distribution and pricing, but had to rapidly review their strategy upon realizing their products were actually widely sold on the marketplace by third-party sellers. By officially listing on the Luxury Beauty Store, many of these brands managed to better control the distribution of their products on the platform.
Revenue growth of SMEs making extensive of the web (also referred to as “High-web”) is on average 22% higher than Low or No-web SMEs. In the UK, the e-commerce leading country, the difference can be as high as 500%.
Ralph Lauren, who jumped on the sales opportunity that the internet offered as early as 2000 – before many of its closest competitors – recorded a twenty-three percent increase over the same period.
Such difference can be explained by external and internal reasons, regardless of whether a business sells online or not:
Market & product exposure
The web is a cost-effective marketing channel as it enables mass visibility and laser targeting. SEO/SEM strategies drive traffic towards brands and CRM programs can significantly boost sales and build loyalty through online campaigns and personalization.