The objective of this thesis is to juxtapose the perspective of millennials consumers with that of luxury brand managers in relation to e-commerce within the luxury sector. The authors will investigate the attitudes and expectations of millennial luxury consumers towards e-commerce as well as the actions and strategies of luxury brands today to address this increasingly important topic.
The dynamics of the luxury sector has been studied by many industry experts. Researchers are still struggling to define the concept of “new luxury” especially given the evolving habits and expectations of luxury consumers. The concept of luxury has developed over centuries: from being limited to a small group of elites to becoming more accessible to a wider demographic in today’s society.
Luxury consumer’s behavior and consumption patterns have also changed given digitalization and the increasing significance of the Internet in the daily lives of people. This has posed a challenge within the luxury industry and for the luxury brand. Should luxury brands start using digital to their benefits? Can the Internet actually help increase brand awareness and sales while maintaining the status of the brand?
It seems that the two concepts – luxury and e-commerce – are contradicting each other. Luxury has long been considered as exclusive and rare while the Internet on the other hand is a medium for mass consumption characterized by its ubiquity (Laudon and Traver, 2012).
According to The Boston Consulting Group (BCG), by 2022, personal and experiential luxury is estimated to be a €1,135 billion market, which is a significant increase from €845 billion in 2015. Top-end luxury is forecast to achieve healthy gains, growing from €245 billion in 2015 to €365 billion in 2022. Furthermore, the total number of luxury consumers is expected to reach 480 million by 2022 (BGC 2018).
Going deeper into segments, the demand for experiential luxury is expected to increase. This category includes products and services such as high-end food and wine, luxury hotels, and exclusive vacations. Nearly half of all consumers, majority of them Millennials, say that they are buying fewer products and purchasing more experiences. By 2022, the experiential segment is forecasted to account for nearly two-thirds of the total luxury market, representing a fundamental shift in consumer behavior – from ownership to being. This has caused the luxury industry to become increasingly complex and, as a result, luxury companies have to continuously adapt to these evolving trends in order to thrive or survive.
Despite this, experts still seem to be resistant. Kapferer and Bastien (2012) mentions in their book on luxury strategy that “selling real luxury brands online will dilute the brand value of luxury brands”. Other authors have suggested otherwise recommending luxury brands to be especially careful and precise when it comes to the integration of e-commerce into their brand’s strategy (Okonkwo 2005; 2010).
Nevertheless, e-commerce has experienced tremendous development and growth in recent years. Digital has now become inevitable to everyone including luxury businesses. New research from BCG (2016) indicates that today, around six out of ten luxury sales are digitally influenced. This research which surveyed approximately 10,000 consumers in ten countries plus interviews with industry leaders also found that online commerce, which now accounts for 7% of the global personal-luxury market, will grow further to make up 12% of that market by 2020.
We have seen how e-commerce can be perceived as incompatible with luxury strategies and how experts in the field continue to show reluctance because of this incompatibility. There are some authors, however, who have done some research on this topic such as Riley and Lacroix (2003) who examined the use of communication strategies for luxury brands in an online environment. There are also some studies on the early use of e-commerce in luxury. However, the authors of this study are convinced that deeper research is needed on the millennial consumers attitude towards luxury e-commerce as it has significant implication on the demand side of the industry in the upcoming years. Additionally, limited research has been done on this new consumer’s behavior and expectations when it comes to luxury brands.
To sum up the existing theories, Kapferer and Bastien (2012) argue very strongly against the use of e-commerce in luxury whereas other authors (Okonkwo 2005; 2010) are favoring the use of e-retailing. This raises the question on how e-commerce impacts the luxury brand. Is it just a risky trend that will end-up diluting the brand image? Or can e-commerce be leveraged and incorporated into a brand’s strategy thereby creating a competitive advantage for the brand?
This thesis aims to explore this relatively unknown area and to provide relevant insights into how millennials perceive and use e-commmerce within the luxury industry and whether this new channel aligns with the expectations of the digital-savvy millennial generation.
Another interesting question that will be addressed is whether a luxury brand could leverage e-commerce to gain a competitive advantage over other brands who are still not fully exploring this channel without diluting its brand image.
Based on this, the following research questions were drafted:
Question 1: What are millennial luxury consumers expecting from their experience when shopping for luxury brands online ?
Question 2: How are luxury brands adapting their strategy to meet the new expectations of their new customers?
This thesis will constitute a qualitative study facilitated through an offline immersion with luxury millennials consumer and brand representatives of luxury companies. It will be structured as follows:
We will begin with a comprehensive literature review of luxury and e-commerce, their main concepts, and their development over time. Within our literature review, we will include relevant ideas concerning millennials and their habits in relation to the two concepts.
The following segment will focus on the methodology and scope of our research. We will expound on the design of the research as well as share a detailed view on the participants of our study.
The next segment will present our results through an analysis of the narrative surveys conducted on both luxury consumer and brand representative. The authors will provide insights from the interviews, which will be the basis of our recommendations, which will be discussed in the following segment.
Finally, the thesis will raise questions based on our findings that can be foundations for future research and provide a summary of this endeavor through a conclusion.
B. Literature Review
Luxury is a term that has always been associated to the elite and wealthy people. From the Egyptians to the Incas, luxury has been a sign of power and wealth. In today’s society, luxury products and brands symbolize an elevated lifestyle – whether through clothing, jewelry, watches, hotels, restaurants, or cars. In any sector, luxury conveys an unfulfilled dream and in many cultures represents a certain success achieved in a life (Moriani 2012). The more the luxury sector grows, the more this threatens the levers of the luxury dream and the essence of what luxury evokes: the notion of rarity and of access to a privileged life , to products of exception and to a life of exception (Kapferer 2015). In a digitalized world and with the increasing purchase power of consumers, the question of the future of Luxury is being raised constantly in publications and consulting studies. But before diving into luxury within the context of digital and e-commerce, it is important to start by understanding the concept of luxury and the business model it traditionally operates in.
1.1 Luxury As A Concept
The concept of luxury is often elusive. For most people, it is easy to imagine but difficult to describe luxury with definitions. This is because the concept of luxury is dynamic. The notion of luxury has evolved through time and cultures.
Oxford dictionary defines luxury as “a state of great comfort or elegance, especially when involving great expense”, “An inessential, desirable item that is expensive or difficult to obtain” or “a pleasure obtained only rarely”.
Luxury as an absolute concept needs no brand (Kapferer 2010), as people talk more about lifestyle elements than about products. Luxury as a concept typically evokes images of the lives of the rich and powerful people. Luxury was first found in religious temples, churches…it later became the signal of rank in all aristocratic societies (Podolny 2005). In the past, luxury was the consequence of social stratification. Today, luxury creates social stratification in countries in which it did not previously exist (Kapferer and Bastien 2012). According to Georg Simmel (1986) the concept of luxury is always tied to philosophical and sociological factors of surrounding society. Even from the Roman antiquity, luxury has been closely related to concept of fashion and other items that people have used to present their wealth. Pamela Danziger (2005) describes the definition of luxury with words like sybaritic, voluptuary, opulent, self-indulgent, princely, pampered, posh, and tempting.
1.2 Luxury as a Business Model
Luxury is also a business model by itself. This has been empirically defined through time by those luxury brands that dominate the pantheon worldwide: Louis Vuitton, Chanel, Gucci, Hermès, Ferrari, Rolex, etc.
These companies, many of which are still family owned, have crafted a common business model, which has become a pillar of their resilience and profitability. This business model runs contrary to the present business models operating in different business sectors. It rests on strict principles that maintain the uniqueness of luxury and preserve the non-comparability of those luxury brands that stick to it. Here are a few examples (Kapferer 2015):
• Do not delocalize production: luxury is the ambassador of the local culture and refined art de vivre.
• Do not advertise to sell: luxury communicates to build the dream and to recreate it. This is not measured by short-term sales increases because, unlike consumer packaged goods, possession of a luxury good dilutes the excitement one had before the purchase was made.
• Communicate to non-targets: part of the value of owning a luxury good is the quality craftsmanship of the product, but another necessary part is the recognition by non-owners.
• Maintain full control of the value chain: from ingredient sourcing to the retail experience, luxury quality can only be delivered if the brand has 100 percent control.
• Maintain full control of distribution: this is where one-to-one service and interaction should take place. The experience must be exclusive.
• Never issue licences: brand licensing necessitates loss of control? and increases the risk of consumers having a bad experience. Luxury brands promise exceptional quality and an exceptional experience, but licensors must be profitable even after having paid important licensing fees. This can only be achieved by reducing the quality of the products themselves or of the distribution.
• Always increase the average price: since the middle class gets richer, to remain its dream the luxury brand should never trade down nor cut its prices. If it does create some accessible lines, this must be done on a limited scale and be counterbalanced by systematic trading-up.
• Develop direct, one-to-one relationships with clients. Luxury means treating all clients as VIPs. This necessitates direct, personalized, one-to-one interaction, ideally in exclusive stores that represent the dream in real life.
There are other business models among the high-end label: the fashion business model and the premium business model. The main characteristic of the fashion business model is that it delocalizes production in search of low-cost labor forces. However, unlike luxury, fashion does not sell timelessness. As soon as the fashion season ends, sales and super-sales that slash margins are employed to eliminate inventory. Fashion does not worship quality as much as luxury does.
As for pricing, in the luxury business model average prices should always go up (this does not prevent having some access prices), as there are enough newly rich consumers to justify this strategy as long as they dream of the brand. The premium or super-premium business model rests on the willingness to create an objectively ‘best’ product. Grey Goose super-premium vodka, for example, advertises itself as the ‘world’s best-tasting vodka’ since it has received many awards from expert juries. Unlike luxury, which refuses any comparison, super-premium brands look for it and build their fame through it (Kapferer 2015).
1.3 What Luxury Leaders Think of Luxury
Gabrielle Coco Chanel (1883 – 1971) once said, “Luxury is a necessity that begins where necessity ends.” Ms. Chanel also claimed “Some people think luxury is the opposite of poverty. It is not. It is the opposite of vulgarity.” (Okonkwo, 2010)
Her successor Karl Lagerfeld asserts “Luxury is the ease of a t-shirt in a very expensive dress. If you don’t have it, you are not a person used to luxury. You are just a rich person who can buy stuff.” (Thomas 2007)
According to Jean-Louis Dumas, Chairman of Hermès, “Luxury can be very simple, for example, staying 15 minutes longer in bed.” (as cited in Forbes India, 2013)
Mr. Pinault, Chairman of Kering argues that “Luxury is now for the masses and the classes, … Exclusivity is no longer a criterion for luxury.” (Pinault at the 2012 Financial Times Business of Luxury Summit as cited in Doran, 2012) In parallel, Bernard Arnault, founder and CEO of Louis Vuitton Moët Hennessy (LVMH) describes modern luxury as “The ordinary of extraordinary people and the extraordinary of ordinary people.” (as cited in Kapferer, 2010, p.92)
1.4 The Question of New Luxury
The concept of luxury has started to evolve as the world continues to change because of advancements in technology and society. Danziger (2005) introduced a concept of “new luxury” more suitable for the 21st Century customer. The perception of luxury has changed into various forms mainly due to the Internet. While people prior and within the 20th century considered luxury products as expensive and exclusive items, “new luxury” concentrates more on exclusive experiences and feelings. In new luxury, the importance of price, brand, and status of the items have diminished in exchange of quality and originality.
Taylor et. al. (2008) state that in the 21st century, the perception of luxury has changed across socio-economic classes. It is no longer the question of who has the access to luxury items but rather whether or not and how often they will demand authentic or fake items. As information becomes more accessible, consumers have become more aware of their purchases and the perception of luxury is closely moving towards mainstream, democratized, and masstige.
1.5 Luxury Products and Characteristics
Luxury products encompass a wide range of goods and services. Often, people associate luxury products with high-end bags, jewelery, cars, or hotels.
‘Luxury includes two levels of representation. The first is material, it includes the product and the brand – its history, identity, unique know how, the talent.. The second level is psychological. This covers representations, which are influenced by our social environment and the brand values’ Gutsatz (1996).
Defining what makes a product a ‘luxury product’ can sometimes be difficult, but there are a few key characteristics that can help give a product a luxury label. When it comes to the physical, or functional, components of luxury products, these can be identified as certain associations tied to the product’s characteristics since all the luxury goods share some common characteristics. Chevalier and Lu (2010) state that a luxury product needs to have a “strong artistic content”, “be the result of a craftsmanship”, and to “be international, selective and exclusive”. All luxury producers attempt to deliver products or services procuring a feeling of exception, emotion and privilege. This can be achieved thanks to unique features like the savoir-faire, culture, art, beauty and heritage. However, some believe that the perception of a good being luxury only lies in the consumers’ perception of the good or the brand. Hence, if the consumer perceives the good or the brand to be luxurious, then for this consumer the good is a luxury item (Radón 2010).
Today, luxury items are usually sold in flagships of the brand, other shops of the brand department stores and sometimes online on the brand’s website or a multi-brand selling platform website. When it comes to department stores, sometimes the brand corner is on the same floor of another non-luxury brand for example. The same applies for e-commerce channels.
Heine (2011) mentions six major characteristics for products to be categorized as luxury: pricing, quality, aesthetics, rarity, extraordinariness and symbolism. All the aforementioned characteristics are not relevant in all luxury categories, but work more as a guideline for generally perceived characteristics. The characteristics are also categorized into manufacturing, concrete and abstract characteristics. Concrete characteristics refer to physical product attributes and are directly observable. A combination of several concrete attributes yields to an abstract attribute such as comfort (Olson and Reynolds 1983)
The category of manufacturing characteristics was added because it proved very relevant to respondents (see also Dubois et al. 2001, p. 40). These characteristics refer to the specific manufacturing process that allows for the creation of concrete and abstract product characteristics.
The Characteristics of Luxury Products by Heine
When you ask people to describe a luxury product, price is generally the most referred to attribute. In addition, it is also the most used characteristic in the literature, as it is considered as the most objective and the easiest-to-measure criteria to evaluate the luxuriousness of a product (McKinsey 1990, p. 16; Meffert and Lasslop 2003, p. 5; Mutscheller 1992, p. 65). Luxury products should always be priced high in an inter-categorical comparison, and usually the most expensive in intra-categorical comparison. Even though luxury items are generally perceived as expensive items, a brand cannot climb into luxury category simply by raising their prices without justification of superior quality.
Perceived quality of a product is the combination of several manufacturing characteristics, product attributes, and product benefits. The manufacturers of luxury products are considered as the leading experts in their field of industry, with strong creative power, which covers their stylistic and technical competence gained with the long experience of work, and focus on innovations and research and development. Stylistically the luxury item should be a result of the highly talented designer, who aims to create new trends with passion and sense of superior style, which is necessary condition to please the luxury crave of the richest and the most powerful. Technically, the complexity of the Luxury product requires considerable effort, which in many cases requires high talented craftsmanship of the prize-winning long-time experts. (Heine 2011)
Material-wise, the product needs to be build out of the high value materials and components that are generally recognized in an inter-categorical comparison, such as gold, diamonds, silk, platinum etc., depending on the field of industry. The construction and functionality of a luxury product needs to be well thought and tested, to achieve the most durable, functional and comfortable end result. The workmanship of luxury product requires zero tolerance for flaws or imperfections, unless they are “planned imperfection” as a result of handmade manufacturing. The features of luxury products should always be better than of any ordinary products, also depending on product category. (Heine 2011)
One of the most important characteristics for a luxury product is its aesthetics. Kapferer and Bastien (2009, p. 314) argue that “money is not enough to define luxury products (…) because it is not a measure of taste.” Dubois et al. (2001) emphasize the polysensuality of luxury products as they “not only look beautiful but also are pleasant to hear, smell, taste or touch” and therefore offer a “source of sensual pleasure.”
Luxury products are by definition not ordinary, but rather a rarity (Kisabaka 2001). Even if many luxury companies could produce and sell huge amounts of their products, they limit their production and availability by releasing only very limited special editions of certain products. (Heine 2011)
Sources of Rarity by Heine
Extraordinariness is closely related to innovativeness of luxury products and it’s another characteristic that many people attribute to luxury products. The extraordinariness of a luxury product often results “only” from a different design or construction principle. In their role as experts, luxury manufacturers often determine the stylistic trends, which are then adopted by mass-market manufacturers (Goody 2006, p. 344 et seq.). As luxury manufacturers are expected to be the pioneers of their industry, the products are expected to possess some technical or designable features that exceed all the other equivalents. (Heine 2011, 62.) In addition to eccentric or innovative functional features, extraordinariness may also arise from the product’s history or its manufacturing process.
Finally, unlike mass products that are generally made to answer to consumer demand, and to serve functionality, luxury products are made to represent nonfunctional and abstract. The symbolism of luxury items is not supposed to represent any objectives, but more of the desire of belonging to a superior class while adapting their sense of taste and worldview. The symbolism is usually conveyed through product design or other brands values that can be achieved through strategic luxury marketing-mix. (Heine 2011)
1.6 Luxury Brands
When it comes to defining a line or a brand as a ‘luxury brand’, certain specifications need to be met. Unlike “premium brands” that are “based on objective superiority when comparing alternatives, luxury brands on the other hand is non-comparable” (Kapferer and Bastien 2012). Luxury brands need a unique and memorable name. They often use a person’s name and usually that of a designer or craftsman who differentiates himself by exploring hi remarkable skills (Chevalier and Mazzalovo 2008). The name of a brand usually ends up becoming a reference, a symbol of attributes that go beyond the products of the brand by themselves. Giorgio Armani, Chanel, Louis Cartier, Bulgari, Dior, and Boucheron are all brands originated from family names. Even large luxury groups are headed by families like Richemont and LVMH for example. The family name also manifests a certain heritage and remind that such items are ordinarily made for small group of close friends – at least at the very beginning (Chevalier and Mazzalovo 2008).
Like any brand, a luxury brand should follow certain legal rules: it needs to be registered in a country and in a sector, be an arbitrary world in this sector, should not harm moral values and finally should demonstrate a real commercial use. The definition of a brand changed through time. A brand was once a sign that guarantees the origin and distinguishes from competition (the lawyers’ perception). It was also an sort of an identity that distinguished vs competition ( the designers’ vision). Others consider a brand to be a promise (the advertiser’s way of seeing it). Jean-Noel Kepferer, in his book The New Strategic Brand Management, defines the brand as a name associated to a value proposition of tangible and intangible characteristics. Without the intangibles, you are just a product name and not a brand. One of the most constructive brand tools is the brand identity prism that is very simple to understand and communicate. Kapferer first developed this concept in his book “Strategic Brand Management”. Essentially, the prism has the style and themes of the marketer (sender) on one side which are being received by the consumer (recipient) on the other side. The other axes of the prism define the level of internalization or externalization of the activities.
Brand Identity Prism by Kapferer
Luxury brands are highly associated with their core products (Kapferer 2008). This is reflected by the larger part of the existing definitions of luxury brands, which refer to specific associations about product characteristics (e.g. Meffert and Lasslop 2003, p. 6; Büttner et al. 2006, p. 12; Valtin 2004, p. 30). The constitutive characteristics of luxury products therefore correspond largely with those of luxury brands, which leads to the following definition: Luxury brands are regarded as images in the minds of consumers that comprise associations about a high level of price, quality, aesthetics, rarity, extraordinariness and a high degree of non-functional associations (Heine 2012). The brand plays a major role, especially in the luxury industry (Chevalier and Mazzalovo 2008). Owning a luxury goods is linked to the symbolic desire to be part of a better social class, defined subjectively by everyone’s dreams. In this respect, anything that emphasizes your sense of belonging to a social group becomes luxury (Kapferer and Bastien 2012). Luxury make people want to have or even be luxury, seen therefore as a dynamic social force (Pinkhasov and Nair 2014). The key social function of luxury brands is reinforced by the important personal personal and pleasurable component of luxury (Kapferer and Bastien 2012). In order to achieve long term success, luxury goods must represent a social statement as well as individual pleasure (Riad, 2011).
1.7 Luxury Consumers
Luxury brands depend on customers who value the identity, philosophy and image that the brand creates. The best customers are the ones submerged in the brand’s culture (Kapferer and Bastien 2012). These customers are fascinated by the strong emotional value associated to the brand (Chevalier and Mazzalovo 2008) and the incredible experience the brand has to offer. Bendel and Kleanthous (2007) state that democratization of luxury has made brands more accessible towards audience, and the brands now have to provide added value to their customers with social performance, sustainable business practices, and other deeper brand values. The modern luxury consumers are also expecting to gain experiences when dealing with luxury brands in purchase situations and other social interactions.
According to Patrick Albaladejo, an affiliate professor at HEC Paris, luxury consumers can be divided into four categories. Understanding the characteristics of each category and their corresponding expectations is important for brands to be able to meet the needs of these customers and make them live the luxury dream the way they see it.
Some might argue that this idea of categorizing luxury consumers goes against the essence of luxury – the brand should not adapt to the customer and instead should created and set the direction of the taste of tomorrow. However, these categories move beyond the dimension of taste, but also of feeling.
Albaladejo describes the first category of luxury consumers as the Connoisseur. The Connoisseur is the customer who is interested in the brand’s history, the details of each products, and the art of creation. The Hermès Festival des Métiers exhibition that has toured the world was specifically made for this category. Celebrating the craftsmanship of the Hermès artisans, this exhibition is a dream for the brand lover as they get a peek inside the world and products of Hermès.
Another category is the fans of the brand. These customers are less interested in the roots, heritage, and foundation of the brand but rather they focus on the public image of the brand and their image as they associate themselves with the brand. The value they receive from the brand is derived from the social implications of owning the products of the brand. This is a reminder of the bandwagon effect mentioned many times by Kapferer where he describes the customer as being unable to judge or describe what good taste is. The fan chooses a certain brand because they know that by choosing this particular brand, they will be perceived with the high-status groups and celebrities who patronize that particular brand.
The third category are the Logophiles. They represent the consumers who value the brand signage more than the brand culture itself. They are fond of highly conspicuous products. This view is supported by Mouillot (2013) in describing Arab women for example as being ‘logophiles’, suggesting that through the use of designer logos they adopt an identity that they like.
Finally the fourth category of luxury consumers are the occasional consumers. These are the consumers occasional purchases luxury products for themselves or as gifts for someone special. They usually go for the “affordable” luxury categories like cosmetics or perfumes.
What is interesting is that these four categories aren’t completely detached one from the other. These categories can be visualized as a kind of ladder mounted by the luxury consumer – the occasional consumer starting from the bottom of the ladder and the connoisseur at the top.
In relation to marketing, a new trend called “lifestyle” branding started to emerge within the luxury sector. This trend is based on the notion that luxury consumers share common interest and life values. As a result, the loyalty of customers to brands will be based on the ability of brands to resonate to their unique lifestyle and values. Paurav Shukla, Senior Lecturer at at Brighton Business School, puts it like this: “Managers will have to change their core message and value proposition to reflect the market conditions and consumer motivations. The question which managers need to ask is what is the value proposition in the present circumstances most of my customers are looking for, and how can I develop and convey a message which reflects consumers’ reality rather than the brand’s own reality.” (The World Financial Review, 2013)
1.8 Luxury and the Millennial Generation
The millennial generation is becoming increasingly significant demographic for luxury brands as the segment grows in size and purchase power. Because of this, luxury brands are looking for ways to reach, engage, and retain them. Understanding their mindset and purchase behavior is important for the future of brands.
The millennial generation is one that grew-up with the internet which has affected their social behavior and consumption habits (Deloitte 2017). In terms of luxury, millennials represent a significant portion of the market and their continued growth has achieved a critical mass. Millennials nowadays represent approximately 30% of luxury buyers, a percentage that will grow to approximately 45% by 2025, according to Bain’s Claudia d’Arpizio. Some values related to the luxury goods such as emotional and personal context which were highly important to the prior generation still seem to be appealing to the millennials. They are even driving their purchasing decision even more.
However, the traditional attachment to craftsmanship and exclusivity, while still valuable pillars of luxury for millennials, is now often supplemented by a need for other popular lifestyle values, such as sustainability. This focus on sustainability is being witnessed on many levels. Luxury brands have significantly increased their communications on sustainability (e.g. through advertising the use of renewable and organic materials). This shift makes sense – based on a recent study conducted by Deloitte (2017) on millennial luxury consumption drivers, 89% of U.S. millennials always or often consider whether a brand is ‘sustainable and ethical’ before making a purchase decision. The millennial luxury consumers of today are also more keen on a non-conspicuous consumption, and their social disposal of luxury purchases is usually more discrete.
The question of e-commerce is one that has been frequented by luxury brands because of a fundamental rule of luxury, that is “communicate but never sell on the Internet” (Kapferer 2009). This pervasive belief is prevalent on both the consumer and brand side of the luxury industry. For luxury brands, going online will dilute the image of their brand because of accessibility, price transparency and exclusivity. For consumers, on the other hand,
The luxury market is undeniably changing. According to a study by Mckinsey & Company, by 2025, nearly one-fifth of luxury sales will be facilitated online (Achille 2018). By this time, millennials and generation Z will account for 45% of the global personal luxury goods (PMX Agency 2017). This trajectory has profound consequences on the sustainability of luxury houses. Millennials has been characterized as digital natives with very different purchase behaviors than that of traditional luxury consumers. This has made e-commerce increasingly important for consumption of luxury brands.
The exponential growth of e-commerce and the emergence of the millennial market has disrupted the traditional customer journey of the luxury consumer of the past. Brands now have to decide whether to adapt and enhance their customer experience to accommodate this growing trend and evolving market.
New luxury players have also emerged that use digital as their primary playing field. For example, Farfetch, a multi-brand online luxury retailer is expected to reach an IPO of $5 Billion ([email protected] 2018), an outstanding feat today’s digital race in the luxury retail sector. Other players have capitalized on the luxury industry’s gray markets by developing businesses around second-hand products, subscription-as-a-service, and peer-to-peer. These new players, born out of the Internet, have become a threat to luxury brands.
2.1 The Economy of E-Commerce
Any form of transactions facilitated through electronic systems such as the Internet is called electronic commerce or e-commerce. It covers both business-to-business (B2B) and business-to-consumer (B2C) transactions online. For a transaction to be considered e-commerce, therefore, requires part of the process to be facilitated via the Internet. This implies that e-commerce encompasses a wide range of activities including transactions through websites, electronic fund transfers, inventory management systems, or peer-to-peer sites (Mohapatra 2013).
When evaluating the strategic impact of e-commerce on an organization, Chaffey (2009) identified two key systems with different functionalities needed in an organization to accommodate transactions with buyers and suppliers: buy-side and sell-side.
Buy-side refers to transactions to procure resources needed by an organization from its suppliers. Sell-side refers to transactions involved with selling products to an organization’s customers (Chaffey 2009). These two perspectives should be taken into account when identifying business opportunities within the e-commerce environment.
Buy-side and sell-side E-ecommerce by Dave Chaffey (2009)
2.2 Types of E-Commerce
There are different types of e-commerce used by luxury brands. Focusing on the sell-side of the dual e-commerce system, Chaffey (2009) determined four online e-commerce types based on different objectives for certain target market. These categories are not mutually exclusive and may overlap depending on the objective of the company.
Type 1 – Transactional E-commerce Sites
This type covers the platforms for purchase online, traditionally online retail stores of brands or multi-brand luxury websites, also called multi-brand websites. The primary objective of this type of site is to facilitate the sale of products online and provide tools, such as additional information or value-added services, to support sales.
Luxury brands such as Louis Vuitton (fr.louisvuitton.com), Gucci (www.gucci.com), and Hermes (www.hermes.com) sell their products online through their official websites. Examples of multi-brand luxury websites are Net-A-Porter, the pioneer for selling luxury online, Farfetch, and Moda Operandi.
Moda Operandi – Multi-brand E-commerce Website
Céline – Mono-brand e-commerce website
Type 2 – Service-oriented relationship-building sites
The main objectives for this type 2 are lead-generation and relationship building through information dissemination. Information on products is usually provided through websites or e-newsletters to facilitate offline purchases. These websites offers additional value to customers by providing them detailed information on products and services. Typically, business-to-business (B2B) companies with complex products use Type 2.
In the case of Rolls Royce, the official website showcases the different models while highlighting the story and essence of each through captivating visuals and powerful copy. Specification on the features of the different models are quite limited, therefore prospective consumers are encouraged to speak to a private advisor.
Rolls Royce – Official Website
Type 3 – Brand-building Sites
Type 3 sell-side e-commerce focuses on supporting brands through an online consumer experience typically via a company or brand website. Type 3 showcases the brand universe through visual and written storytelling. This type is primarily used by fast moving consumer goods (FMCG) companies that partner with distributors to sell their products.
Luxury brands also operate on this type of site. Omega, the luxury Swiss watchmaker, showcases each product though vivid images and thorough description across its range. Additionally, the website also promotes content such as videos and photos relating to the world of Omega and their consumers.
Omega Watches – Official Website
Type 4 – Publisher or Media Sites
The objective of type 4 sell-side e-commerce is to provide information on a range of content, organic or sponsored by companies. These online sites operate based on advertising from brands that promote their products or services.
Typically, these sites create or organize content based on a certain theme, allowing brand’s freedom to partner with these sites based on their “fit”. Online media publishers, search engines, and social network sites comprise this category.
Cartier – Youtube Page
Vogue Paris – Official Website
This paper will focus on Type 1, Transactional E-commerce Sites, which include the official online shops of luxury brands and multi-brand online shops, such as Net-A-Porter and Farfetch, that operate as online department stores. These online shops primarily sell luxury products online directly to the luxury customer.
M-commerce: New Sub-type of E-commerce
A new sub-type of e-commerce has developed in the recent years with the growth and spread of smart devices – mobile commerce. Mobile commerce, or m-commerce, is the use of mobile technologies to facilitate online purchases. Transactions are made in a mobile situation, traditionally through digital platforms such as applications or browsers.
M-commerce transactions are not limited to smartphones encompass a wide a range of mobile devices including tablets and wearable devices. Luxury brands
2.3 E-Commerce and the Millennial Behavior
Recent years have shown the rapid evolution of industries because of the millennial demographic. According to a Marketline Report (2017), millennials have been instrumental for the shift of brands online, as they prefer to shop online rather than conventional retail shopping. Millennials have been instrumental for the growth of the sharing economy such as Airbnb, Uber, and Deliveroo, which have disrupted the various industries these apps belong to.
As this demographic grows in size and purchase power, retail-driven businesses have to better understand the millennial mindset in terms of ownership, use of technology, and their relationship with brands.
Millennials and Ownership
The millennial generation cares less about ownership and prefers spending on experiences such as unique activities, holidays, and travel. This attitude shift does not radically change their perspective on personal ownership especially for big-ticket items such as homes or luxury products – they prefer to do this later in line.
However, this perspective is not reflective of their overall quality of life. Millennials typically expect a certain level of quality in their lives and will pursue it even with reduced means (MarketLine Report 2017).
Millennials and Technology
The use of technology and consumption of Internet by millennials have radically changed the landscape of many industries. For example, the online consumption of media content has changed the business of journalism and print media that previously relied on revenues from advertising and paper circulation. Popular media publications such as Vogue, The Financial Times, TIME Magazine have shifted their business model from predominantly print to online versions.
Millennials are also using technology such as smartphones and tablets to experience and shop for brands. This is especially true for apparel brands, across budget to premium segments, and represented the largest segment of online retail, accounting for 28.9% of the sector’s total value in 2015 (MarketlLine Report 2017). Social networks have also contributed to the growth of online retail, primarily driven by millennials, with brands altering their marketing strategy to capitalize on social media online.
Millennials and their Relationship with Brands
Millennials have different expectations when it comes to their relationship with brands. They want to connect with brands on an emotional basis. According to Paul Woolmington (2017), millennials are looking for a personalized relationship with brands or brands that inspire them.
Millennials are also less loyal to brands compared to previous generations. They continuously look new innovations (Sit 2017) and unique experiences to authenticate their relationship with brands (Marketline Report 2017).
These factors have significant implications on how brands communicate and interact with millennials both online and offline.
2.4 Recent Developments of E-Commerce in Luxury
The growth of luxury market online has primarily driven this race of luxury brands towards e-commerce. According to a 2017 report by Bain ; Co., online sales are expected to drive growth in the luxury market, and by 2025, 25% of the luxury market will be through online sales. This represents a lucrative opportunity for luxury brands to go online.
E-commerce has also a powerful consumer insight tool for luxury brands. They are able to get closer to their customer in terms of preference, habits, and value, through data. This has allowed luxury brands to take their relationship with their customers to a new level: brands are able to hyper-personalize products and communication; strengthen loyalty through membership platforms and promotions, and respond to rapid shifts in consumer needs in terms of products, services, and experience.
E-commerce has also introduced a new operational marketing approach called omni-channel marketing. This type of marketing provides an opportunity for businesses to utilize both online channels and offline channels to better target and segment their customers. It also provides the customer with a better experience by synergizing online and offline channels and organizing it as an integrated journey.
Many retailers are also adopting an online-to-store channel, wherein customers order products online and pick up orders at the physical store (Cao, J., et al., 2015). This strategy allows retailers to offer a wider variety of products while optimizing the logistics of their physical assets. Other retailers may also adopt an approach that aims to incentivize purchases online instead of brick-and-mortar stores through showrooms and pop-up stores. Similar to traditional retail stores, consumers can experience the product offered through a sensorial experience – touch, feel, smell – and purchase the product online at a later date.
The Amazon effect (Read 2018), the concept referencing the consumer’s changing behavior when it comes to shopping, has also had profound effects on traditional commerce such as that of luxury retail. Consumers are expecting better shopping experiences and customer services both online and offline. The Amazon effect has also created opportunities for new players to capitalize on a different type of consumer – the online luxury shopper. According to Bain & Co (2017), the market for personal luxury is growing and is gaining steam online.
For these reasons, luxury brands have included their catalogue of products online primarily through multi-brand online retailers. While this type of online platform proactively showcases luxury brands to a wide online demographic, it limits the control of these brands in terms of creativity and customer experience.
Farfetch is a good example of a new player capitalizing on this trend. As a multi-brand online retailer, Farfetch sells a variation of luxury products online ranging from ready-to-wear, jewelry and watches, leather goods, and accessories. The company operates similar that to Yoox Net-A-Porter (YNAP), the digital pioneer in Luxury online retailing, but with an augmented business model. Unlike YNAP, which operates like a digital department store that purchases luxury items from brands, Farfetch sells luxury items on behalf of brands with commission on the sale (Felsted 2018).
The online retailer has made headlines in 2017 as the capital-light company sets its sights on a $6 billion initial public offering. The company has also been partnering with well-known brands in the luxury industry such as Tiffany & Co., Chopard, and Debeers for fine jewelry,
As a response to these new luxury e-retailers, luxury brands such as Saint Laurent, Hermes, and Celine have recently implemented their own online retail platforms through their official websites to adapt to the new digital reality while mitigating the limitation of creative control.
Interestingly, there is no clear luxury brand leader for a mono-brand e-commerce websites.
The Convergence Between Luxury and E-commerce
The concepts of e-commerce and luxury were once thought incompatible by some key opinion leaders in luxury who believed that e-commerce, which is characterized by its accessibility to everyone with a basic internet connection, goes against the traditional notion of exclusivity attached to luxury. Despite the continuous development of e-commerce from its beginnings in 1995, notably with the launch of Amazon and Ebay, luxury brands are still wary of this business primarily because of the fear of losing control of their image within an unpredictable environment.
Many brands started testing online commerce through partnerships with multi-brands platforms such as YOOX Net-à-Porter – an e-commerce website that was launched in 2015. However, the independent nature of these platforms creates uneasiness with luxury brands because of the lack of control they have on the products as opposed to their own online e-commerce platform.
Jean-Noel Kapferer, a professor at HEC Paris, raises the question whether luxury is a normal industry. Interestingly, luxury is the only industry in which growth is a problem, not because of a lack of demand but because an excess of demand. So for other industries, where having an e-commerce is a strategic move aimed at increasing sales online to grow the business, for luxury, this should not be the goal. This explains the slow e-commerce adaptation by luxury brands who require better frameworks to evaluate the impact of this new type of business. The authors agree on three facets that should be carefully considered when evaluating a company’s decision to go into e-commerce: the Brand Image, the Purchase Behavior of the customer, and Loyalty.
3.1 Brand Image
Traditionally, brand image is defined as the cumulative impression of a brand in a consumer’s mind. It describes the cumulative image of a brand that is manifested through the combined effects of advertising, public relations, word-of-mouth, and embodied through the actual experience of the customer (Norman 1991). Today, the brand image encompasses all touch points which include online interactions with the customer. This reality makes it increasingly important for luxury brands to provide a holistic experience for the customer – from the products they develop, the experience of the customer during point of sale, the mode of communication they deploy, the design of the store, and the interaction of the staff with customers.
For this study, the authors focused on two (2) areas associated with brand image that affects the attractiveness of the luxury brand in the context of e-commerce: Perception and Accessibility.
Perception and Perceived Value
A brand is a name that influences consumers (Kapferer 2012). This is especially true for luxury brands that rely on the prestige of the brand to influence luxury consumers to purchase their products. This relates to the concept of brand power, or brand equity, which reflects the amount consumers are willing to pay, usually above the actual cost of a product, to receive the value of the brand (Wasserman 2015). This value usually stems from the amalgamation of intangible i.e. heritage, country of origin and tangible aspects i.e. craftsmanship of the product, experience at the retail store of the brand.
While e-commerce presents an opportunity for the luxury brand to expand beyond the traditional boundaries of the retail environment by introducing their customers to a new platform to experience the brand, it can be argued that e-commerce limits overall value provided by luxury brands to their customers. This limitation between luxury and e-commerce stems from the concept that luxury aims at producing products with the highest level of intangible added value (Kapferer, 2012) considering factors such as pleasure and desire elicited by the luxury products (Kemp 1998), prestige seeking (Vigneron and Johnson 1999), and social values that symbolize wealth (Vigneron and Johnson 1999).
The nature of e-commerce, on the other hand, creates a barrier between the product and consumer thereby limiting the pleasure and desire derived from a luxury product. In the context of social values and prestige seeking, e-commerce calls into question the consumer’s preference for a luxury brand due it’s perceived limited supply (Verhallen 1982). This aligns with Kapferer’s (2015) notion that the availability of luxury online breaks the two pillars of luxury creation value: space and time. Luxury requires time to be produced, purchased, and delivered, that contributes greatly to it’s perceived value which is contrary to the model of e-commerce wherein products are available for consumption anytime, anywhere.
Accessibility and Scarcity
According to Verhallen and Robben (1994), the luxury products has a greater effect on demand if people also perceive the product as unique, popular, and expensive. This is typical of true brands or products that are deemed rare or scarce.
Kapferer and Bastien (2009) distinguishes between two major types of rarity: physical and and virtual. The former is defined as rarity of physical substances such as materials or processes and the latter refers to the impression of rarity.
For true luxury, rarity should be in the form of the former, limited by the processes or materials they use to create luxury products. However, the modern luxury market has shifted to a capitalistic approach (Kapferer and Bastien 2009), using both physical and virtual rarity vis-à-vis the luxury brand’s image to ensure continuous market growth. This shift is not surprising. Managing both physical and virtual rarity is becoming an important strategy for modern luxury strategy.
E-commerce has created a platform for easy discovery. Both luxury and non-luxury consumers can click through a luxury website and navigate the various products or services a luxury brand offers online. The accessibility of information creates a problematic for luxury brands that fear the dilution of their brand equity because of the availability of luxury products sold online (Pike 2016).
Moreover, recently there has been an expansion luxury brands to wider demographic by introducing accessible products such as small leather goods, accessories, perfumes and cosmetics. Often, these products provide customers with a springboard to learn about the universe of the brand, entice them to trade up (Silverstein et all. 2008), and build loyalty with the brand. For the luxury brand, expanding their product range provides potential customers with an entry point to the brand and an opportunity for scale through mass consumption. As a result, luxury brands have to strike a balance between providing accessible products and maintaining perceived exclusivity, the latter which supports its attractiveness to luxury customers.
The ubiquity of e-commerce, however, contradicts this notion of controlled accessibility because of its open and accessible nature. E-commerce has made luxury brands accessible on a global scale and to a wide range of markets. According to Kapferer (2015), this expansion threatens the levers of the dream and the notion of rarity and access to privileged life. Virtually anyone with access to the Internet and sufficient funds to buy masstige products can access this dream.
Another concept related to accessibility is information accessibility. Because of the Internet, information on brands and their products are readily available online. This can have both positive and negative impact on both the supply and consumer side of the luxury business. For luxury brands, they can leverage on online strategies such as social advertising, content marketing, and search-engine optimization to target the right consumers. Consumers, on the other hand, can benefit from the abundance of information online, the minimization of the amount of time and resources needed to go to a physical store, and the convenience of looking for bargains.
3.2 Purchase Behavior
The way people consume luxury has been the focus of many research work in the past years. Many believe that the understanding and analysis of certain common patterns between all luxury consumers when it comes to buying luxury goods can have a major impact on the way the brands design their offer. In fact, for decades, brands and retailers of luxury goods have thrived on the premise of telling the consumer what he/she must have instead of asking him/her what he/she wants. However, more recently, industry experts have advised this approach must alter in order to meet luxury consumers’ increasing demands for solid value, greater functionality, and more service (D’Arpizo et al., 2005). For this reason, consumer researchers have been very interested in studying the phenomenon of luxury products and hedonistic consumptions (Hoyer and Stokbuger-Sauer, 2012; Sheth et al., 1991). Despite the long interest in the subject, patterns of consumption of luxury goods remain a contentious issue (Walley et al., 2013; Bian and Forsythe, 2012). For the purpose of simplifying our research, we decided to analyze the purchase behavior of the customer on six different levels: The product type he chooses, the basket size on each one of his purchase, the frequency of these purchases, the experience the customer goes through online compared to the one he lives offline, the price sensitivity level of the buyer and final the level of trust the customer has when purchasing online. Each one of those categories, has been more or less been talked about in research publication.
A luxury product can mean a different thing to different consumers. Upon hearing the word luxury, some might imagine an exceptional bag or a pair of shoes from a luxury maison. Others visualize an expensive mechanical watch.
For some people, buying a luxury is about social elevation through showing-off of their branded goods. These customers tend to purchase luxury products with shown logos. According to Eastman et al. (1999), the need for status is defined as “the motivational process by which individuals strive to improve their social standing through conspicuous consumption of consumer products that confer and symbolize status both for the individual and surrounding significant others”. Previous research on status consumption showed that customers who highly valued status picked visible over less visible products (Chao and Schor 1998; Fan and Burton 2002; Fisman 2008; Hudders 2012; Schor 2007).
Some luxury products also have a form of ritual related to them. For example, in both its advertising and its stores, Tiffany ; Co. had created a ritual for the consumption of its products. For example, when I client removes the blue box from the jewelry satchel and unties the white ribbon. The moment she opens the box, the client’s face brightens up and emotions surface. The ritualization of a product or brand is very important for luxury brands because it creates and contributes to the brand story while prescribing situations for purchase (Kapferer and Bastien 2009; Otnes and Scott 1996).
When it comes to luxury, studies show that consumers who recognize a brand name are more likely to buy that brand because familiar products are normally preferred to those that are less familiar (Hoyer, 1990; Macdonald and Sharp, 2000).
Also the country of origin of luxury products is important in the decision to buy. Consumer behavior’ s researchers usually state that a product or brand’s country?of?origin is a crucial influencing element in consumer decision?making of purchase (Khachaturian and Morganosky, 1990; Knight, 1999; Piron, 2000).
Luxury for some is also living a certain experience. For example, spending a weekend at a 5 Stars hotel in Monaco is a form of luxury consumption to certain luxury consumers. This type of product (dining, travelling…) is identified by the consumers as experiential purchases (Howell and Hill, 2009; Howell, Pchelin, and Iyer, 2012; Van Boven and Gilovich, 2003).
As e-commerce started to develop, luxury brands have started to partner with consulting companies to analyze their online performance in order to understand the mechanics of the purchase online behavior of their customers. Despite putting products in virtual shopping carts, online shoppers regularly abandon them —a problematic that baffles online retailers and still not quite explained by scholars. Industry studies report that 88% of online shoppers have abandoned their electronic cart in the past (Forrester Research 2005).
Basket size is selected to capture consumer differences for both theoretical and managerial reasons. Bell and Lattin (1998) have found a significant relationship between shopper’s basket size and “basket attractiveness” across stores (Kalpesh Kushik 2003).
Little information is found in scholars on the mechanism of online basket filling in the luxury industry perhaps because e-commerce for luxury brands is still in development and not mature enough.
Experience Online versus Offline
Consumers shop online for different reasons. Some might favor online shopping for experiential (e.g., entertainment-seeking) motivations in addition to goal-oriented (e.g., organizing and planning future potential purchases) motives (Novak et al. 2003; Wolfinbarger and Gilly 2001). These experiential motives combine searching and shopping for fun and to alleviate boredom (Moe 2003; Wolfinbarger and Gilly 2001) or utilized as a medium for entertainment or escapism (Mathwick et al. 2001).
The Luxury Institute published that 88% of rich consumers express a preference for using the Internet to research a luxury brand or luxury goods while only 38% prefer to buy luxury goods online, versus 33% who prefer doing this in a physical shop. This has high implication on the luxury industry, as noted by Okonkwo (2007), who expresses ‘the need for luxury fashion brands to create a compelling, memorable, enjoyable and positive total customer experience for online shoppers’. Web experience models have been created in order to guide the design of virtual experiences. For instance, the management consulting company, A.T. Kearney (2002) came up with a 7Cs model to improve the consumer experience online – content, convenience, customer care, connectivity, community, communication and customization. In the same way, Constantinides (2004) spotted functional factors (usability, interactivity), content factors (aesthetics and marketing mix) and psychological factors (trust) as the central building segments of a good online journey.
The price gap between Luxury products with mass consumed products is differentiated to the highest level – meaning luxury sets their prices extraordinarily high to remain exclusive and inaccessible to mass consumers. This is why luxury brands refrain from publishing their products’ prices across various media such as magazines, advertisements, and even the retail store. This aligns with the idea that consumers use price to infer quality of a product (Rao and Monroe, 1989), especially in luxury products wherein signals of quality can assure customers about the performance, authenticity, or tradition of a brand (Vigneron and Johonson 1999).
On the other hand, E-commerce has made prices of luxury products readily available to both buyers and sellers in the online market. This price transparency causes the downward movement of price differentials in the market because buyers are able to compare prices across different sites and competitors (Mohapatra 2013)
Luxury brands and products represent a dream that is scarce and inaccessible; thus, showcasing the assortment of products and their corresponding prices run contrary to this dream which may devalue the brand for the clients they serve (Kapferer 2009). This poses a significant problematic for luxury brands available online.
Early studies have defined brand loyalty as repeated purchase behavior (Jacoby and Kyner 1973) often termed as behavioral loyalty. The concept has evolved over the years into a multi-dimensional concept with various interpretations (Dick and Basu 1994) such as attitudinal loyalty that describes loyalty as a degree of dispositional commitment in terms of some unique values associated with the brand (Chaudhuri and Holbrook 2001).
Another interpretation of brand loyalty is as a component of brand equity. Aacker (2009) gives importance to brand loyalty as a component of brand equity because he claims that a loyal customer base can have a significant positive effect on brand equity. Additionally, the effects of brand loyalty can impact entry of new competitors into the market thus providing security in demand for the brand (Kolter and Keller 2011).
With increasing competencies of competition and the rise of new methods of distribution such as e-commerce, loyalty has become increasingly relevant for companies to sustain and grow their business. Thus, it is important for companies to understand the underlying customer behavior regarding brand loyalty and how this loyalty is strengthened or influenced.
For this study the authors will focus on three (3) important aspects related to loyalty: the use of promotions to obtain repeat customers, the level of comparability between brands, and the attachment of customers with brands.
Use of Promotions
Sales promotions are often used by businesses to reinforce the commitment of customers and encourage repeat purchase with the brand. These promotions often have provided consumers utilitarian benefits such as convenience, time, and costs (Omotayo 2011) or hedonistic benefits such as value expression, entertainment, and self esteem (Chandon et al 2000). Sales promotions also positively affect the purchase behavior of customers in terms of loyalty and brand switching (Nijs et al 2001). Aaker (1996) argued that monetary sales promotions lead to a negative impact by focusing on the financial incentives rather than the other values of the product such as quality. Additionally, frequent sales promotions may affect price sensitivity of customers thus affecting their level of attachment to a brand.
Furthermore, Kapferer and Bastien (2009) described monetary promotions as contrary to the concept of luxury. True luxury is attained when brands have the freedom to set price on their products. The pricing of a luxury product should be in the background of a luxury product, and corresponds to a symbolic value that represents the brand.
Price promotion and price volatility has been a norm for e-commerce platforms. For example, Amazon.com, the world’s biggest online e-retailer, has been known to change the prices of the products it sells continuously. They also consider factors such as market demand, demographic of the online customer, and time of day. This fluctuations in price have become advantageous for customers but pose a challenge for brands who maintain a price strategy for their products.
Luxury brands should not be comparable. The concept of incomparability means that brands must away from the tangible elements of comparison to intangible elements (Kapferer 2015) such as heritage, origins, prestige and other brand building concepts such as the brand’s relationship with art. In this business model, luxury brands justify the price they set to their products through the intangible elements of the brand.
The concept of incomparability is also the reason why luxury houses do not proclaim to be the best luxury brand or have the best products. Rather, luxury brands show their prowess by bringing together both tangible (i.e. rare materials, craftsmanship) and intangible qualities (heritage, prestige) in all touch points of their brand.
In contrast, e-commerce platform allows easy comparability of brands, products, and prices. It follows the traditional business model adapted by consumer goods distributors and retailers in which consumers are able to compare products and choose based on their preferences. In the luxury market, this is especially true for multi-brand online retailers such as Net-A-Porter, Moda Operandi, and Bergdorf Goodman. The availability of products and prices in these platforms is problematic for luxury brands that aim to maintain its pricing strategy based on intangible elements of the brand.
According to Aaker and Joachimsthaler (2000), brand loyalty is based on the unique characteristics that the brand offers. The identification of customers with these unique characteristics that leads to the deepening relationship is what Thomspon et al. (2005) terms as emotional attachments. Thomson further claims that loyalty increases as the customer experiences increasingly positive interactions with a brand.
Brand communities also play an important role in creating brand attachment and loyalty. Communities that form around a brand influence others through positive word of mouth (Aaker and Joachimsthaler 2000) which increases the attachment of customers to brands as favorable opinions towards the brand increases (Batra et al 2012). Cova and Cova (2002) also emphasizes the benefits of brand communities that form around the emotional aspect of the brand rather than the tangible aspects. Consumers therefore also consider the lifestyle portrayed by the brand as part of their long-term purchase considerations.
This commitment of consumers based on emotional attachments to brands have not always led to increased loyalty. Knox and Walker (2001) suggest that consumer who appear to show commitment to one brand occasionally purchases from another. However, while these “loyal” customers are likely to make purchases from other brands from time to time, they are less likely to switch brands compared to non-loyal customers (Oliver 1999).
Our research strategy focused on two areas: first, was a review of the existing theories on luxury, e-commerce, and the relationship between these concepts in order to build a solid foundation for our findings; second, was a qualitative approach in the form of narrative interviews within two perspectives: the consumer of luxury products and representative from a luxury brand.
Through this approach, the authors aim to reveal insights on consumer expectation based on the narrative interviews conducted with both consumer and luxury brand and to create an accurate portrayal of consumer behavior within the context of luxury e-commerce. Furthermore, the authors aim to answer the research questions by developing a framework properly evaluate how luxury brands address the next wave of luxury consumers.
The interviews were conducted personally by the authors. The authors decided to focus on a qualitative research approach based on semi-structured questions which have significantly increased in popularity recently (Strauss and Corbin 2006) as qualitative interviews provides rich and deep information on the target (Alsaawi 2014). Qualitative research in the form of narrative interviews also provides a resource that enables contribution to new knowledge that can lead to a closer view on a particular study area, in that the prospect of movement captured by discursive relation provides analysis with great detail (Martinelli 1999). Furthermore, qualitative interviews open the research to areas or concepts that were not previously considered and may have significant impact on our findings and recommendations.
Two interview guidelines were developed for both segments. The interview guidelines were developed based on the three broad areas: brand image, purchase behavior, and loyalty. This guideline provides the authors with a semi-structured script that offers points of focus for the interview but opens the conversation to possible topics of interest.
All interviews started with personal inquiries on their background in an effort to build the relationship between the interviewer and participant, an approach suggested by Hill et al. (1997) to help the participant feel comfortable and to facilitate fluid discourse between both parties.
Informants for this study were recruited based on two target segments: luxury consumer and luxury brand representative. The participants for luxury consumers were drawn from students at tertiary education or postgraduate level. Participants for luxury brand representatives were drawn from two primary groups: MBA or executive education participants at the Excellence in Client Experience Certificate chaired by HEC Paris and LVMH, and the Luxury Certificate chaired by HEC Paris and Kering.
For the luxury consumer, a total of four (4) individuals were recruited based on the following criteria:
1. Born between 1980 and 1998 (age between 18 to 35)
2. Purchased at least three (3) products from any category from a luxury brand (luxury brands found in Avenue Montagne) in the past 12 months
3. Purchased at least one (1) product from any category from a luxury brand in the past 6 months through a luxury e-commerce platform (mono-brand or multi-brand)
For the luxury brand representatives, a total of four (4) individuals were recruited based on the following criteria:
1. They worked or previously worked for a luxury brand or maison in brand, product development, marketing, or digital division
2. They have worked for the luxury brand for at least (2) years
3. The luxury brand should have been present in an e-commerce platform (mono-brand or multi-brand) during the brand representative’s tenure
All interviewees were informed of the purpose of the interview, which was to investigate the behavior and attitudes of consumers on luxury e-commerce, but information on the coverage and demographics covered were not disclosed.
D. Results and Analysis
As mentioned in the methodology section, the interview guidelines were specifically constructed to allow the authors to gather specific insights from the interviewees on the three broad areas of our study: brand Image, purchase behavior, and loyalty. The table below shows the guided questions or topics of discussion conducted with the brand representative and consumer respondent.
Luxury Areas Brand Representative Consumer Participant
Brand Image Perception
Does the website reflect the image of the brand?
What is luxury for your?
What are luxury products for you?
Name 3 brands that come to your mind when you hear the word “luxury”
Describe your chosen brand in 3 terms.
Is the website reflective of these terms? How?
Accessibility Why did your brand decide to go online? What are the advantages?
How do you generate awareness and traffic to your website?
Where do you purchase these products?
How did you learn about the brand’s website online?
Purchase Behavior What products do you offer online?
Which Price Range do you offer online?
How often do you update the offers at your website?
Do you use your website to push certain offers?
What customer experience did you develop for your customers online?
Does your website reflect this experience? In what way? Ie. design, navigation, aesthetics, customer service
How is the experience differentiated from online and retail store?
Do you think customers (millennials) like to buy Luxury online? Why? Why not?
Which Price Range do you offer online?
What is your pricing model in your website?
What type of products do you buy online?
How many items do you buy usually?
How often do you purchase luxury products?
Do you know in advance what you want to purchase online via website or e-commerce platform?
Where do you buy luxury products online? What platforms? Ie. mobile, website, etc.
Take us through your experience during pre-purchase, purchase, and after purchase.
In which price range do you buy online?
Is price a factor in your purchase decisions? Do you compare prices with other platforms and websites?
What are the advantages of purchasing luxury products online?
Do you think customers (millennials) prefer to use multi-brands websites or the brands’ different websites? Why?
Do you sell on multi-brand platforms? Which ones? Why or why not?
What do you do to strengthen loyalty of your customers online? How do you do this through your website? Is price a factor in your purchase decisions? Do you compare prices with other platforms and websites?
Do you go to multiple online platforms or websites when purchasing luxury products? Why?
Which e-commerce platforms or websites?
Do you prefer to purchase directly from a brand’s online website or through a multi-brand platform? Why?
Do you consider yourself attached or loyal to a particular luxury brand? Which one? Why?
The results will begin with a narrative of each profile, elaborating their experiences and expectations based on the interview guidelines. Based on this the authors will collect and analyze their responses from both consumer and brand and generate insights within the perspective of the three areas of focus, which we elaborated previously in the literature review.
4.1 Vanessa – Participant 1
Vanessa was born in Saint Petersburg, Russia. At 23 years old, she is currently pursuing her post-graduate degree specializing in Marketing in France. She identifies herself as a typical millennial and uses digital platforms such as social media as her creative outlet. She is also an avid user of online sites to discover or purchase both luxury and non-luxury products online.
“If I decide to treat myself by spending that amount of money on a luxury product, I want to enjoy a holistic experience” – Vanessa
This was the initial response of our first participant when asked about the reason she purchases luxury products. Ever since she can recall, she has been an admirer of luxury brands and products, especially that of Chanel and Hermes. Interestingly, her image of luxury is based on the category as the first thing that comes into her mind when hearing the word “luxury” is the jewelry and watches category.
“I think about jewelry and watches probably because it’s really high luxury and it doesn’t depend on the brand. It is a category that is very over priced and where you can find exceptional pieces, where you have personalization, precious stones, and precious metals.”
When asked about the luxury products she owns, she has a collection of luxury handbags from Chanel, Gucci and Saint Laurent, which she splurges on when she has extra money. She elaborates:
“I purchase them when I have extra money. So it’s not on a specific time basis… like once a year or once every 4 months… It is whenever I get money that I know I can spend on something extra, I decide to buy from luxury brands.”
However, it is important to note that most of her purchases are done offline. For her, the experience of waiting for the delivery is not connected to that of the luxury experience. She prefers the “process” that comes with purchasing a product at the retail store.
“If I want the piece, I do not want to receive it in the evening when I’m tired and I will need to unpack it. I would rather go during a free day the week after and I will get to enjoy the process and the item after having it immediately in my hand. So it is some sort of time spending also. It is not only about buying the piece. Especially because for me it is not so frequent.”
As for online e-commerce, she primarily uses these platforms for small purchases or to do online research for specific products.
She does believe, however, that e-commerce will be a platform that she will increasingly use as her consumption for luxury products increases in the future. She describes the potential efficiency of e-commerce and the benefits it entails for her as a luxury consumer.
“In the future… I would use e-commerce more just because sometimes you can have really fast delivery, in 2 hours, and for example, if you are working you can’t go on a week day to buy the shoes that you will need for the next day so I think that e-commerce is already sophisticated in the way of doing things.”
For Vanessa, online research is important as a starting point when purchasing luxury products. She begins her experience in purchasing luxury products either by going directly to the website of a brand, or, if she is looking for better price, she would check Farfetch or Net-A-Porter. She mentions that price is definitely important when considering the purchase of a luxury product. However, in terms of where to actually search for the products, it depends on the quality of the photos presented across platforms.
“I still prefer visiting the brand’s website or 24sèvre because they do photo-shoots themselves and usually the items displayed are being worn by models.
She shares a caveat on one of her experiences with Saint Laurent when she was searching for a specific product (a 55cm chain).
“However, on some luxury websites, for example Saint Laurent, they don’t have the models wearing the items so for example you’ll have the information about the item but it doesn’t really speak to me if I don’t see it on a model.”
Social media has also been instrumental with her online experience with luxury brands. She elaborates how social media was a trigger for her purchase:
“I have this Saint Laurent pochette that I bought and it started on Social Media. I was not at all considering this brand nor bag from this brand because I didn’t know the range of the models. I didn’t know that something like that existed.”
While on the subject on purchase, we asked her about her thoughts on price and monetary discounts for luxury products sold online (either through mono-brand platforms or multi-brand platforms). Her response was consistent with traditional views on price promotions for luxury brands.
“I don’t expect luxury brands to do sales. I don’t think buying luxury is about finding something on sales and I think that the discounted items are the ones that are usually left unsold.”
We then talked about loyalty, and whether she had attachments to specific brands. For her, it is Chanel. She elaborated.
“Chanel is a brand I was passionate about since I was a child. I have an image of Gabrielle Chanel and all the history and movies based on it. So for me it was more about the story behind the brand not just the products.”
She explained how she was passionate about the brand since her childhood. When asked about the reasons behind her loyalty, she responded by juxtaposing her historical experiences with a brand and the current experiences with Chanel:
“My loyalty to the Chanel brand was cultivated in the past and I doubt that my present exposure to the brand will have any effect on it.”
Given her preference to this brand, the authors then asked her if she usually checks the website of Chanel. She mentions that she visits “sometimes”. She first visited the website to check various content such as videos of their fashion shows.
It is important to note that Chanel is currently not offering their accessories, high-end apparel, and leather goods in their website, nor do they offer it in multi-brand platforms. The only category available online for purchase are fragrances and cosmetics.
4.2 Peter – Participant 2
Peter’s exposure to luxury products at an early age (his parents are bug consumers of luxury products) encouraged his fascination towards the luxury industry. Peter is Chinese, 26, and is currently pursuing an MBA in France that specializes in Luxury. His fascination encouraged him to pursue a career in the industry, which he plans on doing after his studies at LVMH.
Prior to the interview, the authors noticed the outfit of Peter – head-to-toe Louis Vuitton ensemble – including a bracelet, shoes, and sweater from the brand. Peter mentions that he purchased these items both online and offline, however this depends on what type of product it is. He also mentions that he is quite comfortable using multi-brand platforms such as Mr. Porter and Farfetch for online purchases
We launched our interview by asking what luxury products means to him. What, for him, are the characteristics that define luxury products compared to other goods. He commences:
“Luxury products is not so much attainable, expensive and exclusive, something with prestige, and something to show the community that you have succeeded in some part of your life. That’s why you have it.”
Interestingly, his response included a social component, consistent with the study of Vigneron and Johnson (1999) on social values tied to the value of luxury products.
After this, we asked his thoughts on purchasing luxury, both online and offline.
“I would say that prefer seeing products online first, by looking at the website. Then I will go to the store and try to feel it. If I see it online and if it is really popping out or rather something discreet, then I want to have an interaction with it. I prefer something classier and something more discreet. But I want to see the aesthetics online first then I will go to the store and see it in person.”
When asked about the type of products he normally purchases online, he specifies that it doesn’t necessarily depend on the brand, rather the category. He
“Online will be mostly shoes. I know it’s difficult to buy it online. But I think if I know the brand well, I know how the comfort is.”
He adds that there are other categories that are easy to purchase online.
“Accessories is very easy to purchase online. RTW (ready-to-wear) also if you know the size with the brand… And another type of accessories would be scarves and eyewear.
This inclination to purchase products from certain categories reflects well with his last purchases online that were a cardholder from Balenciaga, purchased through Mr. Porter, and a Gucci scarf, purchased through Farfetch.
He notes that for some categories, such as leather goods and jewelry and watches, it is necessary to experience these products at the store. He also stresses the importance on how some products should be sensed before purchase:
“Physical store would be bags. I need to feel the weight, the aesthetic of the bag, the blending with my skin, all these things. It’s very important no? I think also in the store, if you want to purchase watches and all these things which I rarely buy. It’s best to see it in store. Because they don’t really sell it online. It’s not very open for watch and jewelry.
Interestingly, for the categories of watches and jewelry, he was certain that is not readily available for purchase online.
During his discussion on the recent products he purchased in the retail store, he shared with us an experience that, for him, was unexpected. As he was searching for a particular bracelet from Louis Vuitton through their French e-commerce platform, it surprised him that it was not available online and was only available in store. The unavailability of the bracelet, widely considered an “accessible” product, was incredulous to him.
Moving forward to a discussion on luxury e-commerce, Peter mentions his preferred platforms for purchasing luxury products – Mr. Porter and Farfetch. For both platforms he uses the official app to search and purchase products. We asked by he prefers using these as platform for purchasing. He discusses:
“I would usually use my phone because I think it’s easy to use the phone with my Mr. Porter application or Farfetch app. Also I think, in terms of online there is also impulse buying somewhat. For example, when you are talking about it with your friend and she says that “I got this” and “I want one too”. I only have my phone with me. So it also affects me. I think sitting down with your laptop gives you more time to think “will I buy it or not?” But with your phone it is easier.”
His response reveals the concept of social values that we have observed previously during our discussion his perception on luxury products. We were also intrigued by the notion of impulsiveness he brought up; thus we asked him to elaborate on the concept and the reasons for his impulsiveness.
“Yes, usually in online websites, they do have promos. Like in Farfetch or Mr. Porter, you get 30 euros off or 15 euros off somewhat with some brands. There are sales as well. So it comes 4 times a year with Mr. Porter.”
The concept of impulsiveness within the context of e-commerce is not new. Many digital-native e-commerce platforms have been doing this for years, such as Amazon who enhance their pricing based on supply and demand, and the demographics of the customer. However, for luxury products, the idea of enticing consumers to purchase based on promotional pricing is often seen as contrary to luxury.
As it was evident that the price of the product affected the consumption behavior, we asked what the maximum and minimum price he would pay for a product purchased online. He mentioned a threshold of 500 to 600 euros. He mentioned his apprehension on going above this limit:
“I think above that will be a little bit scary especially if the delivery does not push through. But based on experience, delivery has been very consistent and good with the two websites I’m using.”
He continued explaining his apprehension by comparing with stories from friends
“It’s more like you try to avoid some card issues, online issues, internet bugs. I have friends who tried to buy online, I don’t remember what website, but the website lagged during payment. And she was paying for a 800 euro coat. There was this fear. So not that expensive for online.”
Given Peter was a regular consumer of luxury products online (2-3 items per month), we asked him to elaborate on the journey from pre-purchase, purchase, and after-purchase. He began by detailing his process for pre-purchase:
“I check what is available first in the website. I check the multi-brand website, I open all the tabs in the brand section. First of all I would filter on what category I’m looking for, let’s say shoes. Then I open all my favorite brands, then I filter them into 2-3 brands that I like. Then, after this, I go to the official website to check what are the available colors, then I compare it.”
He also discusses with us the convenience of the purchase process and the importance of the delivery service:
“Purchasing is easy because I put it in the basket. Sometimes I put 10 things in the basket then decide if you really want it or not. After you input your card details, you purchase, and it goes straight to your email, with all the delivery details. So delivery is very important. You get this code, and this code tells you when it will be delivered – 2 or 3 days. This code will save you if it does not come.”
Upon receiving the delivery, he shares with us his delight on the aesthetics of the packaging, the level of personalization that comes with the delivery, and the additional services that comes with the purchase:
“For Mr. Porter especially, they come in boxes with your name on it. (Before your pay with your card they ask you for your name.) It’s nice because when you open the white box it looks like a Chanel box, when you open it there is a Japanese white paper with your name on it with a card that says “Thank you for purchasing with Mr. Porter” signed by your personal consultant who will take of your account until you shop again next time. It’s very fast and accurate, I haven’t experienced any delay.”
This experience has been consistent, he mentions, especially with Mr. Porter. As for the other platform he uses, Farfetch, he remarked that he experience is different as they usually send the products through DHL. While the level of personalization is not at par with that of Mr. Porter, he still uses Farfetch since they have been consistent in their delivery and services.
Given the inconsistency between the services of Mr. Porter and Farfetch, we asked if these additional services such as packaging were important. He responded:
“Not really, speaking of price… you get it at a good deal so I don’t care if it comes with this or that. The important thing is that I get it. I get it on time, safely.”
We then prodded him further on the advantages of using e-commerce to purchase luxury products:
“Online in one click you can have it. You can see it with high-res photos. Two, time. If you need it ASAP, you can ship it anywhere in the world. Compare when you buy it on the store you have to physically bring the product.
Based on his response, it is evident that security and convenience were highly prioritized in terms of purchasing luxury products online, followed by price, packaging, and level of personalization.
It should be noted that his remarks were based on the advantages of multi-brand e-commerce platforms rather than mono-brand e-commerce websites as he has yet to purchase products from official sites of luxury brands. He explained:
“I have never tried… The websites translates more to ‘go to a store’. I feel like brands are more “I want to show you online, but you should go to the store.”
He then contrasts the advantages of a multi-brand platforms with the limitations of a mono-brand website.
It’s like one-go shopping. But if I see the official website, for example Hermes website, I think I will be focused on Hermes only and I would prefer to go to the store. It’s weird.”
On how he discovered the multi-brand platforms, he mentioned that he learned about it when he received a gift from a friend from Mr. Porter. Intrigued, he asked her about it, and started using it from then on.
For Peter, attachments to luxury brand depend on the category. For example, he is an enthusiast for Valentino for shoes, primarily for its comfort. While the products are available offline in official retail stores and distributors such as Printemps, he purchases them through Mr. Porter, stressing “he is really comfortable with Mr. Porter” and perhaps “gotten used to it.”
4.3 Kate – Participant 3
Kate, 24 years old, can be characterized as a typical millennial. She describes herself as tech-savvy and she uses technology to help her in her everyday activities. She also has a multicultural background having lived and studied in Italy, France and Russia. Currently she is working in an ad agency in Moscow, Russia.
As a digital-native, Kate prefers shopping online than the actual physical shopping experience. This is true for all types of products, including luxury products (mostly accessible luxury), which she purchases around 3-4 times a year. She expounds.
“To me the actual physical shopping experience is not that important and I am the kind of person who likes to do everything that is possible online. If we talk about clothes some items can be bought online in my opinion because they don’t need to fit perfectly, for example a coat…. For accessories, I also prefer to buy online but usually not on the website of the brand but more like on those multi-brands platforms like Farfetch.”
Given Farfetch is a multi-brand platform selling primarily luxury products, we bridged our discussion on her perception on luxury products. She responded by describing the value of luxury products that is primarily derived from the experience rather than the products itself.
“When I think about luxury products, the top thing that comes to my mind is price. So for me luxury is something pricy and is something where the price is not correlated to function and quality because you are actually paying more than the real worth of the products and you know you pay for the experience. So for me luxury is more about the experience and what you feel when you purchase luxury which justifies the price in some way.”
These theme luxury products eliciting value is also apparent when she juxtaposed the experience of purchasing of authentic luxury products with that of counterfeit luxury products.
“This is why I don’t understand “fakes” because you don’t have this feeling so why would you want this luxury item when it doesn’t actually comes with the feeling.”
Not surprisingly, she mentions Chanel, Dior, and Hermes as the brands she envisions when she hears the word luxury. She then states that Chanel for her will always be luxury. When prodded to explain further, she answered that it is hard to explain and she doesn’t know sure why.
Upon asking about her attitude towards purchasing products online, she mentions that she started because her father who was a fan of e-shops. Often her father would ask her to purchase items online, which primarily instigated her comfort when purchasing products online. We also asked her about her attitudes towards physical retail stores. She mentions that she rarely goes to retail stores because of e-commerce.
Her objective for using online e-commerce is not always for purchasing. She also uses online e-commerce sites to discover products. She generally describes her experience online as inconsistent.
“Usually it’s not like a formal mechanism that I follow. I am usually just looking online, browsing on Farfetch or Net-A-Porter and when I see something online this is when the magic starts.”
She expounds on this concept of “magic” as something that drives her willingness to buy. We then asked if this “magic” prompts her to purchase the product. “Not necessarily” she says and elaborates further.
“I have some kind of a rule. When I like an item I put on the basket online, but I never buy immediately because i am very prone to impulsive purchasing. So my rule is that I leave it in the basket for one week, and after waiting one week I still want it then I would consider buying it. It’s very common for me that after a week I don’t even remember that I had those items in the basket so this means I don’t really want them and so I don’t end up buying them.”
We prodded further and asked what would attract her to purchase a luxury product online? She responded:
“For me the most important thing for delivery is actually how fast is it. I don’t really care about the packaging. It’s nice when it includes a knot or something but it’s not going to influence my decision to buy again from this website or not.”
While convenience tops her criteria for purchase, the ability to compare products and price also play a significant role in her purchase behavior:
“I feel the prices are comparable online and sometimes you can get good deal and since the luxury items are quite expensive, sometimes a 5% can really save money.”
She specifically mentioned the names of the platform she uses to purchase luxury products online that provide monetary incentives.
I use mainly Farfetch and Net-A-Porter. I also use Guilt sometimes because they have huge discounts… Even though usually there is not much difference in price between websites, I still check because for me discount is very important. This might seem stupid but sometime for two different items for the same price if one is on discount and the other is not I prefer to buy the one discounted because I would perceive it as a good deal.”
It is evident that her preference towards multi-brand e-commerce platforms are due to the capability to compare between products and prices, as well as the capacity to offer price promotions.
Interestingly, she also perceives the quality of the platform based on the selection of brands within the platform.
“With some multi-platform websites you know the quality will be good because of the selection of the brands. For example on Farfetch, I like the fact that I am sure the quality will be excellent because I trust the website and the brands it chooses to feature.”
When asked about her preferred luxury brand, she responded with the brand she had the most products of, Alexander McQueen. She describes the brand as colorful and provocative. However, she does not associate these descriptions while browsing through their website. Instead, she usually buys their products on the multi-brand platform Farfetch.
“I love Alexander McQueen clothes. I never go to their website. I usually buy it on Farfetch. Maybe Farfetch has some kind of a system because I always see Alexander McQueen clothes that I love. But on the brand’s website, I don’t really like the clothes.”
Interestingly, she perceives a disparity between the range of products that are promoted in the brand’s own e-commerce platform and the multi-brand platform that carries the brand.
4.4 Anna – Participant 4
Fashion luxury has always been an interest of Anna. At 22 years old, she is currently pursuing a postgraduate degree at IFA Paris, studying fashion PR. Her previous professional experience includes two years working in PR in her hometown of the Philippines.
Anna’s attraction to luxury started with her mom, who was an avid luxury shopper. She mentions that she mostly shops for luxury products with her mother when they travel. Recently, she has been experimenting with purchasing luxury products online and she later reveals the advantages and the difficulties that come with this activity.
We began our interview with Anna with a general question on luxury. Interestingly, the first thing that came into her mind was price.
“For me I always use price point to determine if it is luxury – if it is medium range brand or if its a luxury brand. Anything for me more than 500 dollars is luxury. Medium range is around 150 to 480 dollars.”
The use of price point to determine luxury was unsurprising, however we were curious on the limits she sets to determine luxury products. We questioned whether she believes that products worth below $150 could be considered luxury products.
“Of course the product is still luxury. No matter the price point, it is luxury because of the brand.”
She then clarifies on the luxury products she was referring to earlier:
“But if we are talking about online, it’s a matter of price. Because when I go online, I look for the product. If I’m buying something that’s over 600, I have to make sure it’s worth the shipping and other costs.”
Given her response was specific to luxury brands online, we asked her to define and describe luxury in general. She started by naming the brands that she associates with luxury. Her response was familiar.
“When you define luxury, it’s something not everyone can afford. So you’re buying the whole experience, the brand name. Chanel and Hermes are the brands that I know that have not changed their business model to tap into different markets, just because they want wider sales. Unlike Louis Vuitton, they did. They probably lowered their price point, just to expand their market.”
She explained that she chose these brands, particularly Chanel, because of a project she did when she was in high school wherein she was asked to do a presentation about a particular interest. We wanted to know more about how this fascination with Chanel started, she responded by mentioning that she saw a documentary on Gabrielle Chanel. This was one of her first contact points with luxury brands that she can recall and after this episode, she wanted to go deeper and learn more about luxury.
Purchasing luxury products was not uncommon for Anna, whose parents she refers to as luxury buyers. Her luxury purchases are mostly done during her travels, around two to three times a year. She mostly purchases bags and shoes, but also frequents accessories. As for her preferred brands, she mentions Burberry. She further states that she tries to visit a Burberry store whenever she travels abroad.
We then asked about shopping for luxury products online, she reveals that it is relatively new to her. Her recent online purchase was a bucket bag from Mansur Gavriel which she ordered through the official website of the brand (https://www.mansurgavriel.com/). She added that the reason why she purchased through the website was that she could not find the product anywhere, both online or offline. She started looking at an Australian multi-brand e-commerce website (she us unable to remember the name of the website) and other sites such as Net-A-Porter. She then visited the direct website to order. As the product was in-demand at that period, she had to be included in a waitlist. When the website released a new batch, she immediately bought the bag at approximately $700.
Her next purchase was a pair of Miu Miu shoes that she ordered from Net-A-Porter. As there was no Miu Miu store in the Philippines, she decided that ordering online was the best way to obtain the product. This experience, she reveals, was traumatizing because of the complications of shipping and she has yet to purchase any other product online due to this experience. She narrates her experience:
“There is no Miu Miu store in the Philippines. I was looking for a specific pantone for the shoe. But it took me forever to decide whether to buy it or not. Because obviously it is expensive and you are not able to try it. So it took me a while, maybe a good two weeks before I decided. It was in my cart the whole time. Then I bought it. But the shipping took a while. When it got to the Philippines, I had problems when it was coming in because of customs. Net-A-Porter also did not put the right address. That kind of discouraged me to buy again, especially luxury products because they were holding it for some time. That kind of traumatized me.”
However, she explains that her experience during pre-purchase and post-purchase were excellent. She saw the product on promotion at Net-A-Porter as she was scrolling through the platform. Interestingly, she was not proactively looking for the product; rather she explains that her habit of going through the different products and brands in the platform paved the discovery of the product. When she saw it she mentions that she purchased it based on the fear that the sale was going to end.
“I was lucky I saw it. I was looking for it for two weeks after then I thought ‘the sale was going to end’ so there, that was the tipping point. I bought it after.”
Purchasing the product was easy according to Anna as she has an account with Net-A-Porter which is connected to her PayPal account. She continues with her experience during post purchase.
“I really love unboxing. What I like about Net-A-Porter. The paper bag is included with the shoes and the paper box is on top. I loved how NAP had that. And they had a note. It said “Thank you for shopping with us” with your name. So at least, if there is many people buying, they still put an effort to print your name with the shipping. I just love that.”
While she did enjoy the experience online, she mentions that there are some sensations from the retail store that you cannot obtain online.
“I love going to the store because I love to feel the products. That’s why certain things are luxury, because of how it is made… You see the stitching, the leather, etc. For me, once I see it and like it, that’s good. But once I feel it, it makes sense. That’s when I decide to buy it. That’s what you don’t get online.”
Given her penchant for the traditional retail luxury experience, we asked what are the advantages for her to go online and purchase luxury products from online platforms. She brings up the concept of discovery online.
I personally like to discover new brands. I love niche brands. Multi-brand platforms is what I would generally look at… more than the actual website. But I see a brand that I like in a multi-brand platform, I go to the website just to see what the options are. I know that the multi-brand website will not have all the stocks.
She doesn’t normally compare prices between multi-brand and mono-brand platforms because she thinks that brands typically do not offer discounts in their official websites. She adds that monetary discounts is sometimes done by multi-brand websites:
“I’m assuming that the actual brand website does not do discount. multi-brand websites They definitely do for some brands. Because some brands won’t allow it as well.”
Anna adds an important disclaimer:
“When I browse through luxury, I don’t necessarily look for sale options. I look for what’s nice. I don’t buy because of the brand or because of the trend. It depends on whether I like it.”
We were curious on how she learned about the platforms she currently uses. She does not remember when or how she learned to use Net-A-Porter. For her recent purchase at the Mansur Gavriel, however, she elaborates that it was because of one of her friends who encouraged her to check the website.
“I had friends that have done it. And I was like ‘okay, I’ll look’. I remember the first time bucket bags were in, I saw it on a re-seller on Instagram, but they were selling it for a high price. My friend told me that I can check it on the website.”
When asked about her preferred luxury brand, she mentions Burberry. She expounds how consistency is important.
I like Burberry. I like how classic the brand is. I love the whole identity. Burberry had a very British core. Which a lot of brands don’t have. With luxury brands, it really depends on the creative director. And that’s what I don’t necessarily like. For Burberry they were very consistent.
She describes Burberry as British, classic, and affordable even for a luxury product. When compared to the current website, she believes that the brand reflects the terms she mentions. She also adds that the website was her first contact with the brand, even prior to the store.
Luxury Brand Representatives
To gather insights on luxury e-commerce from the brand’s perspective, we sat down with four luxury industry professionals who have spent at least two years working for one or more luxury brands. Some were directly involved in building the e-commerce business of the brand they worked for; others worked in Marketing or Public Relations role for the brand. They all have a deep understanding of the luxury industry and have witnessed, from the inside, how brands manage their online business (brand image online, customer experience) in order to meet their client’s needs.
5.1 Rebecca – Representative 1
The first person that we sat down with was Rebecca. She is a 38-year-old New Yorker with who started her career in Los Angeles as a stylist’s assistant working primarily on celebrity red carpet. After a year working for a top stylist she wanted to experience something different and pursued a job as an editorial assistant at Women’s Wear Daily, which is one of the top trade publications in Fashion. At the time it was a daily newspaper that covered everything happening in fashion in the United States. As someone who values new experiences, Rebecca left Women’s Wear Daily a year after and moved to New York for a Celebrity Coordinator role at Ralph Lauren. This department (composed of two people – herself and another woman) was a part of the Fashion PR division, which was part of the Global Communications division. There she worked on all things celebrity, from the annual Met Gala to the Oscars, to movies (Wolf of Wall Street, a couple Woody Allen films, etc.) and also product launches. She was there for two and a half years. After Ralph Lauren, Rebecca stayed in the luxury industry working for other brands like Lanvin and Paul Andrew (small luxury footwear company based out of New York). However Ralph Lauren was still her most memorable professional experience and she decided to focus on this brand during our sitting:
For Rebecca, the website of Ralph Lauren is very aligned with the brand image which in her opinion can be summed up in three adjectives: authentic, American, glamorous. She finds the website pretty effective at sending the “American” message through its imagery and the “authentic” aspect is communicated through the consistency of the brands’ different aesthetics. Finally the product that’s available for purchase online completely reflects the glamour of the brand. In her point of view, going online was inevitable for an American brand like Ralph Lauren:
“Ralph Lauren is such a ubiquitous brand and touches almost every country in the world – to not service each customer digitally would be insane.”
However, for Rebecca, generating traffic to the website of Ralph Lauren was tricky.
“This is all about brand building for a luxury house, the tactics that a mass or prestige brand would use (SEO, promotions, etc) don’t work for luxury.”
She told us that a luxury brand needs to create a buzz around its website and reward people who come to the website by offering novel information. For example, if people are looking to explore the brand they should be given videos, interviews with the designer about the current collection, etc. The goal is to reduce bounce rate and get the visitor into as many pages of the site as possible. Creating strong, original content is always going to be an important factor in creating a “sticky” website.
For Rebecca, the aesthetics of the website are the most important aspect of the customer experience. To develop the brand image and make the consumer “experience” the brands, some pages on the website were devoted to pure luxury.
“You see there is a ton more campaign imagery, more video, more runway images – they really try to build out the dream on those pages.”
However, Rebecca believes that Ralph Lauren still is unable to reproduce online, the holistic experience the consumer gets in the physical store.
“The in-store experience is very focused on full sensorial experience. It’s really incredible. You are brought into the Ralph Lauren world in such a holistic way.”
When it comes to building the website, it was important for the brand first to make almost all the products available online but more importantly keeping the pricing consistent across channels in order to create a very consistent omni-channel experience for the client. Pushing promotions is also a tactic used by the brand on the website to grab the site visitor’s attention to certain products.
“People are just getting more comfortable with the process of buying things online, trying them on at home, and if something doesn’t work, sending it back.”
This is what Rebecca answered when asked about whether millennials prefer buying online or in store these days. She believes that the habits of millennials are influencing not just younger consumers, but also the entire market. What used to be a scary experience is now super easy.
“People are retreating more and more to the comfort of their homes to consume luxury and brands need to catch up to give them this built out experience through digital – but it’s really hard.”
Loyalty was a topic that Rebecca focused on while answering our questions.
“In order to reinforce the loyalty of the client, the brand needs to create a two-way dialogue with consumers online”
Now consumers want to talk back and be heard and if websites can be adaptable to this, they can generate traction so the brand has to find ways of connecting digitally with the consumers in a brand-appropriate way. .
When it comes to the multi-brand platforms and their effect on the consumers’ loyalty to the brand, Rebecca first confirmed that RL is available through hundreds of multi-brand stores
” With the global reach it doesn’t make sense not to be on those multi-brand platforms.”
Multi-brand stores are mainly allowing millennials to get information and to buy at a decent (or transparent) price since they can compare prices online. However, Rebecca noted that if a girl sees a bag on Instagram and falls in love with it, she would go to the brand first.
“I think there is the perception that if you go to a brand’s online store, you can see the whole assortment – you can’t get that in a multi-brand environment. And that helps you decide which product you want. But if you go to a multi-brand store, you might be able to get a deal because they do different (sometimes more aggressive) promotions. It depends on the priorities of the shopper.”
5.2 Mike – Representative 2
Mike, a 33 year old MBA student from France, was the second brand representative we interviewed. He had started his career working for a small consulting firm in Japan for three years before entering the luxury industry when he was hired by Bottega Veneta Japan where he was in charge of CRM, retail performance, and other marketing activities. As CRM manager, his responsibilities include monitoring the KPIs of the brand and analyzing the brand’s customers in order to propose different action plans for the store managers on how to contact clients and develop the business. After working for three years at Bottega Veneta as CRM manager, he joined the headquarters in Japan where he became in charge of CRM for all Asia for two years. Mike also worked on the e-commerce websites: Yoox Net à Porter in Japan and theoutlet.com. The latter is an online outlet that belongs to Net À Porter which got purchased by Yoox, which then got purchased by Richemont. For this interview, Mike focused on Bottega Veneta as most of his experience was centered here.
When asked to describe Bottega Veneta, the brand for which he worked almost for five years, Mike chose the adjectives: Discrete, Individual, and Luxury. He went on to say that he finds that the website is a reflection of the identity of the brand. For example, for the “discrete” part he noted the very minimalist approach of the website in which the brand tries not to blatantly push products. Instead, visitors visualize impressions and moods.
However, recently Bottega Veneta has been making some changes because they want to make the brand more modern to target the millennials and also adapt to different nationalities.
“They are trying to put more colors on the website. Also you can definitely see the influence of Asian customer in the choice of model on the pictures displayed on the website.”
According to him, at the beginning, Bottega Veneta hesitated to go online. They started their online e-commerce site at a size of one store, then the website became as big as the size of one country in terms of sales. Eventually, the management got used to the idea of selling products online. However, the process happened very slowly.
Generally, Mike believes that going online was integrated in the strategy of not losing customers.
“Bottega Veneta knew that if they didn’t go online they would be losing sales and some clients that they can only reach online. So they had to go online”
But for Mike, going online for a brand has much more advantages than just increasing sales and not losing customers. To him, not only is e-commerce an additional distribution channel, it is also a way to collect a lot of information about clients and provides a channel of communication – through sharing videos, images, content. Mike then talked about the notion of Webrooming.
“Just like Showrooming, having a website allows the brand to do Webrooming. People will go online first then go to the physical store. It is very useful because it allows the clients to check the products any time during the day. It is like a big online catalog so it is a must to have.”
When building the website, Mike admits that Bottega Veneta tried really hard to to actually develop an online journey for their customers
“The spirit they had when they built the website, is like a digital way of entering the store. So for example you go to the website and it would be as if you entered a physical store with products all over the page with some elements reflecting the identity of the brand.”
However Mike thinks that this is some kind of an addition to the offline experience but it cannot replace it in the same way even if it worked pretty well in general. The main issue brands have according to mike’s experience is that their website is usually international (they just translate the content and make it available in different languages but they don’t localize it by changing the architecture of the website which Gucci is doing for example), but all the customers are not looking for the same thing depending on their nationality.
“For example Japanese what they like to see first is small leather goods but Russian prefer to see ready-to-wear first, the USA it is also different”
The online experience on the Bottega Veneta website focused mostly on the navigation according to Mike. They tried to build the website by universe. For example, you start by selecting “women” first then you’ll get a menu with all the products’ range. For Mike this was a compromise because it’s very europeen but most of the clients are asian.
“Basically in the west, I think that people like very clear and as simple as possible interface while in Asia they like to have bug menus with all the sub-menus on one page so they can directly click on want they are looking for..so you can see that the approach is different”
When comparing the experience of the client online and offline, Mike noted that the pain points are different and the upsides are different as well. To him, a client going to a store wants to feel emerged in the luxury universe that the client can’t achieve online. However, when the person chooses to go online, it is mainly for convenience, rapidity, and good price deals.
“So what you are looking for when you go online is different from what you expect when you go into the store. However the two can complete each other. Some clients like to purchase a wallet online but prefer to buy a nice dress in the store for example.”
But Mike believes that the preference of going online or offline for customers, especially millennials, highly depends on the country of origin. So for example in China, millennials love to shop luxury goods online. In China, 20% of the luxury market is already the online purchase while in Japan it’s 4% so totally different. Worldwide it’s about 8-9% at the moment and it will increase quite quickly to reach 15% in the years to come. It’s very hard to say “millennials”, or “Asians”, or “Japanese”…Mike insists on the importance of breaking it down even more and furthermore try to understand the reason behind a pattern of behavior.
“For example in China, they like convenience, speed and price comparison so they find that online. While Japanese really like the feeling of going into the store and living an experience. So it depends.”
In order to offer an omni-channel coherence, Bottega Veneta has the same prices offline and on their website and they never do discount. However, not all the products are available on the website.
“Most of the products (60%) are available online. It’s purely for operational reasons. Some of the pieces are not produced in so many quantities, they are considered rare and BV prefers to display them in stores.”
During the discussion we had with Mike, he reminded us that loyalty starts by collecting the customer’s information. However the brand needs to do this properly because it can be tricky.
“The more you ask the more people will be tempted to not complete the form so in that case you lose all the information but at the same time if you don’t ask enough you can’t do anything with the database so you cannot really use it to create loyalty and that’s the only way.”
But as always every brand has several types of customers. For example, there are the one who know the story of the brand and they identify with it, and others just want it because it’s trendy or because some celebrities are wearing it. And this has an impact on where the customers decide to go to buy online.
When it comes to those multi-brand websites, Mike doesn’t believe that the brand will lose much in terms of customer experience compared to their own website. However, what they lose is mainly access to the information of the clients. Still, the brand can lose huge potential of sales if it is not present on those platforms.
“Imagine someone is looking for a black bag for example of a certain shape, when you go on the multi-brands website, you can see all the brands and you will find products that you like, but if Bottega Veneta is not present there is no chance you will buy a Bottega Veneta bag”
For this reason, Bottega Veneta is present on YOOX and Farfetch. From the customer points of view, it’s not about losing loyalty to a brand, it’s more about finding a product.
“People go on the multi-brand website when they have a generic need, for example, a woman wants to buy a black short dress.”
People will still recognize the brand they like. For example when a fan of Gucci sees their new sneakers, they will go directly to the Gucci website. However, the price sensitive consumer would still visit the multi-brand website to see if there are no special promotions or exclusive models or price. Mike believes, in general, luxury consumers are price sensitive, no matter what type of luxury consumer they are.
5.3 Mitali – Representative 3
Our third brand representative was Mitali, who is a 28-year-old Indian marketer. She entered the luxury industry as a Public Relations manager working in a creative agency for a number of different international clients like Lacoste, Lancôme, Kiehl’s, Chandon and some other Indian brands like Casa Paradox. She was then hired by CasaParadox, one of the brands she worked with. Her job consisted on looking after the Marketing division of the brand while managing their portfolio of products. Her main experience in luxury is with Casa Paradox where she worked for two years and on which our talk was focused on.
Mitali described Casa Paradox as the embodiment of grandeur, timeless beauty, and a hedonistic lifestyle and she feels all three elements are visible through the brand website, with the larger than life projects and mansions the brand has executed. The job to make the client dream is completed accomplished through the website.
On the Casa Paradox website however, e-commerce is unavailable. The selling business online happened with another brand and their website called CasaPop. The only goal of Casa Paradox, the way Mitali described it, is branding. The visitor gets emerged into the universe of the brand.
“The goal was mainly to give the customer an experience besides our showrooms especially since our clients were very international so we wanted them to see what we had behind our flagship store which was based in New-Delhi.”
According to Mitali, generating traffic to the website is important. The digital team did social media marketing and would do some ads on Google in order for the website to rank higher when the customer was looking for something (SEO).
“For the brand awareness SM was working well but to drive sales you still need SEO which requires a big budget.”
To create a seamless online customer experience, the brand focused very much on design but also on the navigation since it was a design label company. However, since they had one website dedicated to brand building (Casa paradox) and another one for e-commerce (CasaPop) the experience they wanted to create for the customer are very different.
“For Casa Paradox, the goal was really to charm the client through the website and compel them to come to us and visit our showrooms or contact us on the phone number. With Casa Pop it was more about giving the customer the whole area of products that we have while insuring that this will lead to some sales and conversion as well.”
The offer on their website was exactly the same as in their showrooms: all products were present and the prices were also the same. The website was also helpful to push certain offers to prospective clients:
“We would do best sellers and try to push products that we know would appeal to our customers and would have a better chance of converting into sales. So we had products that would be refreshed every 2 weeks in the best seller category.”
But even though they tried to create this smooth customer experience online, Mitali believes that the online experience is missing something.
“You would lose the ‘touch and feel’ aspect of it. Especially for CasaPop our product are quite kitschy so we have dramatic colors, patterns, designs and textures so of course a picture cannot capture it as well as seeing it in real and feel the product.”
But not only the “touch and feel” was missing online, but also the notion of “cross-selling” that can’t be done online the way it’s done in the showrooms by the salesperson.
When it comes to the attachment of the client to the brand, Mitali wasn’t sure if the brand needed to create some kind of loyalty program or just expose it’s universe and let the client fall in love and get attached on his own.
“It’s always tricky to talk about loyalty for a luxury brand. Because it’s very subjective, you can’t persuade a client to like your universe.”
The multi-brand platforms don’t affect this loyalty to the brand the way Mitali sees it. Casa Paradox was present on a multi-brand website called perniapopoupshop.com, but the person who would buy directly from it, is the customer who didn’t know the brand before.
“Clients that we got from pernia were actually the one that were discovering our brand through this website. However our well established clients would want to explore our newest collection and universe through casa paradox and then also casapop directly.”
If anything, the multi-brands were helping to generate brand awareness.
5.4 Daniel – Representative 4
The fourth brand representative we sat down with was Daniel whose main professional experience was with Nestlé in consumer goods before launching his own luxury brand Reservoir two years ago.
Reservoir was first just a product that consisted of a watch that looked like a timer functioned similar to high-end watches that have complications and are usually very expensive. Complication watches are sold at about 30,000 Euros. The founders wanted to capitalize on this by imitate this design with the complications of high watches but setting the price at a lower range. The watch was sold at approximately 5,000 Euros, which is still considered luxury for most people. When Daniel joined the company right from the start, his role was to build a brand around this idea of an affordable luxury watch with complications. He believed that they had a great product but knew that he had to create the universe around this product. The brand was launched two years ago and was made public around one year ago. They began to sell both online and offline around six months ago. Daniel shared with us very valuable information since he was the one launching a luxury brand from the scratch online and offline.
When describing Reservoir, Daniel used the 3 attributes: authentic, determined and radical. He then went on to say that the website, which he participated in building, totally reflects those attributes. However, the decision to go online wasn’t automatic for Reservoir.
“The decision to go online or not is one of the debate high watches group have today. If you look at the 12 biggest watches brands today in France, only 3 have an e-commerce website including us.”
Daniel expressed his feelings on the big delay on going online within the luxury watch industry as many luxury watch brands are still hesitating to provide products online because they don’t know how to offer a great experience to the customer online.
For Daniel, however, the focus of his website was to create a brand universe through the website before anything else.
“I always had the belief that if you manage to create on your website a great experience, the e-commerce part of the website will just follow automatically. You don’t really need a lot of elements to build the e-commerce business. You will just need to add the button “add to basket” basically. So this is what we did.”
To generate the awareness and traffic to the website, Daniel started with a social media campaign six months before opening the online boutique and also executed a comprehensive PR plan with the help of journalists and influencers.
“In the watches industry you have a lot of what we call the “experts” who write sections in watches magazines or luxury magazines or even daily journals in the ‘lifestyle’ section for example.”
This method ended up being very effective. Those experts started writing editorials about the brand (which was a purely personal initiative and not a paid advertisement).
“If you are a watches passionate and you buy this journal and read the editorial, you will be tempted to go to the website and check out the watch and why not buy it if you are a collector. These were our first customers.”
Daniel shared with us the customer journey he created on the website of the brand. First he focused on offering to the visitor an access to the universe of the brand by adding videos, photos and some storytelling on the homepage. Then the customer will quickly arrive to the technical description of the functioning of the watch that is very important in this industry.
“Basically you need 2 things: you need to see the model (the design), which means that we need to display pictures that can be zoomed and looked at from different angles. So it was very important to work on the facility of clicking on the images, the rotating, the zoom in and zoom out. And then you need to know the technical characteristics of the watch (the engine, the mechanism, where is it made…)”
Daniel had a very clear idea of what he wanted as a customer experience. He worked with two different agencies that helped him on the design level and the navigation inside the website.
Part of the customer journey is the product range which influences the purchase behavior of the website visitor. For this reason, all the brand’s products are available online with the same prices as offline.
When we started talking on the online versus offline behavior of the clients, Daniel shared with us some of the insights he got from the salespeople at Printemps, where the brand is selling.
“The feedback I get from them Prentemps, that a lot of the people who want to buy a watch are actually looking for advice. Lots of them want to buy a certain watch because they have lots of money but they don’t really have great knowledge about watches”.
According to Daniel, the main element still missing online is the role of the salesperson in building the awareness around our brand.
“The people who visit our website already know our brand whereas in the store salespeople have the possibility to push the sales of our brand and make it popular.”
“The more I work in this business and the more I come to the realization that the customer journey of a ‘normal or mid-age’ customer isn’t that different from the one of a millennial.”
Daniel thinks that the difference between a millennial and a non-millennials is that the latter’s first reflex would be to go on social media to check the brand. In contrast, a non-millennial, or specifically the generations before the millennial generation would check a magazine or ask his colleagues or friends.
“The main difference I see between the behavior of a millennial and an older person is in the ‘looking for information’ step.”
The second difference between a millennial and the preceding generation would be in the ‘purchase power’.
“The risk that you would undertake of buying an expensive watch online without trying and seeing it first in a store is very little if you have the means. Worse case scenario you will return it. So here there are no difference between a millennial or not. It’s a difference between 2 people with different ‘purchasing power.'”
Daniel amazed us during our sitting when we started talking about strengthening the loyalty of a customer in the luxury watch industry. Daniel doesn’t see the goal of making an effort to retain the customer. According to a research done by Bain that he read recently, the average basket size in the life of an online luxury shopper is about 1500€, which is very little. This is explained by the fact that we have the VHNI (Very High net Individuals) that buy lots of very expensive luxury goods, but then we have the biggest category which of people who buy occasionally one item at around 1500€.
“So for us, the biggest number of clients belongs to this category of a one time buyer. We are not actually looking to make these clients loyal so they would come back and buy again but more to catch the biggest potential number of those clients. So I don’t need this loyalty system. I only need to recruit new clients.”
Discussion of Qualitative Interviews
The purpose of this study was to explore the effects of e-commerce on the new generation of luxury consumers – the millennial – in terms of three important aspects: brand image, consumer behavior, and loyalty. Given the relevance of digital in today’s luxury market, it is important to explore the contradictions and congruences between both luxury and e-commerce, as well as the new patterns of behavior and expectations of the evolving luxury consumer. The authors approached the study through fundamental framework of both luxury and e-commerce which was discussed through a comprehensive literature review. Through the literature review, the author’s developed a qualitative survey to identify and explore areas on the topic which had limited studies on. The interview was conducted on both sides of the luxury market: consumers and luxury brands.
The findings of the interview reveal important insights that have significant impact on the areas of brand image, purchase behavior and online experience, and loyalty. The authors believe that Luxury brands can benefit from the e-commerce environment by taking into account the findings of this study. The summary of insights is consolidated below.
Pillars Summary of Insights
Brand Image 1 The notion of brand power is consistent from both consumer and brand side of luxury e-commerce and aligns with the traditional concept of luxury.
2 Luxury consumers expectation on the availability certain product categories is inconsistent with the actual categories provided by Luxury brands
3 The formation of brand image of customers during initial contact with the brand affect it’s long-term perception and loyalty
Purchase Behavior and Online experience 1 Aesthetics and navigation are important aspects when building a brand’s e-commerce website which aligns with the expectation of millennial luxury consumers in terms of discovery and aesthetics (through product imagery).
2 Brands are adamant in trying to create an online universe reflecting the brand’s DNA while the consumers care more about the practicalities: efficient delivery, product research.
3 Millennial consumers give importance to omni-channel consistency which they are getting from the brand’s side in terms of price (offline = online & no promotions) but still not enough in terms of products’ assortment (availability of certain products only in store)
Loyalty 1 The use of monetary promotions have significant effects on repeat purchase behavior of consumers and have adverse effects on brands e-commerce platforms.
2 Social influence and communities impact the initial and repeat purchase behavior in luxury e-commerce platforms
6.1 Insights on Brand Image
The notion of brand power is consistent from both consumer and brand side of luxury e-commerce and aligns with the traditional concept of luxury
Based on the interviews conducted from both brand and consumer side of luxury e-commerce, we have observed the importance of brand power. This concept reflects the strength of a brand as well as the amount customers are willing to pay for a product because of the perceived value of the brand. The interviews from the customer side revealed the perception of value stemming from hedonistic tendencies (Kemp 1998), experience with the brand (Kapferer 2012), and prestige seeking (Vigneron and Johnson 1999). This concept was also evident with the brands, as their representatives mentioned the importance of communicating the image of the brand when implementing and developing their e-commerce platform. They do this by either adapting the website to the taste of consumers or through the products that they provide online.
Luxury consumers expectation on the availability certain product categories is inconsistent with the actual categories provided by Luxury brands
The authors observed that there is a perceived scarcity or availability among the different product categories. Products commonly referred to as “hard luxuries” such as jewelry and watches were perceived to be unavailable or sparse in e-commerce platform (both mono-brand and multi-brand platforms), while there was a certain expectation on the availability of products commonly referred to as “soft luxury” such as small leather goods, accessories, and ready to wear. Interestingly, based on the interviews we conducted with luxury brands, most, if not all their product categories are available online. Recently, there has been a growing trend in traditionally hard luxury companies entering in the e-commerce playing field. For examle, Vacheon Constantin, which have sold 36 watches at $45,000 each exclusively through a third-party website Hodinkee.com (Watson 2017).
The formation of brand image of customers during initial contact with the brand affects its long-term perception and loyalty
In relation to our inquiry on what constitutes a luxury brand for them, majority of our consumer respondents referred to Chanel or Hermes as brands that come into their mind. They explained that they based this perception based on the positive experiences they had with the brand during the period where they were discovering luxury products and brands. It is apparent from the interviews that their previous experience with brands, either through direct contact or indirect contact (such as movies and documentaries on the brands and their founders), had implications on their long-term perception of the brand.
6.2 Insights on Purchase Behavior and Online Experience
Aesthetics and navigation are important aspects when building a brand’s e-commerce website which aligns with the expectation of millennial luxury consumers in terms of discovery and aesthetics (through product imagery).
The aesthetics and the navigation of the website are always on top of the brand’s mind when launching or updating their e-commerce website. This strategy should remain the same as consumers’ main use of the brand’s e-commerce site is to research products. The visitor of the website should be able to look at high-res images and pictures that represent the product from different angles and in different setting (worn, displayed, opened…). We note that some luxury goods’ category require more strategic thinking about the display of the product on the website. For example for luxury watches, the brand needs to display the model (the design) by putting pictures on the website that can be zoomed and looked at from different angles but also the brand should detail the technical characteristics of the watch (the engine, the mechanism, where is it made…) in the description. Luxury brands have yet to determine the best way to present their products on the website to meet the client’s expectation and increase the desirability of their products. For example, we learned that specifying the length of a bag chain is irrelevant to the customer who would rather see the bag worn by the model to better visualize the look.
Brands are adamant in trying to create an online universe reflecting the brand’s DNA while the consumers care more about the practicalities: efficient delivery, product research…
Luxury brands are used to the luxury strategy of creating a universe for the customer, talking about the heritage of the brand, and making the client dream. While this proved to be very successful offline, our research showed that customers necessarily give importance to these details while shopping online. On the contrary, some felt that the overload of information about the brand on the homepage, and the display of random videos or pictures referring to the brand created a “go to store” effect rather than encouraged the customer to shop online. Brands need to understand that the luxury client, specifically with the millennial demographic, when deciding to buy online, they are mainly looking for convenience: fast delivery, ease of navigation between products categories, product comparison. In order to enhance the experience of their clients and stimulate the purchase intention, brands should focus on practicalities by trying to make the customers’ life easier.
Millennial consumers give importance to omni-channel consistency which they are getting from the brand’s side in terms of price (offline = online & no promotions) but still not enough in terms of products’ assortment (availability of certain products only in store)
Luxury brands know that information nowadays is easily shared and they cannot afford to upset a client. They keep their prices consistent between their stores and their online boutique to avoid influencing the client’s preference between buying online or in the store for prices’ bias reasons. The consumer is well aware of this, and therefore never thinks about comparing the prices of the brand online with the ones proposed in physical stores. However, where the brand is lacking consistency, is with their product assortment offer. The client is frustrated when he can’t find online some of the products that the brands decide to display only in stores for operation reasons (limited production of SKUs) or for promotion reasons (displaying special editions only in stores to attract the eye of the walking person on the street/in the department store)
6.3 Insights on Loyalty
The use of monetary promotions has significant effects on repeat purchase behavior of consumers and have adverse effects on brands e-commerce platforms.
Most participants described how monetary promotions or price discounts has had implications on their repeat purchase behavior with a brand or attachment to a platforms. This is evident with their preference on multi-brand e-commerce platform, even if they verbalized their attachment to a specific luxury brand. While both multi-brand and mono-brand e-commerce platforms are regularly used as platforms for discovery, purchase is mostly done with multi-brand platforms where consumers benefit from promotions. Based on the interviews with brand representatives, their brands (excluding Ralph Lauren which is commonly described as a masstige brand) limit or prohibit the use of monetary promotion, as they fear monetary promotions will affect the image of the brand. However, the authors have observed that the attachment for a brand is not affected by price promotions, and actually benefits other platforms.
Social influence and communities impact the initial and repeat purchase behavior in luxury e-commerce platforms
The effects of social influence have been observed throughout many areas of discussion. It is specially observed from the luxury consumer side in which majority of the participants mentioned that they learned about or started using multi-brand e-commerce platforms because of friends that introduced them to the platform either personally or through gift giving. Interestingly, the luxury brand representatives never mentioned the use of communities or the theme of social influence during the discussion on loyalty or awareness. The brands interviewed mostly prioritized on the aesthetics of their platforms and range of products available online.
How luxury brands respond to the new generation of luxury consumers is becoming increasingly important and should be taken into account when developing the e-commerce strategy of the luxury brand. While deciding on an e-commerce strategy for luxury mays seem like a daunting task, the benefits of implementing the right strategy can result in an opportunity for the luxury brand to strengthen its position in the luxury market while ensure sustainable growth for the future.
Based on the global findings of this research, the authors have developed three recommendations in relation to the pillars of the study: brand image, consumer behavior, and loyalty. The authors have provided case studies within the luxury industry to strengthen the foundation on our recommendations.
Recommendation on Brand Image
For luxury brands who have developed their own e-commerce platforms or who plan on including their products on multi-brand e-commerce platforms, we recommend to appoint an e-commerce or digital manager who is responsible ensure excellent client experience, relevant product availability, and streamlined communication across all online channels as well as to liaise with third-party distributors online. The main responsibility of this new role would be to build the luxury brand’s positioning online based on the values and competencies of the brand. The luxury brand Celine is a good example of a brand that has maintained a good positioning when the company ventured into e-commerce.
Céline, the French fashion house, known for its minimalist style and popularized by Phoebe Philo, officially launched last December 2017 its official e-commerce platform through the revamped version of its official website celine.fr.
The e-commerce site, which mimics the brand’s minimalist design aesthetic, marks the first time in the luxury house’ history that under all product categories – from ready-to-wear, accessories, leather goods, and jewelry – will be available online for purchase.
Additionally, the enhanced website will offer additional services for the Céline customer such as collect in store, return in store, organize home collection, pick-up from home, requests for appointments, and more (Karmali 2017). Interestingly, Celine was the last of the fashion houses under the LVMH group to venture into e-commerce.
The focus of this project was to “deliver a design system that’s both minimal and flexible” according to an executive at Work & Co, the digital agency that worked on the design and transactional areas of the website. Interestingly, the enhanced website focuses on the products (Pasquarelli 2017) similar to its curated retail approach in which products are displayed similar to museum pieces. This approach starkly contrasts the approach of most luxury brands online that highlight the brand’s history, legacy, and storytelling.
The case of Céline demonstrates how brands can adopt the same positioning of its products at the retail store to the online store.
Recommendation on Consumer Behavior and Online Experience
The online experience luxury brands aim to build for their clients has significant influence over the consumer behavior of a brand’s website. As a result, luxury brands should continue to develop and enhance the aesthetics and navigation of their website because by doing so they make the online research stage – which almost all millennials go through – much more convenient. Brands should learn from the multi-brand platforms when it comes to what clients like. Many luxury brands fall into the trap of making the website an interface of story telling about the brand, while the prospective consumer is actually just looking to have a clear and quick look at the products’ assortment. It is important for luxury brands to adapt a branding strategy at all contact points: in stores, on Social Media, at events. However, it is also important to consider the behavior of an online consumer, wherein convenience and discovery is prioritized. Luxury brands still have some improvement to do when it comes to creating the best online experience for the customer online:
• They should rethink their products’ availability online. Many consumers are disturbed by not being able to find certain products online while they are displayed in the physical shop.
• They need to put themselves in the shoes of the consumer when displaying the products online. For example, within the leather goods category, it is important for the potential purchaser to see it worn by a model to better visualize its length (an indication of the chain’s length doesn’t really speak to the client).
• Finally for certain luxury product categories, going online should not be an issue anymore. For example, in the luxury watches’ industry, very few brands are present online. The others are still hesitating because they are unsure about which experience to offer online. However, from the customer’s side, the need to find every luxury category online is growing constantly. Luxury watches brands can get inspired from the success stories of some of the biggest players in this category: Vacheron Constantin.
As the oldest manufacture of fine watches, Vacheron Constantin is known for it’s traditional watches and complex timepieces. It is also known to produce the “most complicated watch” ever made. But the 260-year old luxury brand has shown that it is anything but traditional by being one of the first brands to sell hard luxury products online. In 2017, the Geneva-based company partnered with Hodinkee, an online lifestyle blog and e-commerce site specializing in luxury watches, to sell 36 limited edition Cornes de Vache 1955 timepieces. The 36 watches were sold exclusively online through Hodinkee.com with the price tag of $45,000 each and sold within a remarkable 30 minutes (Watson 2017), a surprising feat given the conventional wisdom that luxury consumers will not purchase highly expensive luxury products that they cannot touch and feel.
The case of Vacheron Constantin, however, reveals the lucrative potential of brands operating in traditional business models or with limited retail networks. E-retailing, whether mono-brand or multi-brand, shakes up the traditional business model by reducing the retailer mark-up and the costs associated with holding inventory at the retailer’s store (Roulet 2018). The case also shows the shifting attitudes of luxury customer towards “hard luxury” products available online.
Vacheron Constantin is not the only player gearing in the e-commerce playing field. The luxury watch industry as a whole is gain ground online with many brands partnering with e-commerce platforms such as Farfetch (Barber 2015), that recently launched a fine watch and jewelry section, and the rise of new platforms such as Chronos24, that offers customers new ways to experience luxury brands beyond the traditional retail store.
Recommendation on Loyalty
Social influence and communities are playing a significant role in how consumers develop loyalty with brands, both online and offline. The study has shown that social influence has profound implication on the discovery phase as well as repeat usage behavior in e-commerce platforms. Based on this, the authors recommend luxury brands to develop new ways to excite customers that are based on community-driven platforms. These platforms can be new business models that luxury companies develop based on the new or developing attitudes of consumers towards luxury products such as their attitude towards ownership and product usage.
Recently, there have been a number of brands that have developed new practices based on this. One example is in the luxury automobile industry, Porsche, with their new loyalty based program Porsche Passport.
Porsche Passport is a subscription-based service that gives members access to a selection of Porsche vehicles for a monthly subscription fee of $2,000 to $3,000 depending on the type of vehicle and model they choose. For example, members who subscribe with the $3,000 monthly fee are given access to high-end models notably the Porsche 911 and Porsche Panamera.
The program, launched in limited cities across the United States, allows Porsche aficionados to try the different models of the German manufacturer prior to purchasing a specific model.
According to EVO (Katsianis 2016), one of the world’s leading sports, performance and premium car magazine, the program operates on an application platform in which members can book their preferred vehicle in advance. However, the program also comes with a membership fee of $500 and credit check for validation.
While Porsche Passport is currently on pilot program, the case is interesting as it is the first time a major luxury automobile manufacturer has operated with a subscription-based business model, which normally falls into two categories: owned or rented. The former includes subscription boxes such as Birchbox for beauty products or Hermes Tie Society for men’s neckties and the latter follows that of Porsche Passport.
Interestingly, many luxury automobile brands have followed suit including Cadillac with Book by Cadillac, Audi with Audi on Demand, and Mercedes Benz with Mercedes Benz Collection (Estrada 2018).
This case shows the potential of luxury brands that capitalize on communities to strengthen the emotional attachment of customers by adapting their business in terms the evolving behavior of luxury consumers.
F. Further Research
The study conducted by the authors provides a foundation for further research especially within a larger demographic. The limited number of participants from both buy and sell side of the luxury e-commerce market may lead to generalization of insights that may not be observed in a broader demographic. Variations in culture may also be a point of further research the concept of luxury have been known to vary depending on the culture. The authors also suggest future research based on quantitative surveys carried out separately on the primary categories this research developed: brand image, purchase behavior, and loyalty.
The objective of this research was to determine the behavior and perception of millennials on using e-commerce as a channel to access luxury products. Two research questions were developed, one in the perspective of the customer, and the second in the perspective of the luxury brand. To give better context to the research questions, a literature review was conducted on luxury, e-commerce, and the juxtaposition of both. The authors then examined the research questions based on a qualitative interview that focused on three broad areas that have implications for a luxury business: brand image, consumer behavior, and loyalty.
The qualitative interview was conducted on both buy and sell side of the e-commerce model within the luxury industry. Two separate interview guidelines were developed for the qualitative interview. As a result, the responses from both luxury consumers and representatives from luxury brands gave us deeper insights on what is currently happening online within the luxury industry: the expectations from both sides of the market as well as new patterns of behavior that emerged from the study. These insights are based on an analysis of homogenous or heterogeneous responses and contrasted with findings from the review of existing literature.
Finally, the authors have provided recommendations based on the analysis as well as successful case studies to further highlight our recommendations. The insights of this research provide a platform for luxury companies to capitalize on opportunities brought about by the evolving behavior and perception of the evolving luxury consumers towards luxury products sold online.
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