Ecommerce: NYTimes gets it wrong in the (online) luxury market

Story in the NY Times on the booming luxury market and online shopping–only thing is reporter misses some KEY points on ecommerce and the high end market.
What’s true in the story:

  • More and more people are shopping online, especially for holiday gifts.
  • Many shoppers don’t live near high-end stores.
  • Online department stores can meet the need for exclusive goods, without much price resistance.

Horyn says: “For luxury retailers, the challenge is how to leverage their prestige without appearing snobbishly out of touch. Neiman’s, for instance, is developing custom home pages. Tiffany’s Web site shows how engagement diamonds are cut and set, believing that consumers want more for their money than the luster of a name. “

All true, but what the story misses:

  • Although high-end department stores offer luxury goods online, they aren’t making big money on a regular basis from online shopping. Revenues at NeimanMarcus.com and Saks.com are a small part of their total, and these sites are considered marketing more than a revenue driver.
  • Luxury goods makers generally have a strong resistance to selling online because of issues of branding and consumer experience. Prada, which gets lots of play in this story, doesn’t offer merchandise on its web site–and while Amazon partner Raffello has Prada product on their site, a Froogle search on Prada skirts shows just 59 results, as opposed to 159 for a DKNY skirt query (and even DKNY doesn’t sell direct to consumer online.)
  • There is a limit to the kind of high-end merchandise a shopper will buy online–home and style goods, handbags, even shoes do well. But few women are going to buy expensive dresses, pants, coats and items that require fit (and touching fabric/texture) online unless custom fit mechanisms improve–but the high-end ain’t there yet (cept for Nike, of course.)
  • The smaller designer outlets– Net-a-porter.com, Vivre.com, Yoox, Girlshop.– focus as much on trendy merchandise and smaller designer as luxury brands–and while their businesses are growing, the margins are cruel.