In years past, word of mouth and possibly a sprinkle of familial tradition were critical to product discovery. However, with the changes of time and technology, digital research has become more significant than a friend’s recommendation when it comes to purchasing retail products online, especially luxury items.
The growth of wealthy U.S. households (defined as an average income of approximately $200,000 or more by eMarketer) has been steady, rising from 59 million in 2011 to over 68 million today, classifying over 23% of the nation’s families as fiscally affluent. Outside of the U.S., the world is seeing similar growth; the global pool of wealthy shoppers is expanding and so is the demand for luxury goods.
As with all retail sales, luxury eCommerce is becoming increasingly important to affluent consumers. Instead of driving to a physical store, luxury shoppers enjoy the convenience of having an item delivered to their doorstep within a few short business days. Additionally, purchasing from authentic brand sites gives shoppers peace of mind knowing they’re buying legitimate items from the brand itself without having to worry about receiving counterfeit goods.
In the U.S. alone, affluent households have embraced eCommerce and are utilizing online research to aid in product discovery. Approximately 74% of U.S. millionaires used the web for shopping last year, and in 2015, nearly half of the entire pool of affluent households bought luxury products online. Furthermore, according to Experian, approximately 81% of affluent shoppers plan to purchase luxury products online next year.
Despite the growing digital demands of luxury shoppers, some luxury brands are still reluctant to make the move to online retail. Europe, which according to Forrester Research accounts for 30% of luxury goods sales worldwide, only received 6.4% of the world’s online luxury sales in 2015 due to their lack of online stores. This percentage could explode with more digital shopping options, especially since the average affluent customer spends over four hours online every week. Even though the demographic of affluent families continues to grow worldwide, the world’s top luxury brands only provide eCommerce sites to approximately 45% of leading markets.
Why are these brands so slow to move into eCommerce? Some brands fear that an online store would tarnish their exclusive brand image, making them less “luxurious” to shoppers, or greatly take away from in-store sales and valued personal service. Some brands also don’t want to tackle fraud protection for their frequently targeted name-brand items. Price disparities between countries in the worldwide luxury goods market can also create a grey area for comparable imports and exports, another tricky hurdle unique to certain brands.
But the demand for online luxury shopping is becoming more difficult to ignore and big name brands and retailers are slowly but surely migrating online, steadily increasing investments in their eCommerce sites. As an example of this movement and socialization of luxury goods, Britain’s sales of luxury items alone are expected to double by 2019 and several other European counties are projected to see even larger growth rates.
In all, most forecasts point to a global luxury mega market just waiting to be tapped into. To do this, brands should attempt to meet their shoppers halfway and provide more online shopping options, though the task presents its challenges with price disparities and fraud control. In response to brands and retailers migrating online, consumers are projected to transform the luxury market, driving digital purchases from 3% of the global market to 18% by 2018, expanding the total market size to $12 billion. The slow movement of luxury brands to eCommerce, which is just now starting to pick up speed, should snowball in the next few years and meet the demands of the growing affluent shoppers around the world.