First came the seamstress with her evolved needlework and skilled tailoring, then the local shops offering bespoke styles, and international catalogues allowing you to order whatever you fancied. The ’80s were marked by home-shopping channels, high-end designer stores for your haute couture and a fast-fashion fixation. Shiny malls and all-under-one-roof mega stores soon seamlessly blended into our urban fabric. Then e-commerce was born and it blew the doors off our beloved boutiques.

Twenty years ago, Net-a-Porter’s business model to sell designer fashions on the internet was considered dubious. Surely high-fashion shopping couldn’t, in actuality, be acquired sight unseen and look untried? It was one thing to add a bevvy of Christmas gifts to the Amazon cart, another to buy a spanking new Hèrmes bag from a website.

Contact-less, frictionless, ceaseless shopping has been every big business’ dream, and whilst we aren’t there yet, 2020 served to upend our established shopping habits and shove us one step closer to online consumerism. While it might take more than a global upheaval to push brick-and-mortar retailers entirely to the digital marketplace model, the epic tussle between in-person stores and e-commerce platforms continues.

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E-Commerce Embargo
According to management consultancy Bain & Company, the e-commerce luxury shopping industry is at the threshold of a paradigm shift. It clocked in a whopping US$58 billion in 2020; compare that to US$39 billion sales in 2019 and you can judge for yourself the gravitation towards digital. Another top consulting firm, McKinsey, found that people who rarely shopped online before 2020 now make 80 percent of their fashion buys off the internet. That figure might see a dip once the pandemic is over and people want to feel luxury in the flesh once more, but for now, consumers have migrated to e-commerce at an astonishing rate.

Bain & Company predicts that by 2025, some 25 percent of all high-end purchases will happen digitally, and global revenues are expected to surpass an estimated US$136 billion. Yet, fashion houses like Dior and Céline, were slow to lift their e-commerce embargos in the fear of appearing too massy or less classy.
At a basic level, luxury is defined by exclusivity and rarity – take away the element of scarcity and even diamonds lose their demand. The lengthy waiting list for the Hermès Birkin made it the most sought-after designer bag in the world. In January this year, Bottega Venetta caused a massive marketing disruption after vanishing from the social-media universe. During the pandemic, when brands were increasing their digital footprint for wider reach, falling off the Instagram, Facebook, Twitter and Weibo grid was an unprecedented move, yet it reaped gains – both in the number of fan accounts and sales – for the luxury house.

“Some of the top names of the couture world were slow to lift their e-commerce embargos in the fear of appearing too massy or less classy”

Online VS Offline
Chanel follows a similar exclusivity strategy. Even a global health crisis could not push the brand digital. You may add Chanel’s fragrances, skincare and cosmetics to cart, but haute couture, fine jewellery and watches can only be bought in boutiques. Their business model is unlikely to change. Chief Financial Officer Philippe Blondiaux has stated categorically, “We don’t intend, crisis or no crisis, to sell fashion, watches and fine jewellery online.” The concept that a multibillion-dollar brand can exist in 2021 without online retail is both bold and titillatingly perverse.
Most customers today start their journey online, and since 40 percent of fashion is being bought off the web, Hong Kong’s premier resource to buy pre-owned luxury timepieces Watchfinder & Co. says, “companies had to reassess their business models and strategies to survive, or even thrive. At the peak of the pandemic, e-commerce was not a luxury, it became a priority.”

Oscar de la Renta, the first brand to embrace Amazon’s Luxury Stores, explains that the foremost challenge for a high-end brand to sell online is returns. Even though AR technology and 360-degree views allow customers to try on garments virtually from their phones, without interpersonal interaction and the physical donning of an outfit, it’s hard to imagine the fall, drape or fit on one’s body and complexion.

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CEO Alex Bolen is working to find a solution to their 30-percent online return rate. When “a bad day” in Oscar de la Renta’s brick-and-mortar stores realises only a low single-digit return rate, the implication on costs is huge. To redress high returns, a company would need to introduce more inclusive fitting sizes – a slippery slope to mass-market? – and stock a bigger inventory, another red light for the luxury brands.

By refusing to sell online, Chanel has made its position aptly clear: it is not a part of the pack competing for eyeballs on the World Wide Web. Instead, its products are valued for their individuality, rarity and an element of mystery, a concept the consumer can invest in – with some degree of effort on their part.

But fashion must follow the customer or die. Before the hard knock of the pandemic, the world’s biggest luxury conglomerate, LVMH Moët Hennessy Louis Vuitton, made an exclusive arrangement for Dior and Céline to build an online presence through its multi-brand platform 24 Sèvres, which launched in 2017. However, the digital venture – rebranded as 24S – was still losing money last year. Controlling the destiny of 75 brands – including Givenchy, Marc Jacobs, Stella McCartney, Loro Piana, Kenzo and Bulgari – LVMH is the authority on how to start, acquire and run successful businesses, but standing out in the oversaturated, fragmented digital world is tricky when the competition is from stalwarts like Net-a-Porter and Farfetch, who have perfected their online models over the past two decades.

“Products are valued for their individuality, rarity and an element of mystery, a concept the consumer can invest in – with some degree of effort on their part”

Relevance is the New Legacy

Does the recent accelerated growth in luxury e-commerce sales, which has almost tipped into double digits, imply the future of shopping is exclusively online? Jean Jacques Guiony, Chief Financial Officer of LVMH, begs to differ. He believes “the five senses” experience of sampling merchandise has always been at the heart of brick-and-mortar stores and it cannot be matched online.

Platinum Guild International, a global organisation created in 1975 to promote the platinum jewellery market, echoes similar sentiments: “Rarity, exclusivity and engagement are the core values luxury goods hold. Many brands are expanding their customer base online but still keep some exclusivity by providing a premium, privileged shopping experience that consumers can only receive in stores.” In fact, its third-quarter analysis of the Indian, Japanese, US and Chinese markets reveal that when it comes to precious jewellery, “consumers want to feel, hold and try on the products before buying. Perhaps, at a certain price point, ‘online-only’ is not enough.”

They are surely right. It has been postulated that once the retail apocalypse is behind us, online and offline channels will merge. Customers will expect high-quality, personal experiences both in stores as well as digitally, a trend already being witnessed at Watchfinder & Co., which says: “Having started purely e-commerce, we simultaneously grew to have physical store presence all over the world. Both are essential to the luxury industry.”

The rarefied atmosphere of a high-end boutique will not only remain relevant in the modern age, but flourish anew as nostalgic big spenders rediscover that real touch of luxury.

 

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(Text: Nikita Mishra)