Luxury fashion retailers are gaining ground online — but they’re still lagging much of the retail industry when it comes to digital sales.
Despite recording a 13 percent jump last year, online still accounts for just 8 percent of the total luxury market’s revenue, according to the latest report by Bain & Company. That’s less than half the penetration of the broader apparel and accessories categories, according to eMarketer.
This shortfall stands at odds with the fact that many of the luxury category’s core, affluent shoppers, are more likely to shop online than are the broader population.
“Luxury brands were late to the digital game,” Hana Ben-Shabat, a partner in A.T. Kearney’s retail practice, told CNBC. “The reasons for that is the purest view of luxury has always been about exclusivity.”
Things have slowly been changing over the past few years, after the fashion industry realized its historically analog business no longer jibed with reality. Indeed, a recent study by FTI Consulting found that 66 percent of affluent households, defined as those with an annual income of $100,000 or higher, buy online at least once a month. That compares with just 58 percent of households earning less than that amount.
“The customer has evolved,” said Brendan Witcher, a principal analyst at Forrester Research. “Now they equate digital with the words ‘value’ and ‘efficiency.’ It doesn’t have the same connotation.”
Brands including Burberry and Rebecca Minkoff have been ahead of the curve, including making their runway products available immediately following their fashion shows. Still others, like Carolina Herrera and Elie Saab, do not even have their websites configured for online selling.
Generally speaking, it’s harder for luxury brands to get their own websites up to speed, as they don’t have the same amount of customer data as a third-party retailer like Net-a-Porter or Neiman Marcus, Witcher said. Yet many that are tackling their own sites are doing a better job.
Business management consultant L2’s analysis noted a significant jump in the percentage of luxury brands offering free shipping on all online orders. While only 37 percent provided this service in 2015, that number jumped to 71 percent last year. Complimentary shipping has helped luxury shoppers become more comfortable with spending thousands of dollars online, as “they know that there is always the ability to return,” Ben-Shabat said.
Luxury brands have also done a better job making their sites easy to navigate, Witcher said. In the past, their sites were complicated as they sought to bring the same high-brow experience of their stores onto the web. But not every customer wants to spend hours learning about the brand’s history or watching its latest fashion show.
“We have to stop treating every consumer like they have the same needs and wants,” Witcher said.
Still, there’s one place where most luxury brands are in agreement: Amazon. Though a handful of affordable fashion labels like Kate Spade sell merchandise on the site, LVMH CFO Jean-Jacques Guiony told analysts in October there is “no way” its brands can do business with Amazon for the time being.
Shabat agreed that in its current iteration, Amazon’s mass distribution does not fit with the luxury market’s desire for exclusivity. But as it builds out more high-brow experiences like the Echo, Amazon’s status could change, Witcher said.
“They’ve become so much more than a retailer,” Witcher said. “If I have Echo and I always buy Chanel perfume, is it really such a bad thing for me to say to Amazon Echo, ‘Hey, order me more Chanel perfume?’ That’s not a low-class experience. It’s a high-class experience.”