Already a Bloomberg.com user?
Sign in with the same account.
Many luxury brands still treat the Internet with caution, worrying an online presence will dilute a sense of exclusivity. Are they missing out?
Sure, the bricks have it bad, but the clicks are struggling, too. Traffic tracking firm Comscore, based in Reston, Va., says that U.S. online retail spending totaled $29.6 billion in the third quarter of 2009, a 2% decrease year-over-year. It marks the first time on record that e-commerce has seen negative growth in two consecutive quarters. But some experts believe the holidays will prove e-commerce's strength, especially when it comes to customer service. According to a recent report by Cambridge (Mass.)-based Forrester Research, 2009 U.S. online holiday sales will increase by 8%, to $44.7 billion. Offline sales are still dominant, amounting to $392.9 billion, according to the National Retail Federation. But with most analysts declaring that number will either remain flat or decrease by a percentage point or two, Forrester's prediction suggests many consumers are still shifting to online shopping. That may be true for big box and specialty retailers, but there is one category where online presence is minimized: luxury apparel. While numerous studies have argued that affluent consumers spend more money online than any other market, many luxury retailers are still leery of accommodating their customers on the Internet. The fear in the corner offices of fashion houses in Milan, Geneva, and Paris remains that the Internet will dilute the exclusivity of luxury brands. Many mass market retailers such as Amazon.com (AMZN), Target.com (TGT) and Walmart.com (WMT), as well as aspirational sites such as Crateandbarrel.com, Bananarepublic.com, Redenvelope.com, and even upmarket department store chain Nordstrom.com (JWN), have found online success. But these brands still fall short of what many consumers consider true luxury. Leading the Way
Still, there are changes afoot in the luxury sphere. Companies that once professed nothing but contempt for the Internet now at least have Web sites. Others, such as Ralph Lauren (RL) and Tiffany & Co. (TCO), have fully embraced e-commerce. Many companies are now even developing social networking strategies. The marketing teams behind Louis Vuitton (LVMH), as well as Yves Saint Laurent and Alexander McQueen—both of which are units of French retail giant PPR (PRTP.PA)—maintain Twitter accounts. But for all that, they are still only tentatively dipping their manicured toes into e-commerce waters. McQueen, which is based in the U.K., operates a full online shop for U.S. customers only. The U.S.-only site of sister company YSL sells accessories, but not clothing. Same goes for Balenciaga and Bottega Veneta, also owned by PPR. (Balenciaga also accommodates British customers online, unlike the other PPR sites.) The inconsistencies don't stop at PPR. At French luxury giant Moët Hennessy Louis Vuitton, better known as LVMH, sells its Louis Vuitton leather goods and accessories online, nothing more. Marc Jacobs, whose eponymous designer is also the creative director at Louis Vuitton, sells nothing on its Web site, although you can find Marc Jacobs' clothing, handbags, and shoes on outside vendor sites, such as online fashion boutique Net-a-porter.com. Same goes for LVMH brands Givenchy, Céline, and Kenzo. There are still some brands that sell absolutely nothing online, save for beauty products. Consider Chanel. While the legendary Parisian fashion house sells cosmetics both on its own site as well as on a few other high-end e-tailers, such as LVNH's Sephora.com and Saks.com, its current fashion and accessories collections are not for sale online. More Brand Control
Why? The team at a Chanel has cited brand protection as the major factor. Chanel designer Karl Lagerfeld even met European Competition Commissioner Neelie Kroes in February 2009 to urge the European Union to give brands more control over who sells its items over the Internet. Luxury retailers argue that customer service online isn't what it's like in a boutique, and shopping over the Web could ruin brand perception. (Businessweek.com made five attempts at contacting Chanel's corporate office—including three phone calls and two e-mails—but had received no response at the time this article was published.) The only place Internet shoppers can find Chanel's popular 2.55 purse, or that jade green tweed suit from the fall 2009 collection, is eBay (EBAY). And while the items may be brand new, they'll come from a secondary seller not authorized by Chanel. This attitude is outdated, say those who study the luxury consumer. "It's totally backwards," says Pam Danzinger, president of Unity Marketing, a Stevens (Pa.)-based market research firm. "Today, people will buy anything online. If they trust the brand, they'll trust the Web site." According to a study released by Google (GOOG) and Unity Marketing in October 2008 that surveyed 1,000 people with a net worth of $1 million or more—and a yearly income of $175,000 or more—designer clothing was respondents' favorite thing to purchase online. Next came jewelry and accessories. Consultant Kate Newlin, author of Passion Brands (April 2009, Prometheus Books), suggests luxury retailers need to understand that online provides, in many circumstances, a heightened customer service experience because of convenience and efficiency. She suggests that instead of limiting the availability of products online, these brands should take a cue from Apple (AAPL) and offer customized products, as well as a selection of refurbished goods, on the Web. (If customers are going to buy refurbished/secondhand items, they may as well buy them from the brand itself.) Inconspicuous Consumption
Louis Vuitton already personalizes items with its monograming service, as does the Ralph Lauren Rugby brand. The company's "Make Your Own" feature allows shoppers to personalize cardigans, hats, and button-downs with unique color combinations and embroidery. Newlin also argues that, in a time of inconspicuous consumption when buying from your home office might be more comfortable than hightailing it to Barneys for the latest Proenza Schouler tweed bustier dress. "If you want to buy, but you don't want to be seen buying, luxury online can be a social courtesy," she says. That may be true, but will luxury apparel ever fully make the transition to e-commerce? With clothing, fit and fabric are much more difficult to discern over the Web. "There's so much comfort with shopping on the Internet—the price advantage, the ease of shopping—that I think the advantages of e-commerce supersede the risk of an item not fitting," says Marshal Cohen, chief retail analyst at Port Washington (N.Y.)-based market research firm NPD. "More than 50% of the population has grown up with shopping on the Internet. It continues to be the biggest growth opportunity for fashion, and luxury in particular. They're not going to see the same level of growth in traditional outlets." Click here to see the best e-commerce sites for the 2009 holiday season.