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.
Showing posts with label online retail. Show all posts
Showing posts with label online retail. Show all posts
Thursday, August 14, 2008
Thursday, March 27, 2008
Online retail and the struggle for brand control
A version of this piece was published in Marketing in 2008
In 1921, Wolseley Motors commissioned the architect William Curtis Green to create an opulent and impressive showroom in the heart of Piccadilly, next door to the Ritz. In doing so, they anticipated a very modern trend – a drive to control the environment in which their marque was displayed, and a desire to create a direct line of contact with the consumer.
Then as now, the motor industry sold through networks of independent dealerships – an arrangement which enabled them to scale rapidly to achieve national distribution without bearing the huge capital cost of establishing local presence. But lack of control of the retail environment created a particular challenge for Wolseley, which was a premium brand, and the Piccadilly store was their response.
Fast forward eighty years, and brands face the same challenges today.
The internet has created a new distribution channel, one where retailers have multiplied and competition is intense. But unlike in the physical retail environment, in-store merchandising skills are still in their infancy, and online retailers are often criticised for poor images and inaccurate product information.
Brand managers have been slow to get to grips with the new demands of the online retail space, and the lack of effective merchandising continues to do nothing to discourage price competition.
And whilst brands are often insufficiently proactive about their brands’ representation in online retail, price comparison websites add further fuel to this commoditisation, encouraging consumers further to value price above other elements of the service package.
So where does this leave brands online?
Ironically, back where Wolseley started in 1921. Brands like Panasonic, Nike and Levi’s have all opened stores online, selling direct to consumers.
In doing so, they regain control of their brands – displaying them online as they want them displayed, and at the same time creating direct contact with consumers that they can then use for eCRM programmes, building aftersales support, cross-selling initiatives as well as communities of their users.
These sites are rarely at the sharp end of price competition – their role is a different one. They carry a comprehensive range of branded products, rarely available in a retailer, and more detailed information about products – allowing customers to look more closely, even if subsequently they complete a purchase from a different retailer.
But it isn’t just online that manufacturers have pushed into direct retail operations. The much-praised Apple stores have built on the brand’s design heritage to create an immersive experience for consumers – a place to bathe in the brand and to love it. Sony have launched their concept store in Heathrow’s new Terminal 5, where their ‘technology garden’ will give cash-rich time-rich passengers hands-on contact with the latest kit. And BMW in Munich have just opened BMW World, a glass and steel landmark building that incorporates restaurants and a café – but most particularly, a special service for customers as they collect their new vehicle.
As digital channels grow in importance as distribution and marketing channels, they tend to push manufacturers towards commoditisation, emphasising the directly comparable features of products – primarily their functionality and their price.
But what Sony, BMW and Apple have shown is that the key to fighting commoditisation is in amplifying the distinctiveness of their brands, through design, proximity and experience. To do this, they’ve brought together the different channels, and used them to complement one another.
In doing so they’ve moved the debate on from whether the internet is a branding medium, valuing instead the part each channel can play in the customer’s overall interaction with the brand. To these brand innovators, the online/offline, retail, advertising and direct channels are all opportunities to make the brand manifest to the consumer, and by allowing the consumer to choose where/when to play with the brand, they’re responding directly to customer demand.
It didn’t work for Wolseley, whose showroom is now a restaurant. But its many modern imitators are testament to the continued importance of managing the retail experience for brands – something most brands still struggle with in digital.
In 1921, Wolseley Motors commissioned the architect William Curtis Green to create an opulent and impressive showroom in the heart of Piccadilly, next door to the Ritz. In doing so, they anticipated a very modern trend – a drive to control the environment in which their marque was displayed, and a desire to create a direct line of contact with the consumer.
Then as now, the motor industry sold through networks of independent dealerships – an arrangement which enabled them to scale rapidly to achieve national distribution without bearing the huge capital cost of establishing local presence. But lack of control of the retail environment created a particular challenge for Wolseley, which was a premium brand, and the Piccadilly store was their response.
Fast forward eighty years, and brands face the same challenges today.
The internet has created a new distribution channel, one where retailers have multiplied and competition is intense. But unlike in the physical retail environment, in-store merchandising skills are still in their infancy, and online retailers are often criticised for poor images and inaccurate product information.
Brand managers have been slow to get to grips with the new demands of the online retail space, and the lack of effective merchandising continues to do nothing to discourage price competition.
And whilst brands are often insufficiently proactive about their brands’ representation in online retail, price comparison websites add further fuel to this commoditisation, encouraging consumers further to value price above other elements of the service package.
So where does this leave brands online?
Ironically, back where Wolseley started in 1921. Brands like Panasonic, Nike and Levi’s have all opened stores online, selling direct to consumers.
In doing so, they regain control of their brands – displaying them online as they want them displayed, and at the same time creating direct contact with consumers that they can then use for eCRM programmes, building aftersales support, cross-selling initiatives as well as communities of their users.
These sites are rarely at the sharp end of price competition – their role is a different one. They carry a comprehensive range of branded products, rarely available in a retailer, and more detailed information about products – allowing customers to look more closely, even if subsequently they complete a purchase from a different retailer.
But it isn’t just online that manufacturers have pushed into direct retail operations. The much-praised Apple stores have built on the brand’s design heritage to create an immersive experience for consumers – a place to bathe in the brand and to love it. Sony have launched their concept store in Heathrow’s new Terminal 5, where their ‘technology garden’ will give cash-rich time-rich passengers hands-on contact with the latest kit. And BMW in Munich have just opened BMW World, a glass and steel landmark building that incorporates restaurants and a café – but most particularly, a special service for customers as they collect their new vehicle.
As digital channels grow in importance as distribution and marketing channels, they tend to push manufacturers towards commoditisation, emphasising the directly comparable features of products – primarily their functionality and their price.
But what Sony, BMW and Apple have shown is that the key to fighting commoditisation is in amplifying the distinctiveness of their brands, through design, proximity and experience. To do this, they’ve brought together the different channels, and used them to complement one another.
In doing so they’ve moved the debate on from whether the internet is a branding medium, valuing instead the part each channel can play in the customer’s overall interaction with the brand. To these brand innovators, the online/offline, retail, advertising and direct channels are all opportunities to make the brand manifest to the consumer, and by allowing the consumer to choose where/when to play with the brand, they’re responding directly to customer demand.
It didn’t work for Wolseley, whose showroom is now a restaurant. But its many modern imitators are testament to the continued importance of managing the retail experience for brands – something most brands still struggle with in digital.
Thursday, September 14, 2006
Internet retailing, still not asking the customer
First published in Marketing magazine in September 2006, this piece looks at how rudimentary research is on online consumers' behaviour instore, compared to the sophistication of research on physical retail. It's still the case now, though things have certainly improved; and the obsessive attention to conversion and customer journey displayed by operators like Amazon is still bafflingly rare across online retail in general.
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