Luxury brands target the e-commerce space to woo customers

SINGAPORE — While few would blink at dropping hundreds of dollars at sites such as Redmart, Asos and iHerb for a quick retail fix or for the weekly grocery shopping, consumers are more likely to hesitate before clicking on the “Purchase Now” tab for a bag worth thousands of dollars.

The luxury retail sector is one that has proven to be resistant to the e-commerce wave because of multiple factors: High-end brands are known to be slow to embrace e-commerce, fearing a dilution in their carefully managed brand cache, and the difficulties of translating the personal touch and exclusivity that come from shopping at a boutique to the online shopping experience.

On the consumer side of things, there is the aforementioned resistance to purchasing big-ticket items online. Since the digital shopping experience lacks the tactile element, a significant proportion of luxury consumers might baulk at the idea of buying a high-priced item that they cannot inspect and touch.

But things are changing. Last month, homegrown luxury e-tailer Reebonz unveiled the results of its 2016 Asia Luxury Index, a survey commissioned by the company to analyse data and track shifts in consumer patterns in the region. It showed that the online expenditure in Asia on luxury goods on the site grew by 50 per cent from 2014 to 2015, with shoes, bags and timepieces leading the growth. The e-commerce site, which retails both new and pre-owned luxury goods, is currently in eight countries, including Hong Kong, Indonesia, Australia and China, and has recorded “strong double-digit growth year-on-year”, according to Reebonz co-founder and chief brand officer Daniel Lim. He attributes the company’s strong performance to the rising middle-class in the markets that they are in as well as the increasing mobile penetration rate, citing that 60 per cent of Reebonz’s retail sales in Indonesia come from mobile-based purchases.

Disrupting Luxury

A report on the luxury e-retail sector last year by management consultancy firm McKinsey & Company predicted that the global digital sales figures for women’s luxury fashion are expected to grow from a 3 per cent of the total luxury women’s fashion market in 2015 to 17 per cent by 2018, for a total 
market size of US$12 billion (S$16.4 billion). For luxury brands that are currently battling slower retail sales at their brick-and-mortar stores and a slowdown in China’s economy — one of the main drivers of the global luxury retail industry — this is an opportunity that cannot be ignored.

“Going into digital means giving up some control over how your brand is presented because it’s such an interactive, open space. For traditional luxury brands that have long been trading as exclusive and prestigious, that’s a scary territory to venture into,” posited Erica Ng, senior editor of retail intelligence (Asia-Pacific) at fashion forecasting company WGSN.

“But over time, luxury brands have come to realise they have no choice but to be on digital because that’s where consumers are spending more and more time on, initially for communications then for entertainment and now for shopping. Luxury brands have gone through a great evolution to become more inclusive and accessible, and the see-now-buy- now model is a great example of the length they’re ready to go in today’s hyper-connected environment with instant access to things — clothes, accessories and beauty.”

British luxury-goods giant Burberry’s surprising announcement in February this year that it is adopting a see-now-buy-now approach to its groundbreaking Sept 19 runway show in London signalled a tipping point in the way luxury brands interact with their consumers. The clothes seen on the runway will be available via Burberry’s boutiques worldwide and on its e-commerce site immediately following the runway show, and its new approach is widely seen as a response to the instant gratification consumers demand in the age of live streaming and social media.

“The changes we are making will allow us to build a closer connection between the experience that we create with our runway shows and the moment when people can physically explore the collections for themselves. Our shows have been evolving to close this gap for some time. From livestreams to ordering straight from the runway to live social media campaigns, this is the latest step in a creative process that will continue to evolve,” said Burberry’s chief creative officer Christopher Bailey in a statement at the time of the announcement. Tom Ford followed suit with a similar announcement on the same day.

The Third-Party Players

The fact that Net-a-Porter, the luxury e-commerce site founded in 2000 is now a household name is proof of a growing class of younger luxury consumers who are comfortable with purchasing luxury goods online. And Net-a-Porter had partnered Chanel in the French luxury house’s first e-commerce foray for its jewellery line, offering consumers the opportunity to purchase Chanel’s Coco Crush collection in a kind of “digital pop-up store” on the site in April this year.

Closer to home, Reebonz has been infiltrating the Asia-Pacific e-luxury market with a unique business model. The rapid growth of the pre-owned luxury goods segment of the business has seen the company launch two online retail platforms — Reebonz MarketPlace and a standalone app named Reebonz Closets — that encourage and facilitate consumer-to-consumer transactions for pre-owned luxury items. “One of the key things that excited us most (from the 2016 Asia Luxury Index) is that the pre-owned luxury business is getting more accepted in some of the markets we are in,” said Lim. “Pre-owned luxury items in Europe and the US are very accepted as (the consumers there) have been consuming luxury items for a longer time, and there’s always going to be a secondary market in these mature markets, but we are now starting to see a strong pickup in Asia for the pre-owned luxury market.”

Acknowledging that one of the main hurdles in purchasing luxury fashion online is the issue of authenticity, Lim pointed to Reebonz’s authentication service as one that differentiates it from resellers: “The number one issue for luxury consumers is trust, so we wanted to make sure that everything we sell is authentic. At the start of the business, we wanted to tackle that. For pre-owned items, we have our own ateliers for the leather goods, watches, jewellery and gemstone categories to assess the authenticity of the products,” explained Lim. A potential customer can also arrange for a private viewing of an item that is retailing above S$3,000 at the Reebonz office.

A New Fashion Ecosystem

The key factor behind this trend, said Ng, is the emergence of a new generation of luxury consumers “who place an emphasis on the experience of owning something over actually owning it. Online marketplaces that let customers rent luxury items for occasions, or even for a whole season, or platforms that let customers trade and exchange their designer goods are taking off quickly as consumers have a more fluid relationship with products. This has totally changed how we experience music, books and is now impacting luxury and fashion, too.”

The increasing lack of personal time and the wider availability of choices online have also led to a growing demand for curation, suggested Ng. “The core concept is third-party retail that presents customers with a curated selection of brands and products. This stems from the challenge of living in an affluent society where there is too little time and too many choices, and (the need for) the convenience of shopping across multiple brands without being kicked off the site to complete the purchase elsewhere.”

On the other end of the spectrum, luxury brands are looking to extend their reach and branding efforts to the digital space by integrating their online and offline campaigns. To this end, luxury house Dior has launched highly-produced digital elements to its recent campaigns, including a new series of make-up videos featuring model du jour Bella Hadid that made its debut last weekend on YouTube. Furla’s new Made For You bag customisation service includes a micro-site where potential customers can experiment and explore different customisable options before heading down to the brand’s flagship boutique at Marina Bay Sands to make payment.

“In Asia, the level of penetration of e-commerce is very low in general — it’s in the single digits — and for luxury e-commerce penetration, the numbers will be even lower, so there’s still a lot of runway room for us to grow,” predicted Lim. From exciting aspirational content to multi-brand, multi-platform shopping possibilities, the digital space is set to become the most exciting playground for those with cash to spare — and are looking for ways to spend it.