Definitions of “luxury” vary significantly and depend on with whom you discuss the topic and in what context. The term “luxury” is not the easiest to define. It is relative, mysterious and elusive. In essence, it revolves around subjective criteria, depending who you ask. Irrespective what anyone considers the term, it denotes a privileged lifestyle and a “nice to have” product or experience.
Gary Harwood at HKLM, one of the founders and directors of a leading strategic branding and communication design consultancy, stated: “A luxury brand is very expensive, exclusive and very rare – not meant for everyone. When it ceases to be these things, then it’s lost its exclusive cachet. Commoditizing luxury brands and making them more accessible to the middle market puts them at risk of becoming ordinary, common and less desirable. And the more available a brand is, the less luxurious it becomes.”
Authentic luxury brands compete on the basis of their ability to invoke exclusivity, prestige and hedonism to their appropriate market segments not the masses. There is a classic litmus test:
- Is the product manufactured in artificially limited quantities? (i.e. the rarity factor)
- Does the firm have a story to tell? (i.e. history & pedigree)
- Is the firm portraying a unique lifestyle?
- Is craftsmanship the hallmark, which delivers products that only High Net Worth individuals can purchase without question?
- Does the brand offer authenticity?
- Does it implement an absolutely no discounting policy?
- Is the product (and at least most of its materials/parts) manufactured only in its country of origin?
Rationale of an absence of “authentic” luxury sales online
Many genuine luxury brands such as Hermes, Chanel and Louis Vuitton are reluctant to utilize the internet to sell their pricey merchandise ─ other than a limited number of more affordable items such as their cosmetic lines, fragrances and small leather goods, as well as their silk scarfs.
There are three major reasons why luxuries brands of this caliber should not sell their products online.
- Unique business model: The top tier luxury brands such as Hermes, Chanel, Dior and Patek Philippe, amongst other prestige marques, require a controlled distribution environment whereby they determine merchandising and pricing. They are ultra-sensitive in the manner in which their label gets handled. This is why they target and legally pursue third party e-commerce sites vigorously. Moreover, unlike traditional marketing, the mention of price is considered a taboo in the unconventional luxury marketing strategy. In the ideal luxury world, price is not something which should be divulged ─ let alone online. As a golden rule of thumb, the presumptive price should be higher than it really is.
- Total customer engagement: High-end luxury brand executives firmly and unanimously believe that high-priced and exclusive goods should be viewed and felt in person in a plush and attentive retail environment which attracts their best shoppers. Additionally, the well trained sales staff offer fashion advice and alterations on the spot. Their swanky online presence serves to bring the consumers to their bricks and mortar shops. This approach confirms the answer to this question: Do the well-heeled, who seek exclusivity and personalized experiences with their luxury purchases, want to make their extravagant purchases online ─ such as a $15,000 watch or handbag? Probably not.
- They are privately owned and operated: Unlike the mainstream market and publicly traded luxury brands such as Ralph Lauren, Coach, Tiffany & Co and others, top tier luxury brands are not eager for volume sales. To retain their scarcity, cache, and avoid diluting their intrinsic value, they refuse to respond to rising demand. They also include a conservative policy of making it more inaccessible to consumers whom they are not targeting. Consequently, with privately held luxury brands, profits are done with the long term in mind, not necessarily the next quarter. In comparison, the publicly traded ones, which are accountable to their shareholders, are constantly under pressure to trim production costs and increase revenues and profits which lead them to cater to a larger audience ‒ the mass affluent. So much for all the elements of ‘genuine’ luxury purveyors who are doing away with scarcity and exclusivity.
Vice president and principal analyst at Forrester, Sucharita Mulpuru-Kodali, stated, “Yes, maybe they could increase sales (through e-commerce).” However, she elaborated, “a brand’s goals aren’t always to increase sales. It may be to preserve the quality of the brand so that it stays in business for another 100 years.”
According to David Sadigh, founder and CEO of the Swiss digital banking magazine, “Swissquote”, the share of e-commerce sales in the luxury domain amounts to about 5%.
Authentic luxury brands who are not catering to the mass affluent are in a league of their own when it comes to e-commerce. Having said that, their present conservative strategy achieves its intended purpose. Essentially, when someone acquires an object of desire, he or she purchases craftsmanship, cache, pedigree, created in limited quantities, enhance one’s lifestyle and offer exclusivity ─ the top tier in its domain. This is a contrast to the “masstige” brands such as Ralph Lauren and Michael Kors, which according to a trend report from PMX – a marketing and research agency, revealed that both of those fashion labels dominated the online market share in their luxury category.
When it comes to authentic luxury sales, every touch point in the purchase process affects brand perception, which in turn makes customer service and presentation vital.