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Online Luxury Has Limits


Business Week e.biz -- Perspective on Retailing

Online Luxury Has Limits

The Web is a better place to market big-ticket items than it is to sell them

Here's a question for all you business owners out there: If everyone in your industry threw next year's profits off the Brooklyn Bridge, would you do it, too? Mom's old line about resisting the crowd is an apt one for the latest group of retailers to appear on the Internet--the luxury bunch. In the past six months, the Web has welcomed some of the biggest names in glitz, from Saks Fifth Avenue to European giant LVMH. This star-studded group has spared little in its quest for online glory, pledging millions of dollars and scads of staff to make its e-stores a success.

Too bad lots of that dough is going straight into the river. Despite the latest gee-whiz Web technology and consumer research, selling luxury items such as Manolo Blahnik shoes and Bulgari watches online is not going to work--at least not in any great volume. It's a retail concept that is unfit for the Internet as we know it. Plenty of companies, such as Ashford.com, are already struggling with it. Here's why:

Internet service is terrible. Even compared with ordinary brick-and-mortar retailers, online-store service is pathetic. What passes for great advances--such as live chat--are not very alluring, especially next to the fawning attentions from the experienced staff of a tony boutique. Anyone who thinks there's even a contest hasn't shopped upscale recently. "It's not just about being able to try the $500 sweater on. It's about trying it on in a wonderful atmosphere where you are fussed over," says Laura Ries, co-author of The 11 Immutable Laws of Internet Branding. Human touch is integral to the upscale sale, and those used to it will be loath to part with it.

Another problem is Internet security. Shoppers don't believe it's up to luxe standards, especially when it comes to delivery. They'll buy smaller items, such as clothes, books, and CDs. But a diamond ring? In my old neighborhood in suburban Virginia, the United Parcel Service delivery man used to leave packages behind the azalea bush if he came when I was not at home. An Amazon.com book I'm willing to risk behind a shrub; a Gucci handbag, no way. And once I have to go to the trouble of being at home for the delivery, the convenience factor is erased.

This is not to say luxury companies don't belong online--they do. Just not as retailers. They should be trooping to the Internet as marketers, because flaunting their images will give luxury companies the biggest bang for their buck. There's no denying the fact that the upscale consumer is online: North America's wealthiest consumers, people with assets of $1 million or more, are more active Net users than their less affluent counterparts, reports Forrester Research Inc. (See, "So The Rich Are Different," e.biz, July 24) Big-ticket items, from cars to furs, demand research. And sites can deliver marketing as well.

Already, some savvy companies have come up with terrific online marketing ideas. Jewelry retail chain Zale Corp. features a way to set up a wish list and e-mail a "hint." That's a great example of viral marketing: Zale pays nothing while the consumer spreads the word. Many diamond sites, such as Blue Nile, are offering visitors a chance to design a ring. Good thinking. Picture a nervous Romeo dreaming up a ring design, e-mailing it to Juliet's friends for their input, then heading to the jewelry store, fully confident of his purchase. He gets one of the biggest benefits of the Internet--shopping at home, free from high-pressure sales folk--without the service and delivery woes.

There's no need for luxury companies to think they're stuck in the Old Economy if they use their sites "just" for marketing. The fact is that seducing us with images of their products is what most of them do best. Skipping the e-tailing stampede is not a black mark; jumping in merely because everyone else has is the dumb move.By Ellen Neuborne, Ellen_neuborne@ebiz.Businessweek.com


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