Will Net-a-Porter and Yoox Change the Luxury Brands Industry Forever?
In late March this year, industry whispers were finally confirmed when a merger took place between online luxury fashion giant Net-a-Porter (NAP) and online e-tailer Yoox. Although there is still speculation about the final form, it’s abundantly clear that this coming together of reputations, ideas and infrastructure will produce the world’s largest ever luxury online retailer. According to industry analysts, the message is clear for top brands such as Prada, which have so far resisted transition to the online market: it’s time to make the leap or face the consequences. But many luxury brands have not yet worked out how to apply digital innovations and, despite all the evidence, huge investment has been plunged into enhancing bricks-and-mortar stores.
The Power of Luxury
Market research company Euromonitor reveals that in less than five years’ time around 40% of all luxury goods sales will be made online. Next-generation spending has shifted focus. The so-called ‘Millennials’ have spearheaded powerful change in the way brands must think about customers’ purchasing habits, not only in the luxury goods market but also across other industries. Bucking the trend of economising in the wake of the global financial crisis, the modern luxury consumers derive their power from the ability to look further afield quickly and more discerningly.
Since the merger announcement, Chanel has unveiled its own plans for an online store. Chanel’s president of fashion, Bruno Pavlovsky, confirmed this at the end of March. “It’s not so much a shift,” he told WWD, “it’s an evolution to better serve our customers. Some of the customers are able to come into the boutique. Sometimes they don’t want to because they want to shop faster and they know exactly what they want, so it should be able to better respond to the customers’ requests”. But he was quick to set the brand apart adding, “It’s more e-service than a pure e-commerce approach.”
The 2013 UK Luxury Benchmark Report specifically highlighted inherent sluggishness in the British industry’s action to adapt, alongside a projected 57% market growth. It’s a wake-up call for those brands missing out on their potential share of a market with a projected value of £9.4 billion by 2015. In fact, figures for 2014 analysed by Statisica.com show a global luxury goods market value of about £150 billion as of 2014, up by £53 billion in the last decade. As expected, growth continues into 2015 – this was reported by Bain and Company as being at a steady upward trajectory of 2-3%, after allowing for currency adjustments.
Transformation for Growth
Perhaps the steady strength of the tourist pound in London might sustain expensive bricks-and-mortar boutiques for a few years, but after that it seems that brands simply must shift their approach in order to stay afloat. London retailers’ obsession with creating an exclusive physical experience for the visiting Chinese tourist has undoubtedly left an unguarded gap for the savvy e-tailer. Yoox Group and NAP have clearly used their advantage wisely, but it’s not yet too late for traditional luxury retailers. Without doubt, the key to future success is to become more open-minded. As Generation Y marches on, credit cards in hand, a way must be found to seamlessly merge brand identity with technological innovation.