online luxury

Banks go shopping in online luxury

Isaac Mostovicz writes that investment banks are securing stakes in lucrative online luxury businesses...

The huge success of online luxury shopping has drawn some of the big names in the banking world. Goldman Sachs and Softbank, a Japanese investment bank, are two of a group of investors providing £138 million in financing to Gilt Groupe, the US luxury fashion website.

Since 2007, Gilt Groupe has been selling time-limited discounted luxury items on its website, and has grown to become the icon of exclusivity in the online world.

Goldman’s financing of Gilt represents an interest by big investors to secure stakes in the fast-growing internet companies, as we saw with their investment in Facebook earlier this year. In February, JPMorgan also secured a 10% stake in Twitter and were looking to invest in other start ups including LivingSocialand Zynga. For Softbank, funding Gilt’s subsidiary in Japan – the only country outside the US where Gilt operates – will give the bank greater contact with Japanese Internet users. Softbank is the exclusive carrier of Apple Inc products in Japan, meaning exclusive rights to the iPhone and iPad, on which people will visit the Gilt website.

Private sale sites are clearly making a buzz, with Amazon making a move into the sector with the launch last week of its own members-only fashion site, However, analysts say that despite the popularity of these sites, they are unlikely to be making vast amounts of money due to the big investments being made in huge marketing drives and technology. The investment banks must see a definite future in this direction though, which is somewhat strengthened by the 3.5 million registered members for Gilt. The way forth is online, where the possibilities for expansion are endless.

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Why mobile retailing should not be neglected

Isaac Mostovicz writes that luxury brands are yet to reap the full reward of developing a mobile presence...

I recently read an article that claimed luxury brands hadn’t yet exploited mobile as a channel to reach consumers. While perhaps unsurprising to many, in an austere age surely even the most luxurious of brands have had to re-evaluate their operation and seek out every potential avenue for increased sales and enhanced customer loyalty.

A recent report by Brand Anywhere and Luth Research Inc. in the US, found that web retailers could increase consumer engagement 85 percent by having a mobile-specific Web site.

Furthermore, with luxury shoppers traditionally being early adopters of new technology, including smartphones for example, that luxury brands are lagging when it comes to providing a seamless mobile experience should perhaps be a concern.

Luxury brands have generally shied away from channels that don’t offer a personal service typically associated with their higher price tag. However, an interesting observation is made in that through mobile, a more intimate interaction consistent with a consumer’s perception of that brand may be had than in a bricks-and-mortar store.

Shoppers are not only now using mobile phones to make purchases though but also to perform research prior to purchasing.

It’s not just the traditional price comparison either, while still powerful, the criteria many consumers base a purchase decision on is evolving. Barcoo is a new mobile app that enables consumers to scan the bar-code of a product and will then instantly provide access to that brand’s environmental, social and ethical credentials.

Whether it be to research a purchase, or subsequently to make it, with the advance of technology there is no doubt mobile will play an increasingly important role in consumers’ brand experience and should not be neglected by any brand.

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A division in luxury spending?

Isaac Mostovicz writes that consumers in emerging markets continue to drive sales for high-end luxury retailers...

While it’s broadly agreed that the global recession has peaked and markets are now in a slow recovery, an interesting trend appears to be developing in luxury purchasing.

In line with the wider economy, mass-market luxury retailers are on the whole experiencing a steady increase in sales. High-end luxury sales however are soaring, experiencing significant year-on-year increases.

As a recent article in the Wall Street Journal identifies, “luxury goods companies are selling to the two groups of people who have any money left: the rich, who are getting richer and richer, and consumers in emerging markets, who are getting richer.”

Not only are emerging market tourists purchasing luxury goods when abroad, but as I wrote in a previous post, luxury retailers are finding new ways to sell online to such consumers in their home country, propelling sales.

But it appears not just the emerging markets that are responsible for high-end luxury sales growth; wealthy consumers in Europe and the US are spending similarly too.

Whether this is a concern for mass-market luxury retailers is yet to be seen, but it’s certainly the high-end luxury market that is booming for now.

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Luxury goes online to reach Chinese consumers

Isaac Mostovicz writes that luxury brands are expanding online to tap into China's new wealth...

Just last week Emporio Armani opened online sales through its own website in one of world’s fastest growing markets for luxury brands, China.

With sales increasing by 20% last year, China is the second largest market for luxury goods, and is set to overtake Japan for No. 1 in just a few years according to consulting firm Bain & Co.

It may perhaps seem delayed that luxury retailers are only just tapping into a nation of shoppers that have undoubtedly embraced the Internet (Chinese shoppers online have doubled over the last year), and are also eager to mark their new wealth by buying luxury labels.

Despite the availability of many Western brands being limited to in-store purchasing, a September 2010 study done by consulting firm McKinsey shows that affluent Chinese consumers prefer foreign brands: 52% of consumers whose annual income exceeds RMB 250,000 (USD 36,765) trust foreign brands more than Chinese ones.

Online sales may therefore seem a lucrative opportunity, however many luxury brands are still reluctant to start selling to consumers via the Internet, fearing they risk brand value since most consumers use the internet to search for discounts.

While the booming retail scene in China has led many Western brands to set up shop and expand their business in the country, will Emporio Armani’s move prompt other luxury retailers to take the plunge and sell directly to Chinese consumers online?

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Chinese consumers demand for online luxury

Isaac Mostovicz writes that luxury is on the rise in China...

A recent survey found that half of China’s urban residents say they prefer buying luxury items online because prices are cheaper than franchised stores.

While this fact is very interesting, and suggests that more companies should make an effort to offer their wares online in China, interest in luxury in general in China is growing rapidly. The Chinese are buying more luxury cars and SUVs than ever before — 500,000 will be purchased this year, compared with 98,000 five years ago. Luxury companies are opening stores (Louis Vuitton opened two flagship stores on the same day in Shanghai earlier this year) or are thinking of opening stores (Harrod’s comes to mind), and luxury hotels (like the Waldorf Astoria Club Hotel) are popping up all over the place.

All this suggests that marketers from the west are beginning to understand how the Chinese interact with luxury, but a great deal more can be done to enhance sales and the experience of buyers. The key is understanding how individuals interpret luxury, and this often comes down to understanding culture.

Photo by gruntzooki

Jing Daily says of this article...

I agree that online is a key access point for Chinese consumers, due to the convenience as well as avoiding the additional luxury and import taxes products in stores have. Though many luxury brands are beginning to understand how to interact with the new wealth class in China, many are not connecting effectively enough online. With younger and more sophisticated consumers spending more and more time online, digital outreach in China’s unique online landscape is gaining more and more importance. L2 ThinkTank did a study on the digital IQ of some of the top luxury brands.

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Is it possible to keep online luxury exclusive?

Isaac Mostovicz writes that luxury websites can work, if they appeal to how people interpret luxury...

Following up on my recent post about luxury companies going online, the Economist has posted an interesting article on luxury companies going online. Some companies, like Tiffany & Co., are doing quite well with their online sales, while others, like Fabergé, are taking more of a ‘wait and see’ approach. These companies say they are reluctant to put their goods for sale online because the experience isn’t the same. Says the author:

Luxury executives explain that the internet is too impersonal for their products, which need the human touch. Allowing anyone to buy online can mean a loss of cachet. Luxury firms like to dazzle customers with plush stores and sleek ads, so that they think only about beauty and not at all about price. The web, by contrast, shines a clear light on price. “That’s the last thing I want people to think about,” wails an executive from the watch industry.

Still, luxury firms are going online in greater numbers because their customers increasingly want the convenience of ordering online. I don’t think it’s impossible for luxury companies to offer a unique, exclusive experience through the online channel. It just needs to be well planned and thought out, and needs to appeal to the different ways that individuals look at the world and consume luxury. A website that appeals to a Lambda woman in one way and a Theta man in another could be quite successful.

Photo by Erin Blatzer

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Luxury brands say “no” to online discounts

Isaac Mostovicz writes that luxury companies with new websites should be aware of how people experience their sites...

According to this article in the New York Times today, several large luxury brands (including Marc Jacobs, Jimmy Choo, Hugo Boss, Vince, Lancôme, St. John, Theory, Kiehl’s, Lilly Pulitzer, Donna Karan and La Perla) have recently started or are about to start selling their wares online directly to consumers. While online retailing is a tried and true channel for many retailers, these luxury companies hesitated because they felt that the web couldn’t provide a similar experience to their stores, but the recession has made them more willing to try new things. Operating a website can be significantly less expensive than operating a storefront, and it can also cut out the department store middlemen who collect the difference between a good’s invoice price and retail price.

The most interesting part of this article is the repeated emphasis of luxury goods companies like Lacoste saying that they will never, ever discount the goods they sell through their online stores. These companies certainly don’t want to devalue their brands, but at the same time, they should be aware that the recession has made many shoppers more price-conscious and only willing to buy when they find discounts. According to a recent article in USA Today:

For others, it’s about buying luxury goods only when they’re on sale — or at a steep discount. Nearly three in four wealthy women say they’ll only purchase luxuries if they can get a good deal, reports a recent survey by AgencySacks, a branding firm that consults for some of the nation’s top luxury brands.

If for many people part of consuming luxury becomes the hunt for the deal, companies that refuse to discount may have to change their strategy.

Photo by Bludgeoner86.

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Redefining luxury in the social media world

Isaac Mostovicz writes that luxury has become fractional in the world of social media...

Everybody knows about the digital phenomenon that is social media and how it has become massively popular during the last few years. However, some luxury brands have only recently begun to exploit this new dimension in luxury marketing. This trend in luxury brands going digital reminds me of something that was said in the American Express’ Luxury research I mentioned in my blog post:

Companies looking to embrace social media as a way to break through persuasion immunity need to be careful to not put all their resources into this one opportunity.  Four in ten (37 percent) of affluent and wealthy consumers currently use Facebook, but only 3 percent say they use Facebook as a researching or purchasing tool.  Facebook remains a mostly a social tool (and a game platform for many).

What should be taken from this is its emphasis on the social side of, well, social media. Steve Rubel on Forbes recently wrote an article asking a key question:

In an era of ubiquitous social networking–one where every online and mobile experience is enhanced by the lens of our friends–how will luxury be defined?

In today’s digital age, social media is redefining the way luxury is marketed online.  Rubel goes on to say that because of the fragmented nature of the media environment and the increasingly personalized world of social media, luxury has become fractional.

A brand that’s achieved luxury status among thirty-something moms in Los Angeles could be considered taboo by the same demographic in New York–all because of the types of social connections we keep online and how they shape our worldview.

This idea parallels with another article I found online about the power of word-of-mouth in China. While these two articles concentrate on different types of social interactions, they note the same big impact it has on brand marketing when it is properly applied to these social channels.  Going back to social media, three key points which are essential for luxury brands to successfully use social media is to make every online experience a social one, develop coveted social objects and map and tap networks. While the first and last points make sense because it stays true to the essence of social media, the second key point revolves around the old age practice of showing off what you’ve got. Only here, it is done virtually, digitally. We’ve got the same primal, luxury urges as we’ve always had, but now they have translated themselves through a more sophisticated platform.

Such an upcoming trend in digital luxury marketing is also recognised elsewhere, for example, a guest contributor on Business of Fashion discusses why luxury brands should focus on mobile web and not mobile apps. Though a complicated process (setting up multiple compatible versions of the same website), the long term effects of such an endeavour is well worth the effort and luxury brands should quickly adapt to this growing trend, otherwise they will face a similar incident like the recent article featured on PSFK- consumers found themselves disappointed when top luxury sites failed to work on the iPad.

To survive long term, luxury brands should not only take advantage of social media, but also do it correctly by marketing socially. Keeping up to date with the latest digital trends is also very important. This new digital and social media dimension only adds to the difficulties luxury brands are now dealing with in the face of a new specialised, luxury consumer.

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Chanel: Experimenting with Luxury Online

Isaac Mostovicz writes...

Kimberly Castro, who writes the US News and World Report’s Luxe Life blog, recently shared an interesting insight from one of her friends about luxury companies moving online:

Luxury brands have been having a hard time on the Internet because ‘luxury’ is an experience. It’s something that you need to feel, taste, and touch with your own eyes and hands. It’s difficult to sell luxury goods online, i.e., a Louis Vuitton bag, because with that one-touch point, you’re missing out on the other variables involved in the ‘luxury’ experience. A luxury product is there for you to dream. It’s difficult to convey this ‘feeling’ online.

I agree with this sentiment–luxury is an experience that different individuals interpret differently, and companies can manage that experience to a great extent in-store. Still, I don’t think the fact that it’s more difficult to convey a brand proposition online should be an excuse for luxury companies to drag their feet in getting online. It probably will take some trial and error to find the right mix of exclusivity, access and service for an online audience.

One example of a company trying something new is Chanel–they have created an iPhone application that displays videos, photos, and news related to Chanel’s latest collections (link to application here, blog post on the application here). The app updates itself when new collections come out, and also includes a store locator. It’s an interesting way to engage with a technologically savvy, relatively young audience who may have more disposable income than the average person. I bet we’ll see other companies finding similarly unique ways to engage with audiences in 2009.

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DODAQ: an online diamond exchange

Isaac Mostovicz writes...

Now this is interesting–a new online diamond exchange called DODAQ is launching soon. Its goal is to transform the trading of polished diamonds, from trades based on existing weekly price sheets to a real time, automated pricing mechanism. Such a system will give people a lot more data–they’ll have benchmarks to compare their trades with and will be better able to tell whether they’re getting a good deal.

DODAQ’s success will largely depend on whether people are willing to use it, and how well the company can prove that it has created a trustworthy marketplace. While many traders may welcome the greater transparency inherent in an online exchange, others who are established in their ways may be less willing to adopt.

The DODAQ exchange hasn’t launched yet, but they do currently have a simulator running so people can get a feel for the service.

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