How Luxury Brands Are Increasingly Embracing Ecommerce
“Is Digital Killing the Luxury Brand?” asked a September Adweek headline. The article focused on luxury retailers’ reluctance to embrace digital, concerned that their exclusivity could be compromised by the Internet’s inherent accessibility.
Oh, that headline was from September 2011. Since then, the luxury landscape has changed quite a bit. Gucci allocated more than half its advertising to digital channels this year. Tiffany & Co. has become an SEO dynamo. LVMH brands such as Louis Vuitton and Christian Dior are even available on Amazon now.
For luxury brands, it’s always been about brick-and-mortar. Physical stores allow the brands to roll out the red carpet and deliver white glove service to customers, while also maintaining full control over the customer experience. But over time, luxury players have had no choice but to move online alongside their customers.
How Luxury Players Improved Personalization
Over the past five years, luxury brands have outpaced the global market in ecommerce growth. McKinsey & Company projects that ecommerce will make up 19% of the luxury market by 2025, up from 9% last year.
It makes sense when you think about who buys these brands. With the exception of Alaska and Hawaii, whose isolated geography often incurs additional shipping fees, there’s a strong correlation between the states that shop online the most and the states with the highest per capita income.
As luxury retailers increasingly embrace ecommerce, we’ve seen a huge improvement in their capabilities over the past year. On Sailthru’s inaugural Retail Personalization Index, Net-a-Porter, Nordstrom and MATCHESFASHION.COM ranked high for their personalized shopping experiences. However, they were anomalies; most of their high-end contemporaries fell much further down the list.
In September, we launched the second Index, where all three brands performed well. Net-a-Porter and Nordstrom improved enough to maintain positions in the top 10. At the same time, far more legacy luxury and ecommerce retailers joined them in the top half, including Rent the Runway, Tory Burch, Brooks Brothers, The RealReal, Shopbop and Neiman Marcus.
It’s worth noting that the competition was also much stiffer this year. For this year’s Index, we analyzed more than twice as many brands, only highlighting the strongest 100. While the majority of luxury brands failed to qualify — about 35% made the list — that’s true of virtually every category. Overall, these brands outperformed those in the grocery, crafts, pets, and jewelry verticals.
Looking at the Luxury Landscape’s Future
It’s not just us. Analyzing 76 luxury retailers, Gartner’s L2 research firm found that most of luxury brands’ web traffic comes from search. That means that consumers aren’t necessarily heading to Chanel.com, as much as they’re coming across it in their research. L2 also noted how much these retailers’ websites have improved year-over-year. In 2017, 44% of these retailers’ websites boasted geolocation features; now, 56% do. Similarly, real-time inventory increased from 28% to 41%.
From year to year, onsite personalization is where we’ve seen the most marked improvement for luxury brands. Retailers could earn 30 possible points in that category. On the Sailthru 100, 43% of in this category earned at least 25 points, while 93% scored 20 or higher.
Luxury consumers are shopping online more than ever and brands are accommodating them. However, the majority of sales still happen in physical stores. Mobile devices are the key to in-store personalization. Email, the most lucrative digital marketing channel, is a great way to drive traffic to stores.
Next year’s Retail Personalization Index is bound to be the toughest one yet. To stay competitive, high-end retailers must give their mobile and email experiences the same TLC as their websites. We’re excited to see which ones rise to the occasion.