BW Confidential - Issue #3 - September 2010 - (Page 30)

Insight: Luxury credit: stock.xchng The internet Untangling the web Luxury brands have taken a softly, softly approach to the internet. But given the opportunities the web now offers, they may soon have to change tack I t’s been said that the internet will shake up the luxury-goods industry, and this is perhaps why companies in the sector have been notoriously slow in exploring the web’s possibilities in terms of sales and marketing. But attitudes are changing. Louis Vuitton began selling online in 2005, PPR sells on its luxury brand sites, and in April Swiss group Richemont bought fashion e-tailer Net-àPorter. Some of the fashion brands that have begun selling through the web have been surprised by the sales generated and at the more expensive items they have sold. The numbers also speak for themselves. While online sales are still only a fraction of the luxury-goods market, they are growing fast. Bain & Company estimates that online sales represented around €3.5bn of the €153bn market, and it is thought that the market will grow by around 35% annually (how much of this is additional business is still unknown). The luxury consumer is online and wants to buy there. Yoox.com, a multi-brand luxury fashion e-commerce site claims five million unique visitors to its site every month. In beauty, heavyweights such as L’Oréal and Estée Lauder have announced they will invest more in digital business and have come up with sophisticated online platforms, but there are still a surprising number of beauty brands without e-commerce enabled “ If I’m going to sell online, I need to make sure that I can offer a good reason to buy from my site, as the product may be more expensive than in a perfumery where it is being discounted Beauty brand executive websites. Even among some of the top groups, the e-commerce function is only available in a handful of countries and is rolled out at a very gradual pace. One reason for this is the supplier’s fear ” of upsetting their traditional retail partner. “There is a lot of paranoia and a worry of repercussion from retailers, but the reality is that people want to buy in stores and online. There is not necessarily a conflict here, especially if brands work with retailers on this,” says US-based Luxury Institute ceo Milton Pedraza. The same fear existed for a long time with TV shopping, but now most brands accept that after a product appears on TV channels like QVC and HSN, sales in brick-and-mortar stores go up. Another argument from suppliers is that they are wholesalers and not retailers and that e-commerce is another business that they would be unable to do well (although there are third-party companies that look after logistics and fulfilment). They also ask why they should add one more point-of-sale with a website, when high-traffic retailers like Sephora already sell online and do it well. For some brands, Sephora’s online shop ranks in the top three doors, depending on the country. This reasoning is also linked to how brands can make e-commerce profitable. “If I’m going to sell online, I need to make sure that September 2010 - N°3 - BW Confidential 30 http://www.Yoox.com

Table of Contents for the Digital Edition of BW Confidential - Issue #3 - September 2010

Cover
Contents
Comment
Update
- Brand & retail news recap
- Digital digest
- Companies on the move
Take note
- Market facts, figures & trends
Best of BW
- Highlights from our e-publication
Launches
- The latest in fragrance, skincare & make-up
Interview
- O Boticário president Artur Grynbaum
Insight: luxury
- Category overview
- Pricing
- The internet
- Return to quality
Wellness
- The spa consumer
- Spa case studies
Retail
- New store concepts
Travel retail
- Inflight sales
Market watch: US
- Country overview
- Industry roundtable
- Retailing analysis
- Emerging retail channels
Radar
- Six up-and-coming beauty brands
Packaging trends
- Make-up innovations
Last word
- Inspiration&Creation founder Leïla Rochet-Podvin

BW Confidential - Issue #3 - September 2010