This week, LVMH confirmed the launch of 24 Sèvres, its long-awaited return to multi-brand e-commerce. But the once-distinct worlds of online and offline retail are converging, giving birth to a new retail reality.
It’s been 17 years since Natalie Massenet’s Net-a-Porter, Federico Marchetti’s Yoox and LVMH’s eLuxury kicked off the first wave of fashion e-commerce. San Francisco-based eLuxury closed in 2009, a few years after Louis Vuitton decided to launch its own e-commerce site, leaving the business without its anchor brand and isolating it from LVMH’s Paris headquarters. But Massenet and Marchetti’s ventures were successful and ultimately merged to form the world’s largest luxury e-tailer with 2016 sales of €1.87 billion, fundamentally disrupting fashion retail along the way.
Change took time. For the first few years, most high-end fashion brands dismissed the idea of selling luxury goods online. But over time, many top luxury brands began working with Net-a-Porter and Yoox, and investing in their own digital sales channels. By 2014, nearly all luxury market growth was coming from e-commerce, with online sales reaching €14 billion, up 50 percent from 2013, according to McKinsey & Company, which noted a “tipping point” in luxury e-commerce. In the next ten years, the firm expects the share of luxury sales occurring online to triple, making e-commerce the world’s third largest luxury market after China and the US.
This week, eight years after the demise of eLuxury, LVMH jumped back into the ring with 24 Sèvres, its long-awaited return to multi-brand e-commerce. In recent years, the space has become crowded and highly competitive, but Ian Rogers, the group’s chief digital officer, says the venture is well-timed and will set itself apart with a distinctly Parisian point of view, product from LVMH brands like Louis Vuitton and Dior that others don’t sell, a more visual approach to merchandising and high-touch services like styling sessions via video chat.
But now a new wave of change is washing across luxury retail. While e-commerce is growing fast, the portion of personal luxury goods purchases that happen online — now about 7 percent of the total — is expected to plateau at about 20 to 25 percent by 2025. This means that, for the foreseeable future, the vast majority of sales will still take place in physical stores. And yet, about three quarters of all luxury goods purchases, even if they take place in stores, are influenced by what consumers do online, according to McKinsey. “My assumption in the long term is that 99 percent of purchases will be influenced by digital in one way or other,” Nathalie Remy, who leads the firm’s fashion and luxury goods practice for EMEA, told BoF last year.
To be sure, the customer journey is more complex and non-linear than ever before, blending online and offline touchpoints. Today, the path to purchase could easily start online and end in a store, or vice versa, moving easily between physical and digital interactions along the way. Make no mistake, retail and e-tail are converging, and there’s little point in thinking of them as separate entities any more. It’s all just shopping.
In response, legacy players with large store networks like LVMH are accelerating online, while digital players like Farfetch and Moda Operandi are deepening their presence in the physical world. Just this week, MatchesFashion.com, which began with physical stores before e-commerce became the engine of its growth, announced plans to open a new “townhouse” in London’s Mayfair which will play host to events and private clients as well as two floors of physical retail.
Some are learning to connect the dots, integrating their online and offline businesses to seamlessly serve customers who move fluidly between physical and digital touchpoints. Farfetch, in particular, has a developed a robust ‘new retail’ strategy, leveraging the virtual store network of its brand and boutique partners.
But this new world of convergence comes with challenges as well as opportunities. For a start, there’s the challenge of building a universal view of inventory across multiple channels, and making sure the right product gets to the right place at the right time. Then, there’s the task of keeping track of consumers — and their data trails — as they move from online to offline and back again. This isn’t easy and will require the kind of innovation that Farfetch, for one, hopes to spark with its Store of the Future platform, which aims to dramatically improve retail productivity, in part, by tracking in-store interactions and developing a more holistic view of customers by meshing together online and offline data.
There’s also the challenge of reimagining the physical store. As e-commerce grows, the store of tomorrow will have to deliver experiences you can’t get online, becoming much more than a selling space. To facilitate omnichannel services like “click and collect” and 90-minute delivery, stores will surely function as distribution hubs for online orders. But now that nobody needs to visit a physical store on a Saturday afternoon, retailers will also have to compete for precious leisure time with activities like seeing a movie, going to a concert, attending a sports match or visiting a museum. That means staging the kind of experiences you can’t get online and, ultimately, transforming stores into places where people go to spend time and connect with others — not just to shop.
Finally, the stores of tomorrow — much like MatchesFashion.com’s ever-changing new townhouse in London — will also have to display the kind of flexibility that allows them to evolve at a rapid rate, because, in today’s new retail reality, a large percentage of shopping may still be happening offline, but there’s little doubt that consumer expectations are being formed at the pace of digital.