E-commerce has gobbled up everything in retail, but in the luxury space, consumers still prefer shopping in real life and not online.
Getty Images; Alyssa Powell/BI
E-commerce is great for a lot of things — snagging sales, stocking up on staples, buying stupid stuff we really do not need. But people's voracious appetite for online shopping does appear to have its limits, specifically when it comes to luxury.
The expectation has long been that e-commerce would revolutionize luxury, just as it has so much of retail. It killed many malls and bookstores; it made Walmart go digital; it transformed shipment and logistics operations across the globe. So why wouldn't it disrupt such an expensive, lucrative space?
It turns out we still like to buy the nicest, most expensive items in real life, in large part because we want a luxury experience when we spend the big bucks. We like to feel fancy when we shop fancy, and dropping stuff into a virtual cart on a random website in between meetings is far from most people's definition of fancy.
A recent survey from Morning Consult, a business intelligence company, explored how consumers look at luxury. It found that people generally have a strong preference for a brick-and-mortar experience when buying luxury items. Of those surveyed, 49% said they would consider buying luxury clothing or shoes from a brick-and-mortar store and 48% said the same of jewelry and watches. Thirty-nine percent said they would consider buying handbags and 40% said they would consider buying cosmetics and fragrances in a store. In every category, under 20% of consumers said they would consider making those purchases online. Gen Z was slightly more open to e-commerce and less interested in the brick-and-mortar experience, but not always by a meaningful margin. Less than 10% of all consumers said they'd buy luxury products through social media, though that number got up to the high teens for Gen Z.
Consumers also said customer service was the second-most-important attribute in defining luxury shopping, right behind the quality of the product. In other words, they don't just want to buy something special — they want to be treated special while they do it.
"The No. 1 reason people like to shop in stores is because they want that experience of browsing and touching things and playing with things," Claire Tassin, a retail and e-commerce analyst at Morning Consult, said. "Customer service, especially in a luxury environment, is such a big part of how you justify the additional expense."
Online luxury sales picked up during the pandemic but have since come back down to earth. Some important names in the fashion e-commerce space, such as Matches Fashion and Farfetch, have cratered. The German-based platform Mytheresa is doing OK — its net sales grew by 18% in the quarter ending in March — but its stock is still down by more than 80% from its IPO price in January 2021. The private companies Moda Operandi and Ssense seem to be selling merchandise and retaining customers, experts say, but the sites have a niche appeal and haven't made much of a dent. have such a narrow focus that they've hardly made a dent. The overarching theme is that many consumers haven't warmed up to shopping luxury — namely, ultra-luxe items and brands — online.
We try to treat luxury with the same e-commerce experience we use for paper towels, and that just doesn't work.
Jason Goldberg, the chief commerce strategy officer at Publicis Groupe, a global marketing firm, said the jury is still out on whether e-commerce will ever take over luxury retail, but for now, there aren't great examples of "runaway successes" in the space. There's no single answer as to why. One reasonable hypothesis could be that people simply prefer to get high-consideration and high-priced items in store, he said. What they get out of a luxury in-store experience hasn't been translated online.
"We try to treat luxury with the same e-commerce experience we use for paper towels, and that just doesn't work," Goldberg said. "In general, online, we have gotten very, very good at needs-fulfillment buying, but we are sucky at discovery. Nobody goes to Amazon because they go, 'I'm just in the mood to treat myself.'"
When unplanned purchases happen online, they tend to happen through social discovery. You see something on Instagram or TikTok and then you buy it. Those types of impulse purchases are fine to make with a few clicks, but when people spend the big bucks, they want to feel a little pampered.
"It is fair to say that going to a luxury store is part of the pleasure of buying a luxury product," said Luca Solca, a senior analyst covering global luxury goods at Bernstein. "Buying online is convenient and fast. But buying in store is a pleasure."
An analysis from Bain & Company found that the share of luxury goods sold online fell to 20% in 2023, after hitting 22% in 2020 and 2021. Solca believes 20% is on the high side and said that on average, the percentage of online sales in the luxury market hovers around the mid-teens, and sometimes even lower, noting that Burberry recently told him they were at 9%.
For the most part, luxury brands prefer that customers would rather shop in-store. Sure, they all have some kind of online presence — it is 2024 after all — but not all of their products are always available online, and the internet is far from the primary area of focus. For the most high-end products, there can even be waitlists. The general aversion to e-commerce makes sense: One way to convince people you're selling a luxury item, and price it accordingly, is to make it scarce and elusive, on top of providing the in-store luxury experience. It helps companies create and keep an aura around their brands.
"Luxury brands historically have actually stayed away from being very strong in the online channel, largely to do with the fact that they didn't want to be a cheap marketplace," said Nora Kleinewillinghoefer, a partner in the consumer and retail practice at Kearney, a strategy and management-consulting firm. "For them, it's about the storytelling."
That dopamine rush you get from buying something fun and fancy and special is meaningful, even if it doesn't last.
There are some exceptions here. The online diamond dealer Blue Nile is a giant in the engagement-ring space, and consumers are increasingly comfortable with buying their cars online. High-end beauty products can do well in e-commerce — once you know what shade of foundation or eye shadow you like, you don't need to keep going into the store. The online marketplace The RealReal sells a fair amount of secondhand designer and luxury merchandise, though it has long struggled with profitability. But outside these niche exceptions, high-end, luxury e-commerce isn't really a big thing yet. There's no super-prosperous Amazon for Gucci and Prada out there.
So much of the fun of buying a luxury item is sensory — seeing the packaging, experiencing the store, chatting with associates whose attention is focused on you. It's a personal, rarefied experience.
"That dopamine rush you get from buying something fun and fancy and special is meaningful, even if it doesn't last," Tassin said.
It's tough to translate to e-commerce. Clicking around a website to buy something and a week later grabbing a box on your doorstep next to your monthly delivery of cat litter does not provide the same rush.
While brands want to sell to consumers however they can, including online, brick-and-mortar matters for their cultural and economic cache. When people have a premium experience in a Chanel or a Louis Vuitton store, it reinforces the brand's premium image. It's part of their top-funnel brand building. And, hey, it helps if you snap a picture in the store and post it online, whether or not any purchase ever happens there.
"They're not just having a premium experience to trick you into buying a handbag. They're having a premium experience to make sure that you continue to associate Louis Vuitton with this extreme luxury premium that makes you feel better about spending that money on their goods now and in the future," Goldberg said. "Part of the luxury experience is less about conversion and more about long-term brand equity."
Ultra-luxe brands don't want their products to be ubiquitous in the way the internet can deliver. Companies know their high-end clients want one-of-a-kind items and personalized recommendations. These customers expect a salesperson to shoot them a text or give them a call to let them know a new shoe came in that they'll love, and they've only got one pair available in their size.
"Unless you have those relationships and connections with your reps, you actually will not get access to these products," Kleinewillinghoefer said. "It's that personalized touch that makes it truly unique."
With their highest-net-worth clients, the in-person buying experience often doesn't feel transactional, she added — people's cards are kept on file, so no one has to think of the whole business relationship thing. And even with more aspirational consumers — people who'd be more likely to do some poking around online — brands are careful to craft their images. Companies want people to come in and feel like they're living the dream and making what they see as an investment in a high-end piece. Companies don't want to "water down" their value proposition by serving too many products to those consumers, which is what the open nature of the internet risks.
"The level of luxury and the type of consumer are critical factors that intersect to define a brand's approach to its consumers, shaping both engagement strategies and the practices to avoid," Kleinewillinghoefer said.
While it might not feel like it, e-commerce is still in its early days. Amazon has only been around for 30 years and the iPhone for 17 years. Retailers have figured out how to make a digital version of a Target, but they haven't yet cracked the code for a digital Prada. It doesn't mean they never will. And, hey, if you want to buy your next designer watch online, go for it! But let's be honest here … you probably don't. Part of the whole schtick is going to the store and feeling fancy about it.
Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.
