Luxury goods join the online retail battle

Published:  06 October, 2015

Department stores and online retail outlets may lose their e-commerce market share as luxury brands prepare to enter the online sales battleground.

LVMH Moet Hennessy Louis Vuitton SE and Hugo Boss are investing in online retail sales as growth in China slows. As the luxury goods makers join Web distribution, department stores and online outlets could lose much of their e-commerce market share. 

The level of online competition has increased in the past year, with distributors such as the French Galeries Lafayette raising funds or reorganising operations to sell luxury goods online. The French department store chain plans to double profit by 2020 by becoming an “omnichannel” retailer.

Conde Nast Inc., the publisher of Vogue magazine, is rebooting the fashion review site to sell luxury products and even Amazon has launched its advertising campaign to boost fashion goods’ sales through their channel.

Luxury brands such as Giorgio Armani and Valentino outsourced e-commerce because of the cost and complexity of selling online. Burberry Group, however, kept its online operations in-house; online sales accounts for about 10% of the company’s retail sales.

As reported by ILM in September, LVMH appointed former Apple executive, Ian Rogers as its Chief Digital Officer to strengthen the company’s digital sphere. 

However, this digital battleground is not just a matter of sales revenue. Analysts estimate that 9% of luxury sales will take place online by the end of the decade, which is nearly double last year’s share. The key strategy here is to capture customer data.

If Europe and the U.S are obvious targets for the online sales of luxury goods, it would be interesting to see the impact this digital development will have in the shopping behaviour among the millenials, 18-29 age group, in Asia Pacific as this consumer group plans to double spending on luxury goods next year but remain loyal to the physical store experience. Read more here.

Source: Bloomberg