Every day eight out of ten affluent or very affluent individuals in the world with an income of at least $500,000 buy something in the Web, the RB.ru business network writes. It would seem that in this virtual space they should be haunted by flocks of luxury sellers. But nothing of the kind: only one third of premium brands are selling their wares online if we are to believe a survey made by the Forrester Research analysts.
The Forrester Research Agency polled 178 luxury manufacturers and sellers. Their greater part turned out to be conservative toward Internet sales.
According to the survey, 94% of luxury companies have their own Web sites, but only 32% placed there online stores. Just 30% have an internal department responsible for e-commerce. 60% said they viewed e-retail as a potential sales channel, but in the nearest time one half of them do not plan to “browse” the Internet. Only 22% are weighing a possibility to set up their own online store in the next year. And 2% confessed they had tried to sell their goods in the Web, but the results were deplorable.
Among those who eschew online sales and do not plan to change their old-time and strictly offline policy are some of the first-rate brands in the industry like Cartier, Versace and Rolex. As a rule, these companies explain their unwillingness to sell in the Web in a usual way: because this does not correlate with their marketing strategy, brand’s image and due to other similar reasons.
That reticence is a big mistake, Forrester says. The growth in online sales shows no signs of easing despite any financial crises. In Europe alone, the Web-market is predicted to reach $246 billion already this year, while in 2011 it is expected to hit $401 billion. In the U.S., total sales are expected to soar to $335 billion in 2012 – a growth of 93% from the last year. Premium brand companies that are selling online expect their total sales to jump 111% within five years.
Though to be fair, it should be said that not all companies explain their offline stance exactly by their Web fears. Eden Hoffman, a regional representative of jewelry manufacturer H.Stern in Russia and the CIS, told RB.ru that her company had decided not to place an online store “basket” right on their hstern.net promo site, since “it would be able to offer full-fledged service and the greatest choice of jewelry to their customers only in brick and mortar stores.” “Jewelry is almost always an emotional purchase,” Hoffman explains. “While choosing, women like to try a thing on in the first place, while in the Web it is impossible.”
Those who subdued their fears and went online now complain about poor results: this channel sells no more than 12% of their goods, they say. Forrester Research’s analysts argue this is their own fault for either they had a poorly outlined marketing strategy or none at all at the start-up stage of their online stores without taking any pains to see into what their audience really needed.
This is evident even by the outer appearance of luxury sites. As a rule they are all glitters and sparkles and saturated with flash-animation, music, videos and other smart gimmickry making them difficult to navigate. However, if the marketing experts of these companies were not that lazy to find out what is really valued by their site visitors, they would see that their customers are just looking for a specific item or information.
Nevertheless, Forrester advises luxury brands to sell their goods online. There is not so much to be done to succeed: you just have to make purchases simple and quick, offer a wide choice to your customer, introduce personalized services (for instance, sending personal letters with invitations to visit your site again) and make customer-to-manager communication easier.
The researchers are sure that savvy luxury brands will eventually adopt Web 2.0 technologies, including social networking.
So far there was no one in Russia to count the amount of branded luxury goods sold in the Internet. However, it is visibly smaller than in the West, experts believe. “In Russia, where the luxury segment is just only taking its shape, online sales appear to be singular instances,” told Maxim Kalyagin, a Finam analyst, to RB.ru. “No wonder. The supply of goods and services in the Runet based on the business pattern proper is ultimately standardized and first of all targeted at mass consumers. In its turn, the sale of luxury goods (jewelry, “designer” clothing, furniture, cars, etc.) implies “exclusivity” of products and a limited or “elite” consumer audience. Besides, the process of choosing such goods means their “personal” perception.” The expert also pointed to the insufficient level of service: for instance, the risks related to delivery of such goods are so far very high.
Maxim Shkadov, General Manager of PO Kristall, considers his company’s Internet operations as an important business component. In his interview to the Rabochi Put daily of Smolensk he emphasized that as a business project their virtual e-store paid back just in three months after its start-up. “However, the project is not only limited to purely commercial profit,” Shkadov says. “We are monitoring visiting statistics. Many people visit our site not so much to buy as to get some information. It is very difficult to overrate Kristall’s Internet resources from the point of view of popularizing our products. Our Web-sales geography embraces all the country, from Kaliningrad to Petropavlovsk-Kamchatski. The most expensive purchase made at the online store exceeded 8,000 dollars. Such large-scale deals are a sign of confidence to Kristall, since to get a jewelry piece, an online customer must pay full sum in advance.”
Asked which kind of diamonds is preferred by Russian buyers, Shkadov says: “The tastes of domestic consumers are quite settled and are marked by eastern raciness, which has nothing to do with propensities of Americans. Russian luxury addicts do not accept “defected” stones with cracks and foreign inclusions. They accept only clear and transparent diamonds of various color hues.”
