About a month ago, I attended the Harvard Business School’s
annual Retail and Luxury Goods Conference in Boston. It was an interesting day of speeches
and panel discussions, bringing together industry veterans and experts from
leading luxury goods and retail companies including Neiman Marcus, Loro Piana,
and Holt Renfrew. You can read more
about the conference in this news article from HBS’s Harbus Newspaper.
I was honoured to speak on a panel with a diverse group
of talented people from across the world of Luxury Goods, including the
American designer Peter Som, Olivier Cardon, President of Roche Bobois North
America, and Roberto Vedovotto, Chairman of Lehman Brothers Global Luxury Goods
practice. I thoroughly enjoyed the back
and forth with my fellow panelists. We touched on many topics, but the one that
seemed to provoke the most debate was regarding the role that the Internet and
so-called "Web 2.0" technologies can play in the branding, marketing
and commercial strategies of luxury and fashion companies.
I have to say, it felt like being in a time warp. There
was a notion that luxury “customers aren’t on the Internet” and that the
Internet “is too risky” for luxury brands. All of a sudden, I knew what it must
have been like to be Natalie Massenet (of Net-a-Porter) or Ernst Malmsten (of
boo.com) back in 1999, making a case for the potential of Luxury and the
Internet, to people who were very risk-averse, conservative and stuck in old
mindsets; people who couldn’t see the potential for what the Internet could do
for their brands and businesses. Of course boo.com and Net-a-Porter have followed two
very different stories. (One, which ended abruptly, was discussed in this post.) Massenet, however, has shown (with her company that is now
turning over a reported $80m and growing at 100% per year), that as with all businesses, harnessing the power of the Internet for Luxury comes down to basic
business acumen, strong marketing skills, and knowing how to properly manage and grow a start-up, while
also understanding technological issues such as the adoption curve and limitations of sophisticated
technologies.
As for Luxury customers not being on the Internet, this
appears to be an assumption made in the absence of basic facts or data. One need only look at a recent article
from the Financial Times to see really how many luxury customers are online:
"A survey of 500 of America's richest families
published in 2005 by researchers Doug Harrison and Jim Taylor found that the
respondents spent on average 13.7 hours a week online. The Luxury Institute, in
a survey of 1,000 wealthy consumers published in March, found that 98 per cent
used the internet for shopping, and that 88 per cent read product research and
review sites.”
Clearly, these are not just young bucks trying to pick
each other up on Myspace or Facebook, but also high net worth communities like
asmallworld and focused fashion communities like Iqons.com. Big brands and
collections are being discussed passionately on all of these highly-trafficked
sites, but also on blogs (purseblog.com, whowhatweardaily) and virtual communities (secondlife.com). The amount of content is
mindboggling.
Obviously not all of it is good content. But, my basic
point is that since conversations about Gucci, Prada and Burberry are going on,
Gucci, Prada and Burberry might as well figure out a way to be part of those
discussions, where it makes sense. The fact of the matter is that the
conversations will continue, whether they are involved or not. Of course, not
all of those places would make sense for every brand all the time, but to disregard the
importance of the Internet outright seems shortsighted.
When it comes to the riskiness of luxury brands on teh internet, I can certainly appreciate this
point. Big players have the most at
stake, given the energy and money that have been invested in their brands,
sometimes over hundreds of years. But that said, where there is risk, there is
also opportunity. Thankfully, some big brands have recognised this and started to experiment with some of these new communication channels. Armani and Karl Lagerfeld have brought their
fashion show videos to the Internet, iPods and mobile phones, showing that
being a pioneer has nothing to do with age, it has to do with attitude. Dior has also experimented with the launch of a jewelry
collection on secondlife.com.
That said, some of the most exciting ways to
really experience what online luxury might feel like in the future is by visiting the amazing
virtual worlds created by emerging designers, who are able take more risks and experiment. Boudicca’s site at platform13.com is like
walking right into the fantastical (sometimes incomprehensible) world of the designers, Zoe and Bri
an, who share
all aspects of themselves and their passions. They have also uploaded all of
their fashion shows to Youtube. Other fashion designers are also providing a peek into their everyday lives by keeping regularly updated blogs. New York-based Brit Sue Stemp and dynamic
British-Japanese duo Eley Kishimoto are amongst those using blogs to create a space to communicate with their customers.
What the future holds for luxury eCommerce in particular is very exciting indeed, because much of the basic foundation has been laid. Competition is just beginning to heat up. Since
pioneers like Massenet successfully brought luxury online, all of the big
retail and luxury players have jumped in. You could say, they have been fashionably late. Neiman Marcus’
direct business (which includes the nm.com, bergdorfgoodman.com and the catalogue business) now generates $700m in revenue. Revenue growth rates for
the online boutiques of Coach and Gucci are massive, somewhere in the 60%+ range. Interestingly, partially because of the rush to capture online real estate and market share quickly, almost every online luxury site feels the same. Not much time has really been spent in creating a truly unique destination. Just check out brittique.com, matchesfashion.com, brownsfashion.com,
neimanmarcus.com, eLuxury.com , and bluefly.com and you will see what I mean. For the most part,
each site is a one-way interaction with the consumer. They also tend to be
organized in the same way, with similar aesthetics using similar fonts
and layout. Only Net-a-porter has successfully integrated compelling content into their site (with its magazine) and just Yoox has a truly different look and feel.
So now, as with any other business where the
product/service starts to become commoditised, the key
players will have to take it to the next level
and differentiate themselves to keep up with the rapid pace of what’s going on.
It's not a zero sum game yet because the industry's growth is so high, but with so many players in the game, its bound to be more competitive. This is where Web 2.0 can play a role. Luxury ecommerce sites which
differentiate themselves through unique product assortments, clever editorial and content, and interactive community development, will be the ones that succeed. On the other hand, with retail it always comes down to number of visits and average purchase size, so its also important that the interactivity and community don’t detract from the primary
objective at hand, which is to drive sales.
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