Crisis in the online luxury goods purchasing market
Haebom
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Haebom
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Looking at the current trends in the luxury market, sales of luxury brands (LVMH, Kering, etc.) are increasing, while sales of online luxury shops are decreasing, and this is continuing for longer than expected.
FT: Luxury ecommerce groups lose their sparkle after top labels play digital catch-up
Changes in consumer buying behavior: Traditionally, luxury brand sales have relied heavily on the experience of customers experiencing and purchasing products in-store. Consumers may prefer the experience of physical stores, especially when purchasing expensive luxury goods, which may be a factor in generating stronger sales in offline stores than online stores.
Unique Brand Value: Large luxury groups such as LVMH and Kering continue to maintain consumer loyalty through strong brand values and unique marketing strategies. These brands attract consumers by providing a unique brand experience.
Economic factors: Recent economic uncertainty may affect consumers’ spending patterns, which may have a greater impact on online shopping. In particular, luxury goods, which are expensive, tend to be less popular when economic uncertainty increases.
Increasing competition in the online market: The online luxury market has a variety of platforms and competitors, which can lead to market saturation along with price competition. This can cause some online luxury shops to experience a decrease in sales.
In fact, online luxury sales platforms such as Farfetch, MyTheresa, and Yoox have lost investor confidence, with their stock prices dropping significantly. Despite temporary growth during the pandemic, the online luxury market has since faced various challenges, including profitability issues, economic uncertainty, and changes in consumer behavior.
On the other hand, traditional luxury brands such as LVMH and Kering continue to grow. These companies maintain customer loyalty through strong brand value and effective marketing strategies, and attract customers by providing unique experiences in offline stores.
Personally, I think this offline experience is very important. In the end, I think what separates ready-made products from luxury goods is social value. I think economic value (price) is also measured by this social perception. In fact, recently, contemporary brands that are excellent in quality and design as much as luxury goods have emerged, so this will continue to level up. Types like SPAO will have their own unique position like Uniqlo.
Farfetch, MyTheresa, and Yoox are online luxury shopping services that have grown explosively during the COVID period. At that time, the money released through quantitative easing and these various channels rapidly expanded the online luxury market. However, their recent performance has been miserable. If the entire luxury market is in a recession, you might think that luxury consumption has decreased simply because the economy is bad, but traditional luxury companies are recovering, so there are even more concerns about online luxury sales.
Personally, I've spent thousands of dollars offline (department stores or flagship stores) and over a trillion dollars online, but the customer experience itself is so different. It feels like I'm being taken advantage of rather than treated well... Anyway, that's how it is. Sometimes, luxury online sellers emphasize price as their competitive edge, but I don't think that's very meaningful. In the short term, they may increase sales, but those who buy luxury goods based on price in the first place cannot have high retention. From an individual's perspective, no matter how cheap it is, it would be difficult to spend repeatedly due to their own financial situation.
In the end, it is about providing an experience of being treated and experiencing social value, and the offline luxury edit shops in Apgujeong Rodeo and Cheongdam are very good at this. They are not restricted by brands, but rather provide a similar customer experience. When the online luxury market competes with replicas and prices, existing luxury brands are pushing what they do best, with customer experience and better treatment.
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