If luxury ecommerce has proven anything, it is to be resilient and innovative. Adopting cutting-edge technological trends to attract a younger, more demanding and digital clientele. It's a big market where the data shows up as shiny as sequins.
By 2024, the luxury market is expected to grow between 2% and 4%, with regional and national variations, according to a McKinsey analysis. Luxury retail is estimated to reach at least €305 billion this year due to strong demand in Europe and the United States, while local consumption remains important in China. For its part, according to Statista, the most important sectors for the luxury industry in 2024 will be:
- United States with projected revenues of 126 billion dollars.
- China with projected revenues of $123 billion.
- Japan with expected revenues of $22 billion
Luxury resale is also expected to increase in 2024 as more brands take control of their second-hand markets. An increasingly stronger trend. The 1% will continue to buy luxury goods, but other classes may regress. The personal luxury market is expected to grow between 3% and 8% over the next year, according to Bain & Company.
Everything seems to shine with a powerful light, although some analysts assure that the bubble has already burst. What can we expect? In this article we will share some luxury e-commerce trends for 2024 and what we can expect to happen in this exciting digital market.
What's next for luxury ecommerce in 2024?
As online sales return to pre-pandemic levels—and amid a new appetite for in-store experiences—the luxury sector has gone to great lengths to give its customers the royal treatment: “Why would you want to settle for ordering a luxury product online from a multi-brand retailer when you could visit the luxury brand's flagship store and enjoy a glass of champagne while you shop?” A reflection that we read in Drapers.
Changing consumer behaviors are, not the only problem impacting luxury e-commerce platforms. Macroeconomic headwinds also negatively affect fashion retail. This is why luxury brands are changing their wholesale and digital strategies (one of the most anticipated launches of 2023, Phoebe Philo, was limited to DTC online) and these strategies are adding to the problems of the ecommerce sector of luxury.
"Brands are evolving their wholesale policies, introducing tactics such as e-concessions [which give brands full control over pricing and products] and supply delays, all of which challenge the cost and quality of supply for multi-brand retailers." says Carol Hilsum, co-founder of StudioThree, a consultancy specializing in innovation within the fashion industry.
When people give up the luxury experience in physical stores in favor of online shopping, they are not only looking for convenience, but also a broader choice when it comes to products.
Compared to the physical store and website of luxury brands, e-commerce platforms often only offer a limited view of a brand's offering, based on the selection that was purchased specifically for the online retailer or what is available from associated market companies. Which makes it necessary to increase the offer of online products.
Luxury brands are increasingly adopting technology
A trend that we already saw in 2023 that will undoubtedly continue in this new cycle. Luxury brands have been strengthening their workforce with more technology hires, as they explain to Drapers. These talent acquisitions have allowed luxury brands to develop a strong digital presence that was normally reserved for their e-commerce distributors. Choosing to invest in internal talent closes the digital skills gap between luxury brands and luxury multi-brand retailers.
Luxury retailers are also turning to discount-based strategies to drive traffic to their websites. Luca Solca, senior global luxury goods research analyst at Bernstein, said: “Specialist multi-brand players, both marketplaces and retailers, must attract traffic without mega-brand traffic creators who can sell directly through 'brand.' .com'."
“In most cases, they end up attracting traffic thanks to discounts and promotional incentives (which often comes at a cost to relationships with luxury brands who want to avoid cut-price sales to maintain their reputation). But then, when can they start making money?
Solca says there are “only two viable strategies” to do so:
- “(The first option is) to shamelessly work as an arbitrageur of regional price differences, while sourcing from European retail. Much of (Chinese luxury e-commerce platform) Secoo's past success depended on that and (Australian luxury online fashion platform) Cettire appears to be another example of this approach (of buying European luxury goods for less and transfer costs to their respective markets).
- “[The second option is] to focus on consumers with limited access to luxury distribution and major media, while standing out in terms of curation capabilities: MyTheresa [which attributed its “strong customer growth” in the financial year to ended on June 30, 2023 to their Exclusive capsule collections and pre-launches in collaboration with luxury brands such as Valentino, Givenchy, Dolce & Gabbana, Bottega Veneta, Loewe, Zimmermann, Gucci and Etro] seem determined to follow this strategy,” he adds.
Although according to analysts, this may not prevent luxury brands from falling into the red. Many recommend that luxury e-commerce focus on sales forecasting and a “test and learn” approach, “ensuring a clear methodology for testing new processes and approaches in various parts of operations.”
In times like these, a realistic sales forecast is essential. Planning must be based on reality, as excess stock in a period of reduced long-term demand can create significant challenges for both brands and retailers. Agile partnerships with wholesalers will be crucial for brands. A blended sales approach between DTC and wholesale, online and offline, remains the strongest path currently, but it is essential to ensure the business plan is as agile as possible.
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Luxury eCommerce Trends 2024
Beyond the challenges and changes that the luxury e-commerce industry will continue to face, it is advisable to consider what the trends will be. Below we have compiled the most relevant ones.
1. More digital transformation.
Many of the world's most coveted brands have successfully negotiated the move to digital transformation. With 20% of luxury sales set to take place online by 2025* brands are improving their digital presence by updating their platforms to make them modern and fast, offering additional incentives for customers, such as personalized gift packages in stores; or VIP access to private events. They also interact more directly with customers through social media platforms such as WhatsApp and Facebook Messenger.
Several luxury fashion brands are turning to the latest technology. Louis Vuitton introduced a new online chatbot service at VivaTech in 2021, stating that thanks to artificial intelligence, more than 60% of customer requests can be processed 24/7. Gucci offers its customers access to online sales advisors and Chanel has been developing a virtual fitting room service in partnership with Farfetch.
2. The «live-streaming» gains popularity.
In China, live streaming has become so popular that it's almost an everyday lifestyle option, and now virtually every brand is on the Tmall marketplace. The luxury sector is no stranger to adopting the latest trends and hosting live events.
For example, Lancôme, part of the L'Oréal group, first launched Lancôme Happiness Nights in 2021 offering an immersive journey live from its store on the Champs-Elysées in Paris. Dior gave its clients exclusive access to its July 2022 fashion shows and the opportunity to chat 'live' with makeup artists and get beauty tips.
According to a McKinsey study, live shopping will account for around 20% of global e-commerce sales in 2026.
3. More direct sales and clientele in luxury retail.
While not exactly new, the trend of adopting more mobile solutions in retail is likely to continue, making store staff even more autonomous and better at their role.
Rimowa, the German travel accessories brand owned by LVMH, has equipped its sales staff with mobile POS devices, in a bid to improve customer service and reduce waiting times in stores. Mobile point-of-sale technology allows staff to browse inventory, process returns, and manage orders for in-store delivery or direct delivery to people's homes.
4. Virtual, augmented reality and spatial computing.
Virtual reality, augmented reality and spatial computing are the latest luxury retail trends. Many luxury brands are exploring the new world, including Louis Vuitton, Fendi, Dolce & Gabbana, Gucci, Ralph Lauren, Burberry and Prada. Louis Vuitton has created costumes for the characters in the League of Legends video game that players can purchase. In September, Dolce & Gabbana sold nine NFTs in the form of dresses, suits, tiaras and crowns for 1,885,719 Ether (a cryptocurrency), valued at more than 6 million euros. And some brands are accepting cryptocurrencies as a form of payment.
"Luxury is at the forefront of this new world because they share similar values: rarity, exclusivity, high-value items and the VIP dimension," says Eric Briones, director general of the Journal du Luxe.
A Morgan Stanley report from November 2021 estimated that NFTs and online gaming could account for 10% of the luxury market by 2030 and generate more than $50 billion in revenue. This new evolutionary stage of the web offers opportunities for brands by creating more fun and futuristic links with new generations. According to a 2022 GlobalData study, Millennials and Generation Z are expected to be key drivers of luxury growth in the Asia-Pacific market in the coming years.
5. Second hand and CSR
The second-hand luxury market continues to grow and reached a value of 33 billion euros in 2021, 65% more than in 2017. According to a study by the Boston Consulting Group, 70% of second-hand buyers make their first purchase luxury through vintage products. According to Bain & Company, the second-hand market could represent up to 20% of a luxury brand's revenue by 2030.
However, luxury brands have been slow to embrace the secondhand market. Except for some tentative steps (especially in watchmaking). Gucci designer Alessandro Michele reinvented an online store concept offering vintage pieces for his centenary during Milan Fashion Week 2021.
However, blockchain technology offers several advantages, such as better traceability throughout a product's lifecycle and proof of authenticity for second-hand buyers. It also helps promote more responsible and sustainable sourcing, something most luxury brands have been striving for for years. For example, Kering promises to achieve carbon neutrality by 2050; and Chanel has its 'Mission 1, Grade 5' program to reduce greenhouse gas emissions.
According to BrandZ Top 100 CSR Ratings for 2021, top luxury brands (Louis Vuitton, Chanel, Hermès, Gucci, Rolex, Dior, Cartier, Saint-Laurent, Prada, Burberry) improved their CSR ratings by 5 points over 2020, up to 114 in 2021. Something that is expected to continue happening in 2024.
Bonus track: the trend of «Experiential retail»
Experiential retail is the new buzzword for a holistic approach to the customer experience. It has been present in the luxury industry for a long time. We all know that what we sell is not just about the product itself. It's about how the customer feels when buying and using it.
Although not new to luxury retail, the way the trend spreads creates new tools that can be used in your business. We must invest in creating immersive and memorable experiences that go beyond the transaction. Whether hosting exclusive events, providing VIP access to limited collections, or integrating entertainment elements within the retail space, you should aim to make every interaction an unforgettable experience.
When it comes to taking advantage of this trend, it is necessary to invest in flexibility. You must be able to follow luxury retail trends and adopt new ways of attracting customers. Without a doubt, the first step to achieve this is to build an expandable software architecture that leaves paths open for future integrations.
Right now, artificial intelligence, augmented reality (AR), and virtual reality (VR) appear to be at the forefront of creating new and unique shopping experiences. Which they are already developing in companies like Apple, Nike and LUSH.
When it comes to ecommerce, it's all about the user experience and making online shopping as seamless as possible, pleasant and unique as possible. But in the era of omnichannel, experiential retail can be adapted for both online and brick-and-mortar stores. The latter provides more options to involve all the senses and turn the shopping experience into an attractive journey.
Now is your turn!
Luxury ecommerce is undergoing a paradigm shift in which technology, sustainability and inclusivity are becoming crucial conundrums in brands' strategies.
To keep up with the changes, the luxury shopping experience must become more immersive, personalized and socially responsible to reflect the changing values and preferences of the most discerning consumers. As these trends continue to evolve, the luxury industry is set to redefine the very essence of opulence and exclusivity in the coming years.
If you want your eCommerce platform to shine just like your brand, contact us here today to get your project started.
Digital Marketing Manager at Orienteed.