The winning strategy of online sales for luxury brands

For long, one of the main reasons luxury brands would postpone their launch of online sales was their relationship with department stores and large wholesale clients for fear of an uneven competition. Then, after the debut of the financial crisis, most department store chains were forced to drastically reduce prices which translated into losses for the luxury brands. For many luxury brands this came like a wake up call and they realized online sales would bring them the much needed revenue as they would sell directly to consumers, with no intermediaries.

The other reason which has, rightfully, kept many luxury brands away from internet sales has been the fear of losing their exclusivity. While high street stores are only accessible to a certain number of customers, the internet is widely open to anyone. The reputation of a luxury brand and its exclusivity have always been driven by high level of customer service and decor of its highstreet stores.

This explains why brands such as Bottega Veneta, Jimmy Choo or Marc Jacobs are only starting online sales this year, more than a decade after many other established brands such as Louis Vuitton or Gucci. While the advantage of selling directly to consumers is undisputable, the exclusivity factor needs to be tackled carefully.

One of the ways luxury brands can succeed with online sales while preserving their exclusivity is the differentiation between the type of merchandise they sell online versus offline (traditional highstreet stores). Creating special collections which sell only online or vice versa has been a proven winning strategy and this involves also devising separate marketing communications strategies for online sales.

Maintaining a direct link between online and offline sales is also crucial. Several luxury brands are giving customers the option of buying online and picking up their merchandise in the stores. This is not only beneficial for the luxury brand as it has direct contact with the online customer but is also beneficial to the online customer who can touch the product, explore its manufacturing etc. Such a link is being offered by Bottega Veneta for online sales, the direct pick up will be available gradually, the first point being the flagship on Fifth Avenue in New York.

With more and more luxury brands being forced to increase revenue, direct online sales of outlet merchandise is likely to become a hot topic for the coming months. Should brands create their own dedicated online shops selling outlet merchandise, this would also cut the ”middleman” in a sector worth billions of euros.

It remains to be seen how major online shopping sites such as VentePrivee or Net a Porter will be able to compete with the direct online sales of the luxury brands. It could be that, in the long run, such portals will prove successful in selling smaller luxury brands rather than the major established ones. For now, the competitive advantage of these major luxury online sales players is their expertize and experience as well as existing database of customers.

Oliver Petcu