A version of this piece was published in Marketing in 2008
16% of the world now connects to the internet via broadband. But this small group represent 78% of the world’s earnings.
This single fact lies behind the extraordinary growth we’ve seen in online retail over the past ten years. In 2006 total online retail spend grew by 33.4%, 13 times faster than the retail sector, and online clothing sales alone expanded over 40% in that year. According to the ONS, by 2007, 70% of UK web users had bought online.
But as the market has changed beyond recognition for categories like books, music, consumer electronics and insurance, one group of brands as lagged behind – resisting the trend to sell direct, and often discouraging the listing of its products with online retailers.
Concerned that the web didn’t offer brands the quality environment they require to sustain their premium positioning, many luxury brands have steered clear of selling on the web – some electing instead to have ‘brand experience’ sites. Despite this, according to the Luxury Institute, most luxury brand websites are poorly designed and constructed, with MyDeco’s founder Brent Hoberman noting that many make extensive use of Flash animation, making them all but invisible to search engines.
When Tyler Brûlé did the rounds of super-premium brands as he worked on the development of the Monocle magazine/website, he expected to find dazzling on-brand websites and web-savvy marketing directors – “how wrong I was”, he told Luxury Briefing.
Over 9.5 million people worldwide have assets of over $1m, and the luxury goods market is outperforming many markets – growing at over 20% a year in the UK. And since these people are much more likely to be heavy web users, it’s not surprising that the online luxury goods market is expected to grow rapidly – doubling in the next three years.
In Japan, Ledbury Research report that 39% of high earners have purchased an item online at over £1,000, with 28% in the US and 26% in the UK.
For the last eight years, Net-a-Porter.com has been mining this seam, successfully creating a market for high fashion online. The site cleverly reinvents the experiential qualities of boutique shopping through the quality of its editorial – a Vogue where you can buy the clothes, and its pioneering same-day delivery and beautiful packaging have helped to make shopping online exciting for its customers.
Sites like Net-a-porter, Myprestigium, CoutureLab and new UK startup iconicchic.com are filling the void left by the big brands’ reluctance to engage in the online space, and are providing stiff competition for the high street-based retailers as these businesses develop their online offering too.
High end high street fashion retailers Browns and Matches both have online retail operations, whilst Harvey Nichols sells accessories and Harrods has a pretty comprehensive online offering everything from cocktail dresses to confectionery.
These guys aren’t threatened by designers selling direct to the consumer online. If customers can be bothered to wait for the bloated flash-based sites to launch, they’ll rarely find anything to buy, with only around 30% of luxury brands selling online.
But even those who do e-retail merely give the impression they don’t understand either retail or the web. Prada sells online in 15 countries, but has a site built entirely in flash. Gucci’s site is similarly flash-based, whilst Armani has a tiny link on its homepage to ‘shop online’ – clicking on which has no effect (one wonders if anyone’s monitoring sales).
But a few labels are taking on the challenge. Louis Vuitton’s site is elegantly designed and still functional, Paul Smith’s lo-fi but effective.
It’s remarkable that despite the vastness of the market, and the success of retailers in the space, these two are amongst the very small number of luxury labels who are making a serious attempt at ecommerce.
The luxury market online is in its infancy. But since both online and luxury tend to be recession-resistant, we could be seeing a lot more soon.