Luxury Loses its Lustre and Bling Ain't the Thing...Except Online

Monday, August 24, 2009 | 1:52 PM


Questions of whether the gilded luxury bubble has burst are plaguing retailers. Verdict recently issues a dire report about the state of global luxury retailing, which it predicts is facing the toughest market conditions in two decades. [1] Changing consumer behaviour, currency exchange issues and bankers having the bonuses taken from under their noses are all factors contributing to the tough times faced by luxury brands. The silver lining (hey, at least it's a precious metal) is that e-commerce is poised to become a major sales channel for for high-end goods.

In the past, luxury retailers focused almost exclusively on the very wealthy. In the current economic climate, where even rap stars are selling their dazzling grillz for the liquidation value at [2], retailers cannot rely on the ultra-rich to keep their businesses afloat. It was speculated that the closure of two Barney's stores had less to do with the wealthy curbing their spending than with the middle-class, whose aspirational and splurge purchases--which were perhaps influenced by watching Sex and the City's Carrie Bradshaw console herself with Barney's merchandise--have contributed to the store's success in recent years, but now is in decline due to recession woes and job fears. [3]

In the past few years, UK department stores have seen a sharp contraction in sales, damaging the luxury market even further. [1] However, many believe that this is not the end to extravagance as we now know it; shoppers still want their luxury goods, but on the down-low. "It's a lot more chic to be saying, 'I'm cutting back,'" said Alexis Maybank, a co-founder of an online luxury shopping site, Gilt, in a recent Los Angeles Times article. "You see a lot of people seeking privacy in their shopping, but they're still shopping. You see people moving to online sites." [4]

And while many consumers are ready to buy, most luxury retailers aren't willing to sell. The majority of of UK luxury retailers do not offer transactional sites and instead use the web exclusively for branding and informational purposes. But while luxury brands struggle with how to maintain the air of exclusivity and customer experience that can be found in their retail stores, consumers have shown they they are not afraid to make high-end purchases online, financial crisis be damned.

It appears that the road less travelled by luxury brands--online retailing and e-commerce--may be paved with gold, as sites that are offering luxury goods online are thriving. You may not be able to buy Oscar de la Renta goods directly in the UK online, but you can buy them, and those of numerous other designers, on Net-a-Porter recently reported a 48% increase in sales and a 230% increase in profits, citing exclusive collaborations with designers such as Alexander McQueen and RM by Roland Mouret as key drivers to their success. [5] is also hip to the luxury market. On the site, their marketplace sellers list more than a hundred pieces of jewellery priced between £100,000 and £223,000 on the site, and Amazon directly sells jewellery at price points that range above £7500. Other sites, like, are combining quality content with the luxury shopping experience on their site that is as much like an online fashion magazine as a shopping portal.

Ultimately, although luxury purchases may slow in stores, the possibilities for luxury retailing online are as dazzling as the jewellery they sell. In a survey released this month, 43% of UK shoppers said they planned to spend more time online searching for cheaper versions of items from high street stores. [6] And Polo Ralph Lauren recently saw a 19% increase in online sales, notwithstanding comparable-store sales declining 5.2%. [7] So despite the doom and gloom forecasts, the online opportunities for the luxury market are crystal clear.

[1] "Gobal Luxury Retailing 2009" Verdict Research, June 2009
"Culture of Bling Clangs to Earth as the Recession Melts Rappers' Ice" Miguel Bustillo, Wall Street Journal, May 26, 2009
"Barneys becomes latest recession victim" Bruce Watson, Daily Finance, May 6th 2009
"Spending on luxury in tight times" Carla Hall, Los Angeles Times, May 10, 2009
"Net-A-Porter reports profits up 230%" Internet Retailing, June 12, 2009
[6] "UK E-Commerce: Fighting the Downturn" Karin von Abrams, eMarketer, August 2009
"Luxury goods maker Polo Ralph Lauren scores with a 19% rise in web sales" Internet Retailer, June 4, 2009


G Ahmed Awan said...

nice one