{"id":4276,"date":"2024-01-26T17:02:45","date_gmt":"2024-01-26T16:02:45","guid":{"rendered":"https:\/\/magazine.lineapelle-fair.it\/?p=4276"},"modified":"2024-01-29T10:58:11","modified_gmt":"2024-01-29T09:58:11","slug":"luxury-e-tailers-out-of-breath-this-is-how-digital-gods-fall","status":"publish","type":"post","link":"https:\/\/magazine.lineapelle-fair.it\/en\/focus-en\/luxury-e-tailers-out-of-breath-this-is-how-digital-gods-fall\/","title":{"rendered":"Luxury e-tailers out of breath: this is how digital gods fall"},"content":{"rendered":"

For an infinite number of reasons, multi-brand luxury e-tailers have entered a deep crisis, not only financial. Their identity, for many, has transfigured to such an extent that some of the best-known experiences in the sector seem to have come to an end. What, then, will be the future of online fashion?<\/strong><\/em><\/p>\n

 <\/p>\n

Born shortly after the beginning of the 21st century, luxury e-tailers <\/strong>have changed the way of shopping <\/strong>forever. With just a few clicks, they offer the possibility of purchasing a chosen product after carefully viewing the vast range of items available. They have raised the level of service <\/strong>and helped fashion brands, from the largest to the smallest, to enter new and distant markets<\/strong>. They basically created a distribution channel that did <\/strong>not exist before. But after the incredible acceleration during the pandemic years due to lockdowns, now the big multi-brand players in digital fashion sales are breathing heavily<\/strong>. Why?<\/p>\n

The fatigue of luxury e-tailers <\/strong><\/h4>\n

The rise of Shopify <\/strong>and social media <\/strong>sales. These strategies of brands that want to control their online distribution <\/strong>and the shrinking power of the multi-brand retailer.<\/strong> However, if we look more closely, there are also other reasons that have caused the ‘fall of the digital gods’. For instance, there is the resurgence of physical shops <\/strong>offering immersive experiences <\/strong>and personal shopping <\/strong>services or the high cost of returns<\/strong>. There is also a strategic error<\/strong>. In an attempt to compete, marketplaces have become bigger and bigger but increasingly similar to Amazon <\/strong>in terms of size <\/strong>and ambition<\/strong>. Too similar.<\/p>\n

Advantages that are no longer there<\/strong><\/h4>\n

According to Bernstein analysts, e-commerce players are losing their price advantage <\/strong>to the brands themselves as inventory increasingly comes from brands. Hence, it is no longer from wholesale customers, <\/strong>who are more willing to finance promotions. “Generating rapid GMV <\/strong>(Gross Merchandise Volume) growth and going into the black is a very difficult squaring of the circle to achieve, as many consumers only turn to marketplaces to find bargains,” Bernstein writes.<\/p>\n

It no longer satisfies us<\/strong><\/h4>\n

The True-Luxury Global Consumer Insight <\/strong>research by BCG <\/strong>– Boston Consulting Group points to another crisis factor. In practice, the online channel no longer satisfies high spenders<\/strong>. Less than half of high-end shoppers (46%) are dissatisfied with <\/strong>the digital shopping experience, which applies to both purely digital platforms and digital shop windows of the brands.<\/p>\n

The Farfetch case<\/strong><\/p>\n

Last December, the online market was changed forever<\/strong>. The Farfetch <\/strong>case broke out. Founded in 2007 by Jos\u00e9 Neves<\/strong> and launched in 2008, the e-commerce platform sold products worth around $3.5 billion in 2022<\/strong>. The problem is that, after 15 years in business<\/strong>, the company has still not made a profit<\/strong>. The three pillars of <\/strong>Farfetch<\/a>‘s business are faltering. First<\/strong>: its market is struggling to grow, and it still relies on discounts and promotions to attract new customers and generate traffic. Second<\/strong>: its business of providing technology and logistics products for brands and retailers lacks momentum. Thirdly<\/strong>, the brands it manages, including Off-White and Palm Angels of the New Guards Group, are losing market share as luxury streetwear is no longer fashionable<\/strong>.<\/p>\n

Analysts believe that Farfetch has become a company that is too big, too difficult to manage, too lean, and with too much red tape. The fact is that since it went public (as of September 2018, valued at $6.3 billion), the company has lost over 90% of its value<\/strong><\/a>. Its financial cycle had become so unsustainable that, emblematically, no saviour could be found. Then, along came the Koreans from Coupang<\/strong>, but the fact that no one had come forward before speaks volumes about the current lack of appeal of <\/strong>this business in the eyes of the market.<\/p>\n

Other cases<\/strong><\/p>\n

Other marketplaces are not going through their best period<\/a>. MatchesFashion <\/strong>is grappling with increasing losses, while Ssense <\/strong>laid off about 7% of its workforce earlier this year. Mytheresa <\/strong>remains one of the few operators that has consistently made profits, but growth is slowing down, and its share price has fallen by almost 70% since the beginning of the year. YNAP <\/strong>is worth about EUR 1 billion or so, or about one-fifth of the initial investment made by Richemont in 2018 for EUR 2.7 billion, valuing the e-commerce business at EUR 5.3 billion.<\/p>\n

The end of the road?<\/strong><\/h4>\n

Jonathan Siboni<\/strong>, CEO of Luxurynsight<\/strong>, believes that the era of online multi-brand luxury retailers is coming to an end<\/strong>. He believes that their role in the market could be filled by other prominent players in the digital sector. For example, eBay<\/strong>, Tmall, <\/strong>and JD.com <\/strong>already generate high traffic and could make room for luxury on their sites. “Now is the time of mono-brand shops, but I would never discard the role of multi-brands. I still think they are valuable in terms of care, convenience, and trust. But you have to understand what role they play,’ says Sojin Lee<\/strong>, founder of Toshi<\/strong>, a digital business-to-business company.<\/p>\n

The Future<\/strong><\/h4>\n

“In the past, <\/strong>e-commerce was often about convenience <\/strong>and ease of use<\/strong>, but the future will be different. We will have to invest in personalisation, in a more sophisticated <\/strong>and inspired digital experience, in storytelling <\/strong>and local relevance,<\/strong>” said Riccardo Vola<\/strong>, general manager of Italy and Spain of Zalando<\/strong>, at the 28th Pambianco-PwC Fashion Summit<\/a>. Vola identifies three guidelines <\/strong>that sum up the e-tailer’s approach to the future: inspiration<\/strong>, personalisation, <\/strong>and localisation<\/strong>. Without forgetting the impact that artificial intelligence is having – and will increasingly have -. The future, in this sense, is today.<\/p>\n

Read also:<\/strong><\/p>\n