Luxury brands are working harder than ever to get their online product and pricing strategies right with major change in the past year as more of them wake up to the importance of e-sales, according to a new report from Contactlab and Exane BNP Paribas.
And with consumers who buy luxury goods both online and in-store spending around 50% more per year than in-store-only customers, brands are working just as hard to find ways to increase digital engagement with their customers, while retaining personalisation “and the exclusive touch that defines them as a premium shopping experience.”
The report showed that the battle to maximise growth in what has been a tough luxury market has seen some luxury brands increase their online product offering and pricing quite dramatically while others were ahead of the game are radically reshaping their online-available offer.
The report, Online Offer Dive & Pricing Landscape, covers 32 luxury firms and showed the overall number of luxury products from them available online fell slightly (by 3%) for AW16 compared to a year earlier. This was perhaps a surprise given that the number had surged by 20% for AW15.
The dip came as some companies rationalised their brands, shrinking multiple labels down to one masterbrand. But the extent of such reductions was counterbalanced as some ‘laggard’ brands finally woke up to the importance of online and radically increased their line-up that was available to e-shop.
Firms that had been e-commerce pioneers, such as Burberry, Gucci, Tiffany, and Armani, reduced their offer in the high single or low double-digits while “e-commerce-cautious brands” started to catch them up,” Contactlab said.
Fendi (+306%), Chanel (+50%), Bulgari (+30%), Saint Laurent (+24%), Moncler (+23%), Cartier and Ferragamo (both +22%) all increased their online offer by more than 20% for AW16.
The presence of some ultra-luxury labels in this list means the overall entry prices of products available to buy online edged up, albeit only by 1.8%. And while the average price of luxury goods available online dipped by 1.5% (as some brands widened their ‘affordable’ offer), the sector did see a trend towards higher prices in brand e-stores. A number of high-end brands such as Hermès and Cartier embraced digital in earnest, and introduced more expensive products that would have only been shoppable in-store previously.
But there are concerns that diving too deep into online could discourage shoppers from visiting the brands’ lavishly designed and expensive-to-maintain stores. The report said that the ubiquitous access that e-commerce gives to a luxury brand’s products, could be a factor in driving consumers away from in-store shopping and could be a drag on luxury profits.
Some luxury labels have addressed this issue by increasing the availability of products to browse online but not making all products available to buy that way. The report said that has helped them capitalise on generating consumer interest, by encouraging in-store browsing and purchasing.
One trend that has been key over the last year is how a number of labels have shifted their strategies and thus made major changes to what is available online.
For example, traditionally, accessories have been key for the e-stores of many luxury brands. But we’re seeing a move into more ready-to-wear too. Kering’s Gucci, for instance, decreased the quantity of its products offered online but it directed this reduction towards two core categories: Bags and Soft Luxury goods. On the other hand, it significantly increased the offer in RTW (+60%) and non-core categories like Jewellery and Watches.
Other strategy re-thinks have seen Bulgari, Zegna and Hermès having significantly increased both median and entry prices. But Dolce & Gabbana, Tiffany and Burberry have reduced median and entry prices, making their products more affordable. It’s perhaps significant that both Dolce & Gabbana and Burberry have dropped their diffusion lines (D&G and Brit) in recent years but have committed to ensuring that the aspirational, less wealthy customer, still has something to buy in his/her price bracket.
Marco Pozzi, Senior Advisor at Contactlab, said: “Maximum online prices for products that can be bought online have increased from $150,000 in AW15 (such as a Tiffany necklace) to $181,000 in AW16 (Cartier watch). However, 11 brands out of 32 offer products below $20. The online channel, then, is ideal to capture ‘aspirational’ clients.”
He added: “Ralph Lauren, Tiffany and Hermès have overall entry prices below $150, and are masters in category segregation pricing. Even ‘luxury’ brands, such as Chanel and Dior, have very accessible entry prices at $38 (Chanel) and $28 (Dior). Both these prices are close to premium brand Swatch, whose entry price is $38.”