Luxury and digital platforms – from denial to partnership

July 31, 2018 | NEWS

Top luxury and fashion brands need to start selling through third party e-retailers or risk being left behind

Love it or loathe it, customers are moving online. The share of e-commerce in every category is rising fast, and based on recent OC&C research, 60% of all consumer journeys involve at least one digital touch point – and even more so with the next generation of digital native shoppers.

Yet most luxury fashion brands still hesitate to engage with third-party digital platforms and cling onto controlling their pricing, distribution and customer experience in their own physical stores and online websites.

But whether they like it or not, their products are already available on third-party online stores, often peddled by non-legitimate e-retailers – from discounted and out-of-season products to parallel markets.

Partnering with high-profile platforms not only offers an opportunity to shape their online presence, but also to leverage these platforms’ massive reach and advanced capabilities, which go far beyond what each brand could achieve on its own.

Giant platforms like Amazon, Alibaba and JD have tried multiple approaches to attract luxury brands but without much luck so far. For example, Alibaba’s Luxury Pavilion and JD’s Toplife are not getting too much traction yet with the most prestigious brands.

Yoox Net-A-Porter and Farfetch have been more successful at wooing luxury retailers and are starting to build fruitful relationships with luxury brands.

Sink or swim

To stay relevant in today’s digital world, luxury brands need to learn how to operate and adapt in order to maximise benefits from these 3rd party collaborations and:

1. Increase reach

Third party online platforms can help brands connect with customers they wouldn’t reach otherwise. To do that, Parfums Christian Dior, for example, is staging temporary pop-up stores with limited assortment on WeChat to recruit a younger generation of customers.
Another example is Burberry, who have fully embraced e-commerce, has announced a collaboration with Farfetch to access customers in 193 markets, including many in which Burberry would not open any of their own stores.

2. Focus distribution

Luxury brands need to look at their distribution footprint and make sure that it optimally serves the brand. For example, it may be better to replace substandard, franchised outlets with a top-notch online experience. Although not a luxury brand, Nike’s new distribution strategy is an interesting example and harbinger: they partnered with Amazon and slashed their retail partners from 30,000 to just 40, realising that many of them didn’t deliver an inspiring experience of the brand and should be replaced with a better online service.

3. Deliver an outstanding customer experience

Top labels need to meet and exceed customers’ increasingly high online expectations, and partnering with best-in-class players can be a way to catch up. For example, Chanel has opted to collaborate with Farfetch to integrate the platform’s unique user interface and capabilities into their own website to offer customers a superior seamless experience before and after visiting their physical stores.

4. Adopt an agile operating model

Collaborating with third party online partners implies adapting and optimising many aspects of the business. Brands will need to tailor their product range to their digital outlets and adopt new merchandising approaches (e.g. narrower, deeper) and supply chain models (e.g. read and react).

5. Experiment with and optimise online channels

As the online landscape is constantly evolving, retailers need to experiment with new platforms to keep up with trends. They must define clear roles for different channels (e.g. for their own website and for the social media and e-commerce platforms that they partner with), such as brand building, traffic generation, browsing, acquisition of new customers, loyalty building and product information.

Luxury brands need to take full advantage of what the online world has to offer and that includes using established and highly effective e-retailers. Brands need incorporate these into a confident and bold digital game plan, which prioritises the big bets. This is not about maximising profits. It’s bigger than that – it’s about staying the game in the first place.

Find out more about David de Matteis, Partner

Find out more about Pascal Martin, Partner