Earlier this year, in what seems like a different lifetime but was only a couple of months ago (in Pre-Covid times), we wrote about Amazon venturing into the luxury space. In light of the present pandemic, we think it opportune to broach the topic once again.
As discussed in our earlier piece, Amazon is planning to introduce a platform that will be dedicated to luxury brands, wherein each brand can control the pricing and look and feel of their own e-commerce space. While 12 brands including Burberry and Versace were quick to jump onboard, many other top brands shied away.
Although the confirmed list of 12 brands hasn’t been announced yet, we do know that Louis Vuitton, and Gucci, for example, had rejected Amazon’s platform. It’s not that they don’t sell online. Rather, these brands have made significant progress in presenting and selling their collections via their own portals.
The fact of the matter remained that some of these luxury brands were just not comfortable with being associated with a website which lacks the desired aesthetics and user experience. Neither were they comfortable selling their products on a website that also sells diapers and books. Not to mention the issues with counterfeit products and the deep discounting model that is often seen on the portal. While work-arounds for this are a-plenty, comfort in the known worked well for these luxury brands. Especially since online sales accounted for a mere 10% of total luxury sales!
Now, however, in light of the global pandemic and the closure of most retail outlets, does Amazon offer a more attractive option for luxury brands?
Clearly, the current crisis has thrown at us a situation we never saw coming! Fear of the pandemic has resulted in store closures around the globe. Governments across the world have declared emergency lockdown, hoping to keep the virus at bay.
But the situation affecting storefronts is much broader than just immediate closures (Read:Could Our Days of Shopping at Neiman Marcus Be Over?). Even after stores and businesses reopen, it is unlikely that for the next few months people will be able or even want to visit stores or a mall. This coupled with a growing younger population entering the aspirational and luxury consumer segment, make it an opportune time for e-commerce. According to Retail Touchpoints, while the volume of online luxury accessories sales is steady, the average spend value was about $782 in 2019 and is growing at about 5% year on year.
Not just any e-commerce will flourish though. According to BOF only Amazon really has the scale…with its more than $40 billion cash pile, not to mention hundreds of millions of active customer accounts, mountains of shopper data and its ability to optimize nearly every piece of the supply chain puzzle, from inventory management to warehousing…”
Jeff Bezos is one of the most innovative and forward thinking entrepreneurs in the world, if what it takes is tweaking around of aesthetics and presentation, not interfering in pricing, and coming down hard on counterfeit products, then the solution is definitely already in the works. Think ‘T-Mall‘, a separate platform by Alibaba for Luxury.
These unprecedented times have resulted in rapid digital disruptions, requiring companies to be innovative and agile. In light of this, the 12 brands that have already signed up to sell on Amazon have made a wise decision, and it’s probable that many other luxury brands are now considering or even reconsidering their stance.
What is your stand on this argument? Do you think E-Commerce is the necessary way forward for luxury? And again, would you purchase luxury items from Amazon? If yes, what price points would you be comfortable with?