“Our clients are looking for individual service that we can offer them primarily through our exclusive boutiques. The Internet is not appropriate for a brand such as ours.” This remark was made more than two years ago by the CEO of a watch brand in response to our question: ‘Don’t you think it is worthwhile to reconsider your Internet site as a means of defining your online strategy?’
The fears of this CEO were legitimate. His brand strategy is based on the notion of exclusivity and rarity, and probably he was afraid that the Internet would not let him realize his objective of upholding his company in the closed circle of prestige brands. He also corrected us by insisting that his watches were not luxury products but rather prestige timepieces, and that these two categories were, in fact, radically different.

The rise of e-commerce
Since this meeting in 2003, much water has flowed under the bridge. The number of Internet users has exploded. Connections are increasingly more rapid, and often wireless. The direct consequence is that sales via the Internet have also exploded, with a rather surprising result. The luxury goods category is the locomotive leading the e-commerce train, and, at the end of 2005, it recorded a growth rate of nearly 40 percent, according to Comscore. Jewellery, watches, travel, and haute couture – all the products seem to be more and more in demand, even if sales might still mostly end up in the brick and mortar stores.
Numerous brands are desirous of profiting from the Internet windfall. Hermès, for example, welcomes the online visitor to its site, where it offers many of the brand’s products for sale. Dior has already opened its online sales site in France, and gives users the choice of the presentation site, fashion.dior.com, or the sales site, diorboutique.com. Other brands are trying to benefit from the Internet by working discreetly through strategic alliances.

What luxury brand clients want
It is clear than many clients purchase luxury for the shopping experience in the boutiques, for the attention paid to the details, and for the quality of advice…but let’s be realistic. If e-commerce has taken off, it is because there is a large segment of clients in search of luxury goods for whom these considerations are not that important.
For Tobe Smith, Texas wellness guru, and Mikhail Estimov, a young oligarch, retired at the age of 35, the Internet is the perfect way to save precious time. There is no need to send an assist-ant to the store. A few clicks of the mouse and a platinum credit card are enough.

The example of the Russian market
Only 20 percent of the Russian population is connected to the Internet. Need we mention that this 20 percent is part of the well-to-do class? Moscow, which is home to the essential portion of the wealthy, is seeing wireless web connections sprout up everywhere. In 2006, it is not really a viable option to launch a brand or to strengthen its presence in the marketplace without using the Internet, since the target public is already connected.

What about watch brands in all this luxury?
With regards to the Internet, watchmakers are confronted with a double problem: the size of distribution (fear of cannibalization) and the percentage, still quite small but growing, of exclusive boutiques. If watch companies hesitate to move into e-commerce, it is because they have a dilemma: how can they sell online without endangering their brick-and-mortar retailers? For the R moment, their priority is to reduce the visibility of websites selling fakes in order to allow their target audience easier access to their products, while preserving their image.
On the other hand, the large groups are beginning to profit from the synergies that occur between the ON and OFF lines. LVMH is a good example. The management of its own boutiques lets the group drastically reduce the risks of cannibalization. Its website, supported by aggressive e-mail marketing campaigns, not only allows it to sell online, but also, and above all, to re-direct a maximum number of prospective clients towards its retail network, or even to offer maximum visibility to a newly opened boutique.
The next step is probably cross-selling among brands systematically, supported by client data analyses and increasingly refined market studies, and a larger part of mix-marketing invested logically in the Internet.

To each his own channel
What if the luxury market were to offer its clientele the choice of the sales channel it prefers? If brands were to ask their target audience this question, there would be more of them moving into e-commerce… And, what about returning a part of the margin to the retailer located nearest to the online buyer, while waiting for the behaviour of buyers to stabilize? But that doesn’t seem to be in the cards for now.




Fear of identity theft curtails Web purchasing
A quarter of Internet users have stopped making online purchases for fear of identity theft, according to a report issued by Consumer Reports WebWatch.
The report finds that 80 percent of Internet users are at least somewhat concerned that someone might steal their identity from the personal information available on the Web. Most Internet users, 86 percent, have made at least one change in their behavior because of fears of identity theft.
Of those who shop online, 29 percent say they have cut back on how often they buy products on the Internet. Thirty percent of users reveal that they have reduced their overall use of the Internet due to these fears, and 53 percent say they have stopped giving out personal information online, according to the report. More than half (54 percent) of those who shop online say they have become more likely to read a site's privacy policy or user agreement before making a purchase.


Nordstrom To Launch Online Designer Collections Site
The ten boutiques featured on the site will be Giorgio Armani, Blumarine, Burberry, Dolce & Gabbana, Donna Karan, Marc Jacobs, Michael Kors, Missoni, Ralph Lauren and Roberto Cavalli. Each shop has its own branded designer concept - Dolce and Gabbana's shop is an Italian palazzo, Donna Karan's is a New York brownstone, while Marc Jacobs' has the ivy-covered façade of his Los Angeles storefront.


Tiffany
The American company has just announced a 6 percent growth in total sales, but according to the Wall Street Journal: “Direct-
marketing sales shot up 14 percent to $63.7 million, due largely to strong growth in Internet sales, which involved not only an increase in orders but also growth in the average order size.”


Amazon's Q4 2005 Jewellery & Watch division sales double
Jewellery sales at online retailer Amazon.com increased more than 100 percent in its fourth quarter of 2005 ended Dec. 31, compared to the same period in 2004.

The growth stemmed from several changes to the site's jewellery offerings last year, including the addition of loose diamonds, more than 1,000 new watch styles and the Amazon Diamond Search and Create Your Own ring functions, according to an Amazon release.

“Now more than two years after launch, growth in the Amazon.com Jewellery & Watches store is stronger than ever,” Steven Goldsmith, vice president of Amazon.com Jewellery & Watches division said in the statement.



Source: February - March 2006 Issue