Isn't it time to lose the e-commerce attitude at the high-end of retail?

There's a wonderful line in Absolutely Fabulous when Edina is being patronised by a receptionist at an art gallery and she responds:

 You only work in a shop you know, you can drop the attitude.

It's how I always feel on the rare occasions when I've been in a really high-end retail outlet and being eyed suspiciously as an interloper.

Or as Patsy puts it in another AbFab episode when she's 'running' that highest of high-end shops, Jeremy's, and is asked by a customer how much a bag costs:

Patsy: "Why? Are you worried that you can't afford it?"

Woman: "Well, I don't know."

Patsy: "They you can't, get out!"

We’ve looked on a number of occasions at the evolving attitudes towards e-commerce at the high end of the retail market where luxury brands face a choice - embrace the universality of the online sales channel and risk traditional notions of exclusivity or reject this new route to market and keep their offerings safely in stores in the more fashionable zip codes.

This is a personal strategic choice for each retailer of course, although there may be signs of slow acceptance of a new reality if the the newly released “State of Luxury 2018: The Insider View” report from Luxury Daily and Unity Marketing is to be believed. Based on a survey of “599 decision-making luxury industry insiders”, the report finds that 68% of luxury goods brands now sell something over the internet, compared to 62% two years ago.

What that ‘something’ is remains the big question. Given the recent news stories about fashion giant Burberry burning £28 million of remaindered inventory and, prior to that, allegations that Richemont, the owner of Cartier and Montblanc, destroyed more than £400 million worth of watches over a two year period, it’s not likely that luxury retailers are going to be pushing unwanted stock via Amazon anytime soon…

But while Amazon remains all-too-often regarded as the worst possible option, there are signs that some luxury brands are more ready to team up with the larger online marketplaces, such as Alibaba’s Luxury Pavilion or JD.com’s Toplife. To date this year, Balenciago, Alexander McQueen and Yves St Laurent have all joined the latter, for example.

Resistant

Others however remain resistant. LVMH Moët Hennessy Louis Vuitton may have made some digital investments, such as a virtual advisor that can answer questions on Louis Vuitton products, the company still wants its clients coming through its upmarket doors. There’s not a lot of sign of that changing anytime soon, with Chief Financial Officer Jean-Jacques Guiony commenting:

I don't think we expect a dramatic change between the retail and the e-commerce.

LVMH’s philosophy is consistent, if questionable over the long term. Guiony articulates it in the following way:

We mostly view the digital strategy as a complement to the brick-and-mortar strategy. Basically, what people want is get information online and do the shopping offline. That's the behavior of most customers. I'm not saying that digital will not end up taking a share of the global business, but we don't expect this share to be a major one.

But we are pretty sure that what the clients want is get digital and brick-and-mortar experience at the same time...basically, that's what we have in mind, allowing people to start their journey with a brand on the digital network, on the website and continue it in the store and maybe end it up again on the web with things like home delivery and experience being further developed after the purchase in the store.

Exclusivity is the prized asset that LMVH wants to hold onto here, rather than access to a global market of, well, any old riff-raff browsing the Amazon sale. Or rather that’s how a cynic might read the thinking here, although Guiony doesn’t like the exclusivity v inclusivity argument it seems:

To be frank, I don't understand the debate. I mean, for me, the exclusivity, you can be exclusive, you cannot be excluding. There's a big difference between the two and it seems to me that the debate is in between excluding and including. It's not at all what luxury brands altogether are doing. When you look at Dior, which has product ranges from $20 for a lipstick to $35,000 for a crocodile bag, this is, by no means, excluding. Everyone can get access to the brand. It doesn't mean that it is not exclusive for the product we are selling, but this is a different concept.

As far as I'm concerned, the strategy of Vuitton, all the luxury brands within the LVMH Group, is actually striking the balance between desirability and accessibility. So I don't understand the debate, inclusive, exclusive. The debate, for me, is very much about making the brands accessible and at the same time desirable. If we are very desirable and not accessible, we don't do any business. If we are too accessible, it has some impact on the desirability, and we end up not doing any business anymore. So it's really at all times striking a balance on that.

Some might argue that it’s inevitable that over time that balance will have to shift and LVMH will have to shift with it. Guiony appears to agree, up to a point:

What we try to do is really managing this balance, increasing the network, but not too much. Making sure that we keep what makes the brand exclusive, in the case of Vuitton no rebates. All the products are being sold within our own network, including perfume, which is a little bit counter-intuitive when you look at the way perfumes are being distributed by the competition etc...But I think the point to bear in mind is really this question of accessibility versus desirability. For us the key point is really desirability. That's the key success to long-term growth of luxury brands, and particularly for Vuitton.

My take

I remain sceptical about the long term sustainability of this mindset. Brands such as those under the LVMH umbrella have been built on the exclusivity model and the ‘shopping experience’. That experience has, on the few occasions I’ve come across it, seemed to be based on elitist attitudes to the customer. I am Edina! Then again, maybe I’m just not the sort of client they’re after.

But there’s another breed of client that they do chase - or at least, they will be chasing soon. A recent report from Deloitte found that Millennials and Generation Z will represent more than 40% of the overall luxury goods market by 2025 - and they do want to shop online. I'm not convinced the LVMH stance can stay as it is once those potential customers get the necessary disposable income. As Deloitte notes:

For luxury brands, the physical experience has always been the core of that frame (beautiful flagships, religious experiences). The ability to touch-and-feel the product, the relationship consumers have with staff, and in particular the knowledge and service that sales associates provide, are all part of that frame. But as the frame itself becomes increasingly digital, luxury brands must consider what bold, innovative, and luxurious approaches can be adopted...balanced against protecting the core and the heritage of the brand.