Article

Why big luxury retailers are falling behind online

Luxury brands are slow to translate store success to e-commerce.

September 30, 2010

Wealthy consumers are among the most active online shoppers. Yet according to a new report by eMarketer, most luxury brands have been slow to offer the white-glove treatment expected by their online customers, and as a result, lesser-known retailers, flash sale sites and mass merchandisers have moved in to skim market share.

"Many luxury brands, slow to translate store success to ecommerce, are banking too much on their reputation," said Jeffrey Grau, eMarketer senior analyst and author of the new report, "Affluent Shoppers and Luxury Brand Retailers Online." "Affluent consumers expect luxury retailers’ websites to replicate the same shopping experience they offer in their stores."

But many luxury brands have not risen to the occasion. According to Grau, several have been slow to launch fully transactional websites, and are feeling the pressure to take e-commerce more seriously or risk alienating a customer base with growing interest in online shopping.

While households with income of $100,000 or more contributed only one-third of total U.S. retail online spending in Q2 2010, they accounted for two-thirds of e-commerce growth in that quarter, comScore recently reported.

This has left the door open to a host of other online luxury retailers to skim market share. The skimmers could be online boutiques in Greenwich Village, looking to reach a larger clientele, online mass merchants not usually associated with selling luxury goods, like Costco, or flash sale sites, like Gilt Groupe.

"These alternative destinations are making inroads with the new breed of luxury shoppers who make purchase decisions based on value and information rather than brand image," Grau said.

"Wealthy consumers are among a new breed of online shoppers who are not easily swayed by marketing hype," he added. "They feel empowered by the Internet and diligently research online to find good deals and assess product quality. And they feel entitled to a superior online shopping experience with rich visual content and high-class treatment."

(Photo by achimh.)