Chanel — among the conspicuous e-commerce holdouts in luxury — plans to begin testing online sales of eyewear later this year in the U.S. ahead of a broader launch of online selling in 2016, WWD has learned.
That one of France’s most powerful and emblematic fashion houses is finally moving toward online sales telegraphs how vital the channel is becoming in a slow-growth period for the luxury sector, and amidst rapid adoption of mobile commerce.
“At Chanel, our boutiques are key, and the best way to showcase our collections,” Bruno Pavlovsky, president of Chanel fashion, said in an interview. “Digital is something that is totally complementary.”
He shared scant specifics about the eyewear venture, but noted online would be closely linked with Chanel’s boutique network. The executive also hinted that its ultimate online launch would be about “creating a luxury experience, as only Chanel can do.”
Indeed, he stressed that raising service levels, rather than chasing after additional revenues in a new channel, is driving the initiative. “It’s more a question of quality rather than quantity,” he said. “We consider digital a way to be able to better understand, service and deal with our customers. It’s more about the way to build the relationship with our customer.
“Our customers are quite busy — they are traveling quite a lot, and they use digital significantly to better understand the content of the collections.”
Chanel plans to harmonize global pricing starting with the cruise 2016 fashion season to facilitate its foray into e-commerce, as reported.
Pavlovsky described digital as an efficient way for customers to learn when specific collections are available in store, knowing “if it is a specific product, they need to be quick.…It’s a lot about being part of the brand and being able to benefit from the services of the brand.
“It’s not something on top of. It’s something that is part of the service we want to offer the customer,” he stressed.
Nor is Chanel alone in entering — or venturing further into — the e-commerce era.
Fendi, which launched online selling in 28 European countries in March, plans to extend its reach into the U.S. and Japan before the end of the year, chairman and chief executive officer Pietro Beccari said in an interview.
“I think it’s important for a brand today to offer this kind of service to the customer,” he said, noting that Fendi allows clients to return items purchased online to a physical store, or order online with a sales associate and receive the product at home.
Beccari trumpeted “very positive feedback” to the European Web store, which has seen the Roman brand ship leather goods to Bulgaria, Spain and Holland, countries where Fendi does not yet have any physical presence.
The Internet site also offers an effective means to “stay in touch” with people, and use video
and audio messages. Fendi has found that there is an 80 percent overlap between its off-line and online customers.
Sidney Toledano, ceo of Dior, which started selling online in 2005, agreed that offering the best service possible is the driving force behind luxury e-commerce.
“Of course, the boutique remains the first place where clients experience the brand, but if they prefer to buy online, we want to be able to offer them this service, as well. E-commerce is a complement to the in-store experience,” he said.
In Toledano’s view, fashion customers are leaders in their consumption of digital information and use of digital tools.
“They crave information about the latest collection, the latest creation, the savoir-faire…and therefore, they are heavy users of the Internet in all of its forms,” he said. “But they do not only look for information, they also share a lot. The relation with a luxury brand is about emotion, so they share and express a lot of those emotions, probably more than in other industries.”
He noted luxury customers are very demanding to the smallest detail, expecting “an experience” with an e-commerce order, and that the “service and the packaging that goes with it is really unique to the luxury industry.”
That goes for brand communication as well, with Dior recently adding Snapchat to its social media platforms in tandem with its recent cruise 2016 show near Cannes, France.
“The communication strategy has to be day-to-day and orchestrated through all digital touch points to ensure a homogeneous message both on- and off-line; but it is also important to take into account each tool’s specificities and adapt the content accordingly. We had to adapt our organization and set up an editorial team and a content production team,” Toledano said.
During its results presentation in March, Hermès ceo Axel Dumas described digital and physical stores as complementary, noting that when the brand launched online selling in 2008, it found that most of the sales took place in cities that already had Hermès stores, though not necessarily to Hermès clients. Today, the brand sells online in 19 countries, with Canada the most recent geographic expansion, and a site dedicated to women’s silk collections was added in the fall.
The list of holdouts to digital commerce is rapidly shrinking, with Chloé and Dunhill recently signing a letter of intent for a five-year partnership with Yoox Group for the setup and management of online flagships. Yoox also inked a six-year pact to launch online selling of Karl Lagerfeld in Europe, the U.S. and Japan in the fourth quarter of 2015.
Luxury analysts argue it’s only a matter of time before all brands join the online juggernaut.
“There’s no global luxury brand that can afford not to be present,” said Mario Ortelli, senior analyst at Bernstein Research, predicting that the online channel could account for 15 percent or more of total luxury sales in five to 10 years, driven by emerging markets where young and affluent consumers are very digitally savvy.
He noted that digital already impacts 62 percent of luxury purchases via the research phase, the purchasing phase — or both.
Yet Donald Marchand, a professor of strategy execution and information management at Lausanne-based business school IMD, said luxury brands still have a long way to go in moving to a more relationship-based business model. Today, most brands rely on heavy advertising and communication to push products, which drives a “transactional” approach in boutiques without much knowledge of the customer.
“That’s not the way it’s done anymore,” he said. “Customer engagement is what it’s about and these brands have to come to terms with that.”
Burberry is an exception, focusing on harmonizing the look and feel of the brand in the off-line and online worlds, allowing the customer “to move from one to another in a seamless way,” according to Marchand.
Indeed, he noted that it sometimes takes a crisis or a lull to coax a brand into action, as Burberry did a decade ago when it confronted its association with Chavs and over-reliance on licensing.
Today, many brands, having built extensive store networks, are looking for new avenues of growth, with online seen as an efficient channel.
According to Luca Solca, managing director at Exane BNP Paribas, digital engagement remains one of the key growth relays for Europe’s luxury players as it enters a period of modest growth.
“More of the same — i.e., more stores in China — does not work anymore to generate growth,” Solca said. “Besides, when you start to sell online, you discover that consumers’ reactions are overwhelmingly positive.”
Consumers in China and America lead, with digital accounting for more than 10 percent of the luxury market, trailed by the U.K. and Japan at 8 percent, Germany at 6 percent and southern European countries at 4 percent, he noted.
“They will all embrace digital,” Solca predicted of luxury brands. “This is one of the few remaining levers to drive growth.”
New stores have contributed about 30 percent to luxury sales growth in the last eight years, according to Exane’s estimates, with most brands running after easy sales in Greater China, which now has the second-highest absolute number of luxury stores after the U.S., according to the investment bank.
In cooperation with ContactLab, Exane recently analyzed 28 brands and found that digital engagement is spreading among European luxury players, with 26 already operating mobile sites. The latest report ranked Burberry number-one in digital reach, while Gucci ranked first in “digital customer experience,” trailed by Louis Vuitton, Tiffany, Cartier, Ralph Lauren, Ermenegildo Zegna and Tory Burch.
“Digital is more than ever a priority for our group,” according to Jean-François Palus, group managing director of Kering, parent of luxury brands including Gucci, Saint Laurent and Balenciaga. “The growth potential remains very substantial and we believe we can do more.”
Kering touts Gucci as a pioneer in luxury e-commerce, launching online selling in 2002. Today the brand boasts a highly perceived digital competence, and is ranked “genius” in the L2 Digital IQ Index in the fashion category.
The Italian fashion house is to unveil a redesigned site and new front-end platform before the end of the third quarter, boasting a host of new functionalities.
Barbara Rybka, senior vice president of digital at Gucci, said today, mobile and tablets account for 58 percent of traffic on its sites, leapfrogging over desktop computers, which generated 59 percent of traffic in 2013, dropping to 42 percent in 2014.
“It all happened within one year,” she told WWD’s Digital Forum in London last month. “Smartphones saw the biggest gain, from 26 percent of traffic in 2013 to 44 percent in 2014. In our Asia markets — Japan and Korea — this percentage is even higher, well over 50 percent.”
Citing Altagamma-McKinsey data showing that three out of four luxury shoppers own a smartphone, Rybka said American consumers, the first to get Gucci’s mobile site, cottoned on quickly, with more than 57 percent of visits to the store locator coming from smartphones, versus 29 percent from desktops.
Kering’s smaller brands are supported by E-Lite, a venture established with Yoox in 2012.
Ortelli predicted luxury brands would ultimately manage online sales directly, just as they gradually wean themselves off franchisees and wholesale clients in stores.
Marchand urged companies to adopt a “test-and-learn” approach with their online initiatives, lauding hotel chains for leveraging digital to build relationships with their top customers.