Luxury and watches: online at last
It’s been a long time coming. Finally the luxury and watch industries have put their reservations aside and are ready to embark on their internet adventure. Though still only a small step, it nonetheless marks a giant leap in mentality. While numerous other industries have embedded the digital revolution into their business model, luxury and watchmaking have been dragged almost kicking and screaming into the online era. But the page has been turned, the race is on, and there is no going back.
Christie's, a symbol
The latest example to date, the prestigious auction house Christie’s has launched an online shop of rare and vintage watches. They are available for purchase in real time, seven days a week. The auctioneer says the initiative marks a new stage in online sales of luxury goods, and even prides itself on having created an innovative way to build a collection of vintage watches, thus complementing its traditional auction room sales. Christie’s claims to propose a selection of at least 30 watches at any one time by the likes of Patek Philippe, Rolex, Omega, Vacheron Constantin or Tudor. John Reardon, international co-head of Christie’s watch department, says the watches on the site are sold at highly competitive prices which can be more advantageous than those of online and offline retailers.
Christie’s motivations, while multiple, are ultimately identical to those of the watchmakers and luxury groups that are now online: develop a wider customer base. For an individual who would never even consider, let alone dare, enter a luxury boutique, the web opens up a whole new world of products by brands which they would otherwise perceive as “not for me”. The online site is similarly attractive to people who ordinarily wouldn’t bid at an auction. The internet removes barriers to make these goods available to new potential clients.
Compound annual growth in excess of 20%
The online move wasn’t a decision to be taken lightly. The overriding concern among premium brands was how they would convey their uniqueness online. Something they have apparently succeeded in doing, judging by the multiplication of e-commerce initiatives. They also had to convince themselves online business wouldn’t be to the detriment of sales in traditional channels. On this note, a number of brands, among them Hermès, have been forced to acknowledge that sales were low in those areas where they had few or no stores, and excellent where there were stores. The logical consequence being that physical and virtual outlets have become very much complementary.
Results are on a par and even outpace forecasts. According to a recent study by Deloitte consultancy, the luxury industry witnessed a 23% compound annual growth rate for online sales for the 2008-2013 period. While e-commerce sales are still very much the exception, they have nonetheless climbed from 0% to 5.3% of total luxury goods sales over the same period. Deloitte highlights the strategy implemented by the jeweller Tiffany, which operates an e-commerce site in 13 countries. In all, 58 of the 75 major luxury brands have one or more e-commerce ventures. And the juice is clearly worth the squeeze. Deloitte points to the fact that many aspirational or “affordable” luxury brands now generate more sales volume online than in their brick and mortar stores. Larger brands, meanwhile, find the internet a useful way to sell off the previous year’s collections without undermining their exclusivity or prestige, often through a joint venture with internet retailer Yoox.
Richemont has faith
Richemont, the world’s second-largest luxury group, takes its online presence seriously. Speaking at the group’s annual press conference, while choosing not to disclose figures or targets for online sales, co-chief executives Bernard Fornas and Richard Lepeu had nothing but praise for the internet and confirmed their faith in the future of e-commerce for the luxury sector. Accordingly, the two CEOs plan to roll out the group’s online sales sites worldwide. Nor is this a recent development. In 2010 the luxury giant acquired a 100% stake in online fashion retailer Net-a-Porter which, writes French daily Le Monde, is now neck and neck with its biggest rival, the Italian Yoox. The site, which appeals to an affluent clientele, stocks 350 brands including Chloe, Marc Jacobs, Burberry, Miu Miu, Alexander McQueen and Stella McCartney. Sales are reported to be growing in double digits and the site has even produced two spin-offs: The Outnet, which sells discounted designer clothing for women, and Mr Porter which carries high-end brands for men.
The watch brands in the Richemont stable are increasingly proposing their products for sale online. Cartier, for example, already offers a comprehensive selection and the other brands are following suit. As are customers. In the United States, the internet is already one of the main market segments for Baume & Mercier. At group level, Richemont has a brick and mortar distribution centre in Dallas servicing the worldwide web. A second centre is being set up in Japan and trials are currently being conducted in China. Europe should follow.
A source of growth
Tissot, which is active in the affordable luxury segment, is also putting eggs in the internet basket. The brand already sells its products online in the United States, France, Germany and the United Kingdom and will be extending its e-commerce business to a further three or four countries this year. According to chief executive François Thiébaud, online sales are growing fast with sites operating seven days a week. And this is only the beginning.
While the world luxury market is entering a period of “maturity and stabilisation”, with growth slated at around 2% this year, level with last year, as Bain & Co consultancy recently announced, the internet could provide an interesting alternative. Provided, that is, brands are able to enhance the customer experience despite a certain “banalisation” of luxury. Not that they are lacking imagination in that department. Some are even predicting that the internet will become the main point of sale for luxury goods. It’s just a matter of time!
