But too many luxury retailers are being held back by old ideas. Today, high-end brands need to gain more control of their relationships with consumers by going direct-to-consumer online.
The primacy of the brand
Recently, ecommerce provider Digital River commissioned a study of 1,000 consumers. Our research revealed a startling fact: when shopping online, 89 percent of shoppers visit the website of the brand they’re considering. This fact should give retailers pause. Even in the ascendancy of online marketplaces like Amazon and Taobao—even in the era when much shopping takes a micro-moment rather than an afternoon—the vast majority of online shoppers take the time to go straight to the brand when they’re looking to make a purchase.
There is no substitute for the enduring luster of the brand itself. That’s especially true for consumer luxury goods, where brands are particularly known for their prestige, status and quality. Now here’s a good question for upmarket brands: If eight or nine out of every ten of your prospective online customers visit your website, what do they find there?
Many makers of fine goods like accessories and high-end electronics have been slow, some even reluctant, to seize the direct-to-consumer ecommerce opportunity. Far too often, a consumer will encounter a brand website that amounts to nothing more than a glossy catalogue of unpurchaseable products. Making an actual sale is out of the question.
This high-end resistance to direct ecommerce is short sighted. Consider another sobering finding from our research. While almost nine out of ten consumers will visit your website when shopping for your products, 31 percent say they will change brand allegiance if they can’t buy directly from you. If you’re not selling your products directly to the consumers who visit your website, you’re losing about one out of every three potential online sales to a competitor. Brands are powerful—so powerful, in fact, that brands that won’t sell directly lose sales to other brands that will.
The heavy cost of making a sale
Sales aren’t even the most important benefit of direct-to-consumer ecommerce. If you don’t sell your products on your own website, you’re not only losing revenue to third parties: you’re also losing customer insights, customer relationships and customer loyalty.
To see what I mean, consider the experience from your customer’s perspective. Someone who’s interested in your product visits your website, but can’t buy what they want directly from you. About a third of the time, that customer will run straight into the arms of a better prepared competitor. But even if your customer decides to stick with your brand, you’ve left them little choice but to click away to a channel partner or a marketplace like Amazon. Now your customer can buy your product, if they still want to—but that same product gets presented to them in an endlessly scrolling parade of competing items from other brands – or worse counterfeit knock-offs of your products – all of which (your customer is informed) they “might also like.”
Even now, you still could make the sale. After all, many luxury accessory and electronics brands have been getting along on such third-party online marketplaces for years. But that kind of sale comes at a heavy cost. With third parties, you have little or no control over how your brand is presented and experienced. More importantly, you’ve lost the opportunity to build and develop a loyal relationship with a consumer who wanted to buy your products directly from you to begin with. Isn’t it time to let them?
Myths about high-end brands and digital commerce
To help clear away the obstacles to direct online selling, I’d like to strike down a pair of outworn ideas that are holding back some of the world’s most prestigious brands.
Myth: Direct online sales aren’t for luxury brands.
For many luxury brands, there is a fear that direct online selling to customers will somehow cheapen a brand that has taken great effort—centuries of artisan craftsmanship, or millions in painstaking research and development—to build. That’s why some high-end brands believe their websites should be nothing more than catalogues of unpurchaseable goods. But our research shows this is not the case.
Far from diminishing the luxury allure of a high-end brand, direct online sales preserve, deepen and even protect the brand experience. Consider the alternative: pushing online visitors to third-party retailers or marketplace sites leaves your brand vulnerable to lax or absent adherence to your brand guidelines, uncontrollable customer experiences and the possible introduction of counterfeit merchandise, which has been estimated to cost the global economy upwards of $250 billion a year.
By selling your products on your own website, on your own terms, you preserve the equity you’ve built in your name and reputation—and build intimacy and loyalty with your customers, which can fortify your brand for years to come. You can provide the convenience that only online shopping offers while still extending the white glove service your clientele have come to appreciate from your high street shops or other offline settings. And you can protect your customers from counterfeit merchandise, ensuring your site is the default destination for authentic items through strong control over your inventory and distribution channels.
Myth: Ecommerce is too costly and distracting for high-end brands to consider.
The most prestigious and sought-after brands rise to the top of the market by making exceptional products, not by making websites. Building the infrastructure it takes to sell products online directly to consumers is, in fact, a complex and demanding enterprise, and luxury retailers are right to be wary of taking it on. For emerging and traditional luxury brands without an established distribution channel, working with an ecommerce partner to launch online operations can be the most cost efficient path to garner the attention required to kick sales into high gear.
Fortunately, luxury brands can reap the benefits of direct online sales, efficiently and quickly, without mounting an expensive and distracting effort to master ecommerce in-house. The right ecommerce partner can build an online store surprisingly quickly, in a way that shields your business from risk—while allowing you rich insights into your customers’ intentions and behaviors, and guarding the luster of your brand.
At Digital River, our empirical research corroborates our long experience: for consumer brands, particularly at the upper end of the market, there is no substitute for selling online directly to consumers. For a reasonable investment, you can reap lasting rewards—better sales, total control over your brand experience, deep customer insights and rich opportunities to build lasting loyalty. And deep loyalty, after all, is what high-end brands are made of.
You can download a copy of Digital River’s market report, “Are all your customers being served?”.
Marco Vergani is Vice President and General Manager of Europe and the Middle East at Digital River, the leading global provider of Commerce-as-a-Service solutions. Based in Digital River’s London office, has led customer-focused international sales operations for more than 25 years.
