Upscale brands have not waded much into e-commerce, but more are doing so as their customers have demanded it -- and that poses some logistical challenges peculiar to that space, according to a new report from consulting firm McKinsey & Co.
Web sales have grown from 2% of overall luxury sales in 2009 to 6% in 2014, according to the report.
With LVMH Moët Hennessy, Louis Vuitton, Fendi, and Chanel among those launching online sales, and Tom Ford recently joining Net-a-Porter’s stable of brands, e-commerce sales could make up to 18% of luxury sales by 2025, according to the report.
Amazon launched e-commerce as we know it, and mass market retailers have continued to define it, for the most part, ever since. Luxury brands have been reluctant to jump in, preferring to maintain personal relationships with customers and to use their stores as showrooms, protecting their brands from that mass-market feel.
While upscale brands have sold accessories and perfumes online — and through less upscale department stores for that matter — many are now embracing the web because their customers are demanding it. That’s introducing a host of logistical challenges, McKinsey reports.
Luxury retailers are behind in technology and have security concerns when it comes to shipping because of the high-dollar value of their goods. They also often have much less inventory of any one release, and that small amount could be scattered at stores or warehouses worldwide.
In addition to the need for heightened security, luxury customers expect their items to arrive in premium, carefully prepared packages. Both concerns require specialized logistics, Nathalie Remy, head of McKinsey & Co.’s fashion and luxury practice and the report’s author, told the Wall Street Journal.
That could mean that more luxury brands could follow Tom Ford to Net-a-Porter, which has figured out those logistics and has shown that even luxury brands can maintain their high gloss on the web.
“They started later and they are catching up,” Ms. Remy said. But there’s “a very high bar in terms of experience—[luxury customers] want perfect things.”