This article was originally written for Essential Retail.
eCommerce is on everyone’s lips and its growth rates and potential for further growth are impressive. But, we understand that it still only accounts for a small percentage of overall revenue for luxury retailers. Interestingly, the UK seems to have the highest rate of acceptance of online luxury sales in the world (apparently equal to that of France and Italy combined). Looking to the future, our luxury clients see eCommerce as one of the most important ways to build a luxury brand in our modern world. And the eCommerce avenue is probably even more compelling because of the challenges of selective distribution and controlling one’s brand in Europe due to legal constraints.
Selective distribution agreements are almost always used to distribute luxury branded final products. They limit both the number of authorised distributors (through the use of objective, qualitative selection criteria linked to the nature of the product) and the possibilities for resale of the merchandise by the selected distributors. However, there are possible anti-competitive effects of this method of distribution and, especially in the EU, operating in this manner is challenging for luxury brands. Generally speaking, there are three conditions for a valid selective distribution network in the EU. The first condition is the nature of the merchandise must legitimately require a selective distribution network. Secondly, retailers/distributors must be chosen on the basis of objective, qualitative criteria that are laid down uniformly and are not applied in a discriminatory manner. Thirdly, the criteria must not go beyond what is necessary. Managing this is often quite challenging. So, eCommerce is seen as a very viable alternative for growth. Also, eCommerce is key for luxury start-ups and smaller brands because of the high rents charged for bricks and mortar locations in major shopping areas.
But I think omnichannel is the more compelling story — the combination (and getting the right balance) of online, mobile, bricks and mortar and wholesale. The key challenge is getting onmichannel right — does the mobile app match the design of the website which in turn matches or reflects the look and feel inside the store? In other words, is there true continuity in the customer experience? For luxury brands, this metric is perhaps even more imperative. The ability for the customer to have a harmonious experience across format and across devices that is completely bespoke to the brand — that is the wave of the future for luxury retailing.