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- 4 Jun 2010
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Online Resistance – Are its Days Numbered?

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Highlights from the Reuters Global Luxury Summit show how fast attitudes toward e-commerce are changing and where there is still work to be done.

Everyone knows that luxury companies have arrived fashionably late to the online party. Having been initially suspicious of a medium associated with discounted, or even counterfeit goods, the consensus at the Reuters Global Luxury Summit this week was that although online resistance is still common in some quarters, most luxury firms have turned the corner and are now embracing the sales channel.

The world of luxury is now a very different place from that in which Natalie Massenet took the plunge and launched Net-a-Porter- her big idea which everyone said would never work. Massenet recently proved her critics wrong and sold her stake in that ‘silly idea’ for $73 million dollars, which should go a long way in persuading even the most conservative of luxury companies that the rewards they are now reaping from online sales are just the beginning.

Fashion brand Jaeger ‘s recent decision to deliver to 29 countries from its website certainly seems to be paying dividends: “We’ve seen a quantum increase in international sales in the last month … and I think that will only grow,” said Chief Executive Belinda Earl. Indeed, the company expects to double the proportion of sales it makes online to 10 percent over the next three years.

At the higher end of the market Alexander Bolen, CEO of Oscar de la Renta admitted that he had not anticipated the fashion house’s success in this area: “If you had asked me two years ago, I would have said there is no way we are going to have any sort of evening clothes business online. I was totally wrong about that. I have been totally shocked at the sort of business we have done online.”

Strategic consultants and online evangelists Bain & Co have reported that online sales of luxury goods increased last year by 20%, compared with an 8% decline in the industry as a whole. And these growth rates are expected to accelerate this year.

Sophisticated luxury retail sites of the breed pioneered by Net-a-Porter are breaking down many of the problems previously perceived as barriers to the online environment. High quality photography and zoom-technology allow customers to get a real sense of fabrication and free returns policies mean consumers can try garments on in the privacy of their homes without incurring any extra expense if the fit is wrong.

Yet despite the opportunities that online retail affords both luxury companies and consumers, there are firms that remain unconvinced that the internet model is right for their sector.

Brands such as Patek Philippe selling watches, which start at a healthy $12,300 apiece, are concerned that the service and expertise which they consider so integral to their retail model, will be diminished or even lost online: “When you buy a Patek Phillipe, you need to feel and touch it and you need good advice,” said Thierry Stern CEO of the Swiss watchmakers. “Patek Phillippe is not only about business but also about passion. If I sell online, I’ll lose that.”

With resistance like this, even if the optimism of analysts like Bain’s Claudia D’Arpizio is to be believed and online luxury sales do double over the next five years, the sector will still lag behind the broader retail industry which looks set to continue its embrace of all things online.

Sources
The Times
Reuters