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Keys to ecommerce in luxury brands: strategies that make the difference

Until very recently, digitalization in the luxury brand industry was not considered a priority. Basically because the concept of exclusivity was not compatible with the massive access that the Internet has provided to all products and services. However, luxury ecommerce turnover figures tell a different story and have pushed luxury brands to reconsider the importance of going digital.

Online retail, for example, has seen the largest growth in the luxury goods market in recent years. With a total turnover of 19 billion euros, the European luxury ecommerce market is in third place, just behind the United States and Japan. Therefore, ecommerce is the engine of the digital revolution in the luxury industry. Although luxury brands initially only created websites or display applications in their brand and communication strategies, they later also created online stores or turned to sales channels suitable for the industry, such as YOOX, Tmall, Style.com, Galeries Lafayette and Harvey Nichols.

According to the McKinsey Digital Luxury Experience Study, digital sales represent less than 10% of all sales in the luxury goods sector, but have shown a much higher growth rate of +27% since 2010 compared to in-store sales, which grew. by only 7%. This upward trend is expected to continue in 2024 - 2024.

The trends indicate that becoming more digital is a critical aspect for luxury brands. But how?. In this article we will share some strategies that luxury brands have implemented in their evolution towards a global and digitized market, where ecommerce is the new level to conquer.

Go for it!

ecommerce luxury brands

What is luxury ecommerce?

Luxury ecommerce refers to the online sale of high-end products. Often a designer. Brands that sell luxury products and services offer customers an exclusive shopping experience, from personalized references to unique packaging that delivers the feeling of opulence from the website to the doorstep.

In fact, some fashion houses, such as Gucci, Saint Laurent and Boucheron, offer various multi-channel services within the Kering group, for example giving customers the opportunity to check the availability of products in the online store. Gucci has even added a geolocation function to this service.

Comparatively with Versace, it was one of the first fashion houses to offer its collection online, a few minutes after its debut on the catwalk. Today, Burberry also hosts two fashion shows a year which are then available online the day after their runway presentation. Tom Ford did the same and inspired the CFDA's “see now, buy now” model.

As a relevant fact, one of the fastest growing, although most challenging, markets for luxury brands is… China. In this case, brands need to be developed on Chinese online platforms such as WeChat and Weibo, as well as e-commerce platforms such as Tmall and JD.com. Here brands can maintain their identity and benefit from special sales periods in the Chinese market, but they must be alert to counterfeits, which are especially prevalent in Asia.

Some key facts about luxury brands in ecommerce

The global luxury market has sustained significant growth in recent years. At a rate of 18.4% annually, the market increased from $243 billion in 2020 to $341 billion in 2022. However, not all brands can compete. ECDB data show market concentration, major brands and their e-commerce sales.

Louis Vuitton, Chanel and Dior are the top three luxury brands by net sales, but the latter two only make a minor proportion of their sales online. Considering only e-commerce sales, Lao Feng Xiang and Coach remain in first place for Louis Vuitton.

ONLINE SALES OF THE TOP 3 LUXURY BRANDS 2020-2022.

Looking at online sales in recent years, all companies could significantly improve their sales in 2021 compared to the previous year, especially Coach and Louis Vuitton. The latter occupied first place in the luxury market that year with online sales of 2.6 billion dollars.

All brands followed the temporary downturn that characterized most e-commerce markets in 2022. However, the extent of losses varied among players, with Louis Vuitton still managing slight growth as the only one of the top three brands.

Increases market concentration of the best brands

During the pandemic, from 2020 to 2022, the top 25 brands have increased their market concentration by 2.7 percentage points. However, the top three brands have decreased their overall market share.

In 2021, the top three luxury e-commerce brands lost market share, which fell from 13.8% to 13.6%, followed by an even further decline to 13.1% the following year. The top ten brands followed an opposite trend. The online market share showed an improvement in 2021, going from 31.2% to 31.9%. In 2022 it increased to 32.4%.

ONLINE LUXURY MARKET CONCENTRATION 2020-2022

The top 25 luxury brands ranked by e-commerce net sales experienced the most notable growth between 2020 and 2022. In 2020, they had a market share of 51.9%, which increased to 54.6% in 2022.

Online sales in the sector are expected to triple by 2025.

According to a recent report by Luxe Digital, the proportion of global luxury sales made online is expected to triple by 2025, reaching $91 billion.

The report also found that a consumer's online experience influences at least 40% of all luxury purchases. If you're reading this and you're a high-end retailer, you'll want to soon find new ways to attract wealthy customers online.

Let's see below some strategies to better position yourself and boost sales of luxury brands.

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Strategies to improve sales in ecommerce of luxury brands.

1. Attract millennials and Generation Z

The luxury goods market has reached a new normal of lower growth. To be successful, brands will need to focus on anticipating and meeting customer needs younger.

Research from Bain & Company and Farfetch estimates that millennials will make up 40% of the global luxury market by 2025. Analysts also say the appeal of luxury products to Generation Z consumers is tied to a rise in wealth creation in recent years, along with social networks.

To truly resonate with millennials, luxury fashion brands must also rethink distribution channels and product offerings. They need to focus on what millennials are most likely to buy: right now, it's comfortable but high-end items.

2. Tell a very good story

Social media is one of the most common ways shoppers discover new products, and you can help them by interacting with them in a meaningful way. This is especially critical during the discovery phase of your brand.

To drive engagement, create stories that resonate and encourage people to like your posts and respond through comments.

On the other hand, you must respond to direct messages or comments. Take advantage of the opportunity to show your brand's personality: be proactive and highlight your love for your business.

Luxury brands have a big advantage over other companies: a deep history. The world's second most recognized luxury brand, Chanel has a heritage dating back more than 100 years. The brand shares its stories through the Inside Chanel series on its e-commerce site. It features 32 short films that tell the story of culturally defining moments, and how the number 5 came to life.

Do you have a long brand history? Here are some ideas:

  • Determine key moments of your brand and turn them into a short film.
  • Provides insight into the manufacturing process behind best-selling items.
  • Incorporate celebrities or influencers into your store and share the content on social networks.

3. Offer fast shipping or pickup options

Luxury brands must boost their investments in ecommerce to deliver a seamless multi-channel shopping experience. One of the best ways to stand out isn't revolutionary, but it makes a difference: offering fast, free shipping.

With so many brands offering same-day delivery in many markets, some high-end e-commerce stores have followed suit. Louis Vuitton offers free delivery or the ability to pick up or return items in store, and there are no tariffs for international orders.

4. Personalize your customers' journey

It's actually not something new. The luxury market has known the importance of personalization for years. About 70% of consumers spend more with companies that offer personalized customer experiences.

Luxury shoppers are used to receiving special, individualized treatment in physical luxury stores. They are treated like VIPs, with access to personal shoppers and exclusive shopping events.

Some stores also offer custom selections to customers for last-minute fashion emergencies. The personalized experience is another reason why millennials like to visit a store first. However, with innovations such as artificial intelligence and machine learning, they can get a similar personalized experience online.

In an increasingly global e-commerce market, casual luxury brand Rebecca Minkoff personalizes its global experience with IP geolocation. It's a smart strategy because unexpected costs, like exchange rates, can greatly affect the likelihood of a customer abandoning their cart.

The luxury e-commerce site updates currencies automatically in over 100 countries and over 70 currencies. That way, customers know exactly what they will pay for before adding it to the cart. Buyers can also select their preferred location and currency.

5. Be a digital-first brand

Digitally native luxury fashion brands have an advantage. These companies have the advantage of having captured the hearts and minds of millennial buyers. And they are moving into the physical retail space.

Mr. Porter is the sister site of Net-A-Porter. It serves luxury menswear and lifestyle brands, which is another growing luxury customer base. Like Net-A-Porter, Porter offers premium omnichannel support to its top customers, known as EIPs (or extremely important people).

The service includes a dedicated personal shopper and early access to offers and product launches with reserved pricing. Non-EIPs can access 24/7 customer support or fashion inquiries via phone, email, or live chat.

For those who shop on their app, carts and wish lists automatically sync with Mr. Porter's online accounts. It's a seamless on-the-go shopping experience.

Clients do not have to request VIP treatment to receive it. Ecommerce automation can help you set up an always-on VIP experience by identifying and segmenting important buyers with back-end workflows. These include a prompt to send handwritten notes to your VIPs when they spend more than a certain amount in your online store.

Luxury fashion retailers are taking note. E-commerce can offer an equally engaging customer experience with the right tools. and technology is getting better every day.

Now is your turn!

To grow online, traditional brands must adapt, know the trends and implement the technology that accompanies business strategies. Brands like Chanel and Louis Vuitton have shown that the e-commerce opportunity is there and will continue to grow.

Luxury brands must take social and environmental responsibility, adapt their product offerings for a growing customer base, and provide more experiential online shopping options.

Combined, these strategies will help you prepare your business luxury for the future and to win with ecommerce. Will you be ready?

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