Luxury shoppers may be willing to shell out quite a lot online for high-quality products, but only if they can trust that they are getting their money’s worth.
High-end online retail platforms have not been having an easy go of it recently, with widespread reports of challenges in the space. Yet luxury shoppers continue to want digital platforms from which to buy premium products online.
According to a 2023 installment of the PYMNTS Retail Tracker® Series Report, “Everyday Retail Is Taking a Page From Luxury’s Playbook to Win Consumers,” 67% of luxury shoppers said stores should feature higher levels of digital integration. Additional research cited in the study showed that online sales account for up to 20% of all sales in the luxury sector.
Yet while luxury brands and retailers have had centuries of experience in creating immersive, highly curated brick-and-mortar experiences, the digital journey has not yet caught up. These stores often have elegant interiors, personalized services and attentive staff that contribute to the overall luxury atmosphere. Translating this ambiance to an online environment is challenging and requires innovative approaches to digital marketing and website design.
As such, merchants that have already established that trust with consumers have the advantage in the digital sphere. On Monday (April 15), STORY3 Capital announced that it has invested in the eCommerce arm of luxury brand Saks, noting consumers’ existing trust in the retailer’s curation as a key factor setting the company up for success.
“Over a legacy of more than 100 years, Saks has earned the status of the leading and trusted editor of fashion,” STORY3 founder and managing partner Peter Comisar said in a statement. “Saks has cultivated intimate relationships with millions of active customers and the world’s most coveted luxury brands. The exploration and delight of a shopping excursion to Saks is like no other and authentically anchors the company’s position in the luxury brand landscape.”
Indeed, once consumers trust a luxury eCommerce merchant, it appears that they are happy to step up their spending. Luxury apparel brand Mytheresa noted in its last earnings report that the number of “Top Customers” in the United States grew by nearly half year over year and by 16% around the world, and average order value increased by 5.4%.
Still, overall, the space remains underpenetrated.
“Luxury is a very large market segment, and it’s one that hasn’t been captured in any meaningful way by eCommerce players yet,” Korean eCommerce giant Coupang Founder and CEO Bom Kim noted on the company’s last earnings call.
“We hope in a few years, we’ll be having a conversation about how Coupang turned Farfetch into a business that transformed the customer experience around luxury fashion, while also providing strategic value for Coupang,” Kim added.
Overall, high-earning consumers continue to find opportunities splurge on nice-to-have retail items, according to the February/March PYMNTS Intelligence study “New Reality Check: The Paycheck-to-Paycheck Report: Why One-Third of High Earners Live Paycheck to Paycheck.”
The data, which drew from a survey of more than 4,200 U.S. consumers, revealed that those who earn more than $200,000 a year spend the greatest portion of their personal income on clothing, accessories and personal care items — 8.5%, versus the population-wide 7.2%.
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