Millennials and their shopping habits are starting to make a considerable impact on the luxury sector.
Online purchases of luxury goods, including apparel, beauty and accessories, now make up 8 million euros of the industry’s 254 billion euros in sales, an increase of 500 percent since 2009, according to new research from McKinsey & Co.
In another seven years, online sales of luxury goods are expected accelerate even more, with McKinsey projecting 74 billion euros in sales by 2025, meaning online shopping will makeup 19 percent of an industry expected to do 309 million euros in annual sales by that time.
While such an increase in online shopping would likely be reason enough for luxury brands to keep upping their digital game, about 78 percent of luxury shoppers also go online to check out a brand or an item before they purchase, whether that be online or in-store.
“The typical luxury shopper now follows a mixed online/off-line journey, seeking advice of peers on social media or looking for suggestions from trusted bloggers before entering a store, then often posting about their purchases afterwards,” McKinsey said. “The luxury shopper who begins and ends the customer journey is a dying breed — representing just 22 percent of all luxury shoppers.”
And digital shopping habits are not found only among Millennials. Shoppers over age 50 spend almost as much time per week browsing the Internet as the younger generation, 16.4 hours and 17.5 hours, respectively, and while they use social media quite a bit less, 75 percent of Baby Boomers are still connected. But McKinsey admitted that, “When it comes to digital, Millennials lead the way and are teaching older generations new behaviors, as well as setting expectations for the quality of digital interaction with brands.”
It’s little wonder then that luxury powerhouses like Céline, part of LVMH Moët Hennessy Louis Vuitton, are moving to bolster their online presence with new web sites. Just launched in Europe in December, Céline’s site will be the exclusive online seller of the brand, while offering things like online appointment requests and in-store pickup, among other services.
Gucci, part of luxury operator Kering, is at the head of the industry pack online. A recent study of web traffic by SimilarWeb put the Italian brand alongside online-only Stitch Fix and basics brand Uniqlo as the top three gainers over 2017. Gucci’s traffic increased monthly over the year and peaked in December with 4.7 million visitors.
Richemont, too, is looking to get a bigger piece of the growing online market. Earlier this month it offered to take full control of online-only Yoox Net-a-porter Group for up to 2.77 billion euros, with Richemont chairman Johann Rupert saying he wanted to increase the company’s “presence and focus” online.
But even with all this movement online, there is still a gap between shoppers that consider themselves “absolute” luxury consumers, an important population for the luxury industry, and those that trend toward “affordable luxury,” or lower-priced items from high-end brands, according to McKinsey.
These affordable luxury products, along with luxury beauty, lead online sales, however, followed by ready-to-wear apparel and accessories. And those shopping for lower-priced items from luxury brands are younger and more inclined to shop online.
But growth is growth, and the expansion of online is seen by industry experts as little more than a good opportunity for that. Antoine Beige of HSBC said in a note on Richemont’s proposed YNAP deal that the global online market for luxury is “fast-growing” and set to increase at least 17 percent this year.
But outside of increasing their official presence online, luxury brands also need to be aware of the customer-to-customer dynamic happening online. McKinsey said plainly that the consumer, not the brand, is creating its online image and that brands “will need to learn to deal with ambiguity and accept that some aspect of the messaging will be co-created with their customers rather than controlled unilaterally by their management team.”
McKinsey Illustrated this idea by comparing a brand’s official Instagram posts as of mid-2017 with the number of hashtags with the brand’s name: Chanel had 700 posts and 48.8 million hashtags, Louis Vuitton had 1,970 posts and 25.4 million hashtags, Valentino had 4,890 posts and 24.1 hashtags and Balmain has 3,660 posts and 5.7 million hashtags.
If anything, it looks like the more sparing a brand is with their social media presence, the more fervor is created online.
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