How Luxury Goods Will Stave Off Amazon

Luxury goods still remains Amazon’s last relatively unconquered retail sector. What’s bubbling away that will help it stave off Amazon?

As other retail sectors have buckled to the advances of Amazon, luxury goods have been pulling out all the stops putting a raft of strategies forward to avoid listing on the e-commerce giant’s platform. But, how long can this battle remain?

In a huge move last month, Swiss retailer, Richemont, which owns premium brands including Montblanc, IWC and Van Cleef & Arpels, announced its offer to acquire luxury online fashion retailer Yoox Net-a-Porter (YNAP). Richemont already owns a 49 percent stake in YNAP, but is now after the remaining 51 percent that will give it a major competitive boost in in the luxury online retail market.

“With this new step, we intend to strengthen Richemont’s presence and focus on the digital channel, which is becoming critically important in meeting luxury consumers’ needs,” said Richemont’s chairman, Johann Rupert.

YNAP’s chief executive Federico Marchetti says he is in support of Richemont’s approach. “Richemont aims to provide additional resources that further strengthen and accelerate YNAP’s long-term leadership in online luxury. This means investing even more in product, technology, logistics, people and marketing.”

While online sales accounted for only 9 percent of the total luxury goods market in 2017, according to Bain & Company, it’s the direction and acceleration of growth that’s most important to note. Bain & Company predicts that by 2025 e-commerce sales will make up at least a 25 percent total retail revenues, following a growing rate of 20 percent per annum for the past three years. In the meantime, offline luxury retail is only turning in a 5 percent year-on-year growth rate.

So, Richemont’s thinking around strengthening the conglomerate’s e-commerce power makes good sense, without forming an unholy alliance with Amazon. It’s not the first move the luxury goods sector has made to combat Amazon. Last year the world’s biggest luxury group, LVMH, launched 24 Sevres, a multi-brand e-commerce platform and app, selling everything from LVMH, Dior and Bvlgari to Gucci and Valentino in 70 markets worldwide, offering products from more than 150 luxury brands.

LMVH predicts €3 billion in digital sales in 2018, up by more than 30 percent from 2017, according to the company’s CEO Bernard Arnault, who says there’s yet more work to be done in its digital business, especially when it comes to the customer service offering which remains the heart of luxury retailing.

“Let me say this, it is true that we have profitability in the digital sales and it is gaining ground. But it is true that the service level, the convenience expected by the customers, means that we will need to invest considerably in the online services and we’ve seen this in other more developed markets.”

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