Badgley Mischka New York Fashion Week runway appBadgley Mischka & SAP
Online is the next frontier for luxury brands. It’s where luxury brands can find their next path to growth, but for a variety of reasons they have been notoriously slow to follow it. As an industry steeped in heritage and tradition, change doesn’t come naturally to it, but in today’s dynamically changing consumer market, that is exactly what luxury brands must do.
“A big part of luxury brands’ hesitance to embrace sales online has been how to keep that luxury aspect of the brand, if it is so easily available,” says , Global General Manager, Consumer Industries at . “Keeping that perceived cache of luxury in the online world have made them slow to migrate there.”
But migrate sales online is what they have to do for assure a prosperous future. recently reported online luxury sales growth is phenomenal, increasing by 24% in 2017. Yet it still accounts for only 9% of the total personal luxury goods market worldwide.
On the surface online’s less than 10% market share might not seem compelling, but the industry’s perception may not match the consumers’ reality. Compare that meager market share with luxury consumers’ preferences in where they like to shop and a totally different picture emerges.
In a global survey of affluent consumers with annual incomes of 0,000 per year, or equivalent, the Luxury Institute found that 21% of those surveyed prefer to shop luxury online, and another 27% had no preference between online or in-store shopping. Just shy of a majority of luxury consumers don’t shy away from doing so online, rather they actively embrace it.
While heritage luxury brands drag their feet, plenty of others are jumping in unburdened by fears of losing their luxe on the internet. “We are seeing a lot of luxury brands being created online, companies like Farfetch, Net-a-Porter, Bonobos, that have much more of an online than physical presence,” Mitchell-Keller says. “And other more traditional brands, like Badgley Mischka and Gucci, have figured out how to create, maintain, even enhance their luxe cache online. There is no secret or easy answer how they’ve been able to do that, but it can and is being done.”
Two of these born on the internet brands, she notes, have recently been acquired by other companies – Yoox Net-a-Porter by Richemont and Bonobos by Walmart – and Farfetch has just signed deals with Fendi, Burberry and Chanel in advance of an expected IPO in NYC this coming November.
Such deals are expected to pick up in the future, as Mitchell-Keller explains, “The main reason physical luxury brands are acquiring digital brands is because they haven’t figure out the online equation yet. They are looking for help to reach the digital customer.”
Putting our heads together, we think these 5 brands best exemplify the future of luxury online.
Farfetch goes further
Founded in 2008 as a online luxury fashion platform, is seamlessly blending in-store access to fashions across the globe with internet convenience. With offices in 11 fashion hubs, from which it offers same-day express delivery, it lists products from over 700 boutiques and fashion brands. It carries a multitude of heritage and emerging designer brands, including Dolce & Gabbana, Givenchy and Chloé.
Having acquired the London-based Browns boutique in 2015, it used that platform to introduce its technology-enhanced “Store of the Future” concept that marries the digital and personal experience luxury shoppers desire.
Given its chops in digital luxury marketing, Farfetch also initiated a white label digital service called “Farfetch Black and White” for brands that want to use its platform to power their own branded online presence.
Numerous heritage brands are coming on board in one way or another, including Burberry to list all inventory in its marketplace, Fendi for customized handbags, Gucci for 90-minute delivery service, and most recently Chanel.
But tellingly, Chanel was quick to point out that its Farfetch partnership will not include selling fashion online, rather using its proprietary in-store technology for physical retail. “We are not starting to sell Chanel on the Farfetch marketplace – I want to be very clear on that,” said Chanel’s president of fashion Bruno Pavlovky in announcing the deal. To which Mitchell-Keller asks, “How much share will they lose while they are trying to figure online out?”
Such reluctance to embrace full-on digital access for customers is indicative of an industry attitude that has to change to ensure a vibrant future. It is ridiculous for a brand like Chanel to force its 21st customers to shop like they did back in the 80s.
Net-a-Porter brings it
Just acquired by Richemont following a merger with YOOX in 2015, founded in 2000 takes a more heavily content-driven strategy than its closest competitor, Farfetch. But like Farfetch it offers white label digital support to designer brands through its YNAP platform which Richemont says will continue to operate as a separate entity. Nonetheless, it will make strange bedfellows, since YNAP operates flagship online stores for many competitive Kering brands, including Bottega Veneta, Balenciaga, and YSL.
While Mitchell-Keller admires Net-a-Porter, she thinks its website that offers discounted fashions in flash-sale format is especially in tune with how the next generation wants to shop. “My son, who is totally a millennial, had me logon to order a pair of gold Nike shoes, which I understand are status items for the college crowd. So here we are logged in at midnight for the countdown and find out we are #500 in line to order. It is such a different experience than I am used to where luxury brands pamper you in the store, but millennials don’t necessarily want that. They want this,” she says.
Outnet makes it fun for millennials. It is fast, it’s limited, it’s accessible and it’s cheaper.
Bonobos shows men how to wear it
is one of those born on the internet luxury brands, or near-luxury for those who want to quibble, that have captured the loyalty of affluent men shoppers, a hard demographic to attract into the store. It’s achieved that by not just selling clothes, but showing men how to dress fashionably. It is also helped by offering casual-luxe styles that modern men favor.
“I’m intrigued by the way Bonobos shows their clothes,” says Mitchell-Keller. “It’s not just a guy standing there like on most websites. You can see the movement and men interacting with each other. It is a much different experience than just going online and seeing picture after picture of clothes. It’s engaging.”
As a result, Bonobos caught the eye of a big company suitor, , which acquired the company last year, and with it a thought-leader in the next generation of retail fashion, Andy Dunn who joins another ecommerce powerhouse, Marc Lore, at Walmart to give it a leg up into new internet markets.
While Walmart just announced that its recent quarterly online sales growth slowed, up only 23% compared to a year ago vs. the 50% growth enjoyed throughout the first nine months of the year, it continues to project a 40% uptick through the rest of the year, with Bonobos and a recently announced online partnership with Lord & Taylor showing that this low-end leader aspires to reach higher.
Badgley Mischka dress its models with tech
While the brand has long maintained a vibrant online ecommerce presence, co-owner and co-designer James Mischka is described by Mitchell-Keller as a “technology geek.” Being as attuned to tech as fashion, he partnered with SAP to create a runway app for the recent New York Fashion Week where those in the audience could vote on each look as it walked down the runway. “In 9 minutes they got feedback that usually takes them 6 months to get,” she says.
The results were eye opening for the company which discovered that a dress they hadn’t thought would make much of a splash turned out to be the #2 most popular look, allowing the company to place sufficient orders to get it into the stores in record time.
The audience in turn loved the ability to get all the fashion details on their phones instantaneously. The models loved it, who were back stage reading the results and competing to see whose look scored highest. And the other designers at show were envious and lined up afterwards to get an app for their next runway show.
Thinking about new ways consumers can interact and engage with a luxury brand is what makes Badgley Mischka an important luxury brand for the future. “Too many luxury brands aren’t thinking about the technology. They are thinking about product, which is important, but they have to understand how their brand is being consumed differently than it used to be consumed,” Mitchell-Keller notes.
Gucci breaks out of the luxury culture
And we can’t finish our look at luxury online without mentioning . In an interview on CNBC, Kering’s chairman and CEO Francois-Henri Pinault said its Gucci brand is doing about 50% of its sales with millennials. In recognition of its online success, , which specializes in data-driven analysis, gave its top spot for best performing digital fashion brand to Gucci in 2016 and 2017.
I’ve written extensively about here, but suffice to say that Gucci’s success online is thanks to Gucci’s CEO Marco Bizzarri giving free reign to its young creative director Alessandro Michele, who understands how to connect with this digitally-native generation. Thus Gucci has broken out of the inbred, digitally-adverse culture that plagues so many other luxury brands.
In conclusion, Mitchell-Keller and I see a whole digital transformation that is going to happen in luxury, just as it has happened in other markets. While we recognize that the experience of in-store shopping, and the pampering luxury consumers can find there, isn’t going to be replaced by digital engagement, customers today value the luxury of convenience that online delivers too.
“The time issue is a huge one,” Mitchell-Keller concludes. “It’s not just that everyone is now on social media. Everybody also has huge demands on their time. It’s a very different world than 20 years ago when these brands started to become popular. Luxury brands have to adapt to the way that consumers want to interact with their product now, and that increasingly is going to be online.”
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