Luxury brands are converging in their online product and pricing strategy, according to a report from Contactlab and Exane BNP Paribas. The battle to retain exclusivity and personal relationships with customers buying online is seeing luxury brands increase their online product offering and pricing quite dramatically. Fendi, Louis Vuitton, Saint Laurent, Ferragamo, Moncler, Bulgari, and Cucinelli all increased their online product offer more than 20% in FW 2016/17.
Last week, Coach shares jumped by the most in 15 months following the brand’s decision to pull its products out of more than 250 department stores last summer, and kept high value thanks to the breaking news of the acquisition of Kate Spade & Company, publicized on Monday. The decision underlies the intention of the management to create a third pole of luxury with a strong American heritage.The ubiquitous access that e-commerce gives to a luxury brand’s products, in its affect in driving consumers away from in-store shopping, could be a leading factor in causing a drag on luxury profits. Contactlab and Exane BNP Paribas’ latest report, Online Offer Dive & Pricing Landscape (May 2017), reveals the shifting product and pricing strategies of 32 luxury brands as they seek similar success.
From 2014-2016, soft luxury players such as Prada and Ferragamo have increased their Shoppable Offer the most, whereby thewhole brand catalogue is available for online shopping, but not all products are available to purchase online. In doing so, they are able to capitalise on generating consumer interest, by encouraging in-store browsing and purchasing. Burberry, however, have taken a bolder move to gain back exclusivity, by cutting secondary labels like Brit.
Gucci has also decreased the quantity of their products offered online. Gucci has directed this reduction towards their two core categories: Bags and Soft Luxury goods. On the other hand, Gucci significantly increased the offer in RTW (+60%) and non-core categories like Jewellery and Watches. Michael Kors, followed closely by Louis Vuitton, offer the broadest Bags offer.
Similarly, there is no set trend for brand pricing, with the average brand median price increasing around 3%, and entry prices are almost flat. Bulgari, Zegna and Hermes have significantly increased both median and entry prices. In contrast, Dolce & Gabbana,Tiffany and Burberry have reduced both median and entry prices, making their products more affordable. As a result of this, their products are more accessible to the consumer population. Among mega brands, Louis Vuitton and Gucci prices continue to converge.
Marco Pozzi, Senior Advisor at Contactlab, comments: “Maximum online prices for products that can be bought online have increased from $150000 in FW15 (such as a Tiffany necklace) to $181000 in FW16 (Cartier watch). However, 11 brands out of 32 offer products below $20! The online channel, then, is ideal to capture “aspirational” clients.”
Pozzi continues: “Ralph Lauren, Tiffany and Hermes have overall entry prices below $150, and are masters in category segregation pricing. Even “luxury” brands, such as Chanel and Dior, have very accessible entry prices at $38 (Chanel) and $28 (Dior). Both these prices are close to premium brand Swatch, whose entry price is $38”.
“In addition, consumers buying luxury goods both online and in-store spend around 50 percent more per year than in-store only customers. With this in mind, brands must continue to find ways to increase digital engagement with their customers, whilst retaining personalisation and the exclusive touch that defines them as a premium shopping experience.”