Forget digital first. Stores first, digital second is the future of luxury retail.
Consumers have migrated to e-commerce at an unprecedented rate since the novel coronavirus pandemic began. One major luxury brand, however, is standing by the physical store as the future of retail.
Jean Jacques Guiony, chief financial officer of LVMH, recently told CNBC that the in-store client experience cannot be matched online. He believes the future of retail will be mostly in brick-and-mortar, with online complementing the experience. LVMH is the owner of Louis Vuitton, Marc Jacobs, Christian Dior and a number of other luxury brands. It recently acquired Tiffany’s for $15.8 billion.
Luxury retailers were slow to jump into e-commerce from the outset due to concerns over the internet compromising the exclusivity of the product. By 2018, however, brands were embracing special luxury-targeted platforms to cater to newly affluent, tech-savvy Millennials. Estimates have placed online as reaching up to 25 percent of luxury sales by 2025.
Some see the reopening of physical stores as inspiring a consumer rush for real-life shopping after more than a year of social isolation, which could move some luxury spending back to the physical world.
Data from May of 2021 reported on Fashion United indicates that the majority of U.S. shoppers are still making most of their purchases in-store, with 81 percent of Gen Zers enjoying purchasing at physical locations.
Even before the pandemic, luxury department stores were experimenting with new ways to make the in-store experience unique. Nordstrom, for instance, launched its Nordstrom Local concept, a physical showroom which carries little or no inventory and pushes digital fulfillment.
Nordstrom has said that more than half of its sales made online begin in-store, and a third of its online sales are tied to an in-store experience.
Saks began seeing a similar correlation between brick-and-mortar store locations and digital sales as pandemic restrictions lifted. At this year’s virtual NRF Big Show, Mark Metrick, president and CEO of Saks, said that when stores began to open again, there was a corresponding uptick in digital sales. Hudson’s Bay Co., which owns a controlling interest in the retailer, split the online and physical operations of Saks Fifth Avenue earlier this year to boost the individual value of the business. It recently announced a deal to do the same with its Saks Off 5th business.
- Louis Vuitton-owner LVMH believes the future of retail will be mostly in-store – CNBC
- The post pandemic shopping habits that are here to stay – Fashion United
- 1stdibs CEO Discusses Pandemic-Fueled Boom in Luxury e-Commerce – Observer
- NRF 2021: Saks doubles down on its luxury disrupted strategy – RetailWire
- Luxury brands are racing to embrace e-commerce – RetailWire
- Nordstrom’s Local concept needs work – RetailWire
- Nordstrom focuses on seamless shopping as stores reopen – RetailWire
- Richard Baker touts HBC’s value after deal to spin out Saks Off 5th’s online operations – Financial Post
DISCUSSION QUESTIONS: Do you agree with LVMH’s position that stores are the future of retail and that digital commerce is only a complement to the physical experience? Do you see luxury retail, in particular, remaining more tied to physical stores than other retail verticals?