Omni-channel strategies: an unnecessary evil for the luxury industry?

By

Matthieu Guinebault

Translated by
Nicola Mira

Published
Sep 27, 2016

The luxury industry is faced with a major paradox. While e-commerce has syphoned sales away from department stores, the change in consumer habits has not modified the luxury goods brands' factors of success by one iota. The question for the industry is then how relevant an omni-channel strategy actually is.

The issue is highlighted in a report by Luxury Interactive, which also notes how luxury brands have lagged behind others in terms of e-commerce, and even more of m-commerce, while they have quickly taken great strides towards establishing a social media presence. The development of luxury e-retail is still hampered by the logistics of delivering highly valuable products, and by the issue of special taxation. Added to this, there is the persistent problem of fakes: the share of counterfeit luxury goods sales grew from 1.9% of the total in 2008 to 2.5% in 2013.

The report underlines how luxury goods retailers, by not catering to the increasing power of e-commerce, are naturally overtaken by luxury labels, who are dealing with the issue squarely, eager to step in by selling directly via their websites, and also benefiting from stock management advantages. However, this renders the in-store experience offered by prestigious labels secondary, making it increasingly costly to operate retail corners in department stores in the face of declining sales. Yet, besides the sales delay, isn't this strategy damaging for the luxury industry's differentiating factors?

"In the majority of retail networks, an ideal omni-channel strategy broadens the distribution channels and product range available to consumers. But in luxury retail, there are four essential factors contributing to a brand's value creation: exclusivity, limited distribution, authenticity and high added value," concludes Luxury Interactive. According to the report, this need for an exclusive, limited type of distribution is simply incompatible with an omni-channel approach.
 
At the start of 2016, the Global Luxury Etailing Market 2015-2019 survey estimated that the luxury goods market could expect a 14.5% average annual growth in online sales. Online luxury goods purchasers are expected to generate $41.8 billion in annual sales by 2019, compared to $21.43 billion recorded in 2014.