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Multi-brand retailers lead the luxury ecommerce market, representing four of the top five vendors in the space, according to a new report by Technavio. When shopping online, the luxury consumer prefers to shop in a multi-brand environment, and this inclination is expected to drive growth of luxury ecommerce through 2019, according to "Global Luxury Etailing Market 2015-2019." Online department stores have frequently been faster than single brands at adopting services such as free shipping and easy return policies, simplifying the ecommerce experience and making consumers more comfortable buying online. "The global luxury etailing market is witnessing intense competition among the existing vendors and the new entrants," said Vijay Sirathi, a lead analyst for retail goods and services at Technavio.
"The intense competition constitutes significant risk factors in vendors' operations," he said. "Problems in transportation and logistics pose a barrier for foreign players to enter the market. Customs clearance is another challenge faced by foreign players.
"The vendors compete on the basis of customer service and experiences online, which includes compelling price and value, fashion newness, quality of products, unique content, selection, convenience, technology, order fulfillment and personalization. The vendors are trying to capitalize on the inclination of shoppers to socialize on social media while they exchange product-related information.
"Therefore, to survive and succeed in the intensely competitive environment, it becomes imperative for the vendors in the market to distinguish their products and service offerings through a clear and unique value proposition."
Heating up According to Technavio, in 2014, global luxury ecommerce was valued at $21.43 billion. The market is expanding at a compound annual growth rate of 14.28 percent, and Technavio projects it will reach $41.76 billion by 2019.
There is high competition between established vendors and newer entrants, all of whom are selling similar merchandise. To differentiate themselves, retailers are rolling out services and experiences online, including content, product selection and personalization. Those with a specific, defined value proposition for consumers will be the ones who succeed in the increasingly crowded space. Technavio identified the top five vendors in luxury personal goods ecommerce, ranking them based on their contribution to the total revenue in the market. At the top of the list is Nordstrom, which operates ecommerce for its namesake store chain, as well as its off-price outlet Nordstrom Rack, flash sale site HauteLook and menswear service Trunk Club. The retail group has an 11.67 percent market share.![Nordstrom Anniversary Sale](https://americanmarketer.com/wp-content/uploads/2015/10/Nordstrom-Anniversary-Sale.jpg)
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As department stores find themselves facing increasing pressure from ecommerce-only players, a seamless omnichannel approach will enable them to remain competitive, according to a recent report from L2.
With declining traffic and loss of market share in a more crowded space filled with mono brand boutiques and large ecommerce players, department stores have to leverage their in-store capabilities with their online channels to capture sales from consumers seeking a seamless, hassle-free shopping experience. From opportunities to upsell at point of return to allowing for varied purchase paths, bricks-and-mortar retailers can use their physical locations to their advantage (see story).
Currently, ecommerce accounts for a small percentage of luxury sales, but that amount is growing.Only the United States and China will account for more sales in the luxury industry than collective ecommerce by 2025, according to a McKinsey analyst at the Financial Times’ Business of Luxury Summit in 2015.
Back in 2009, McKinsey had capped its ecommerce prediction at 2 percent of sales, or $4 billion, for 2015. The actual figure is around 6 percent, or $14 billion, and the research firm has accordingly reassessed its view of digital channels, anticipating robust growth for the next decade and beyond (see story).
Apparel and accessories are the biggest contributors to luxury ecommerce growth, with strong demand from newly affluent consumers in emerging markets such as China and Brazil. "The growth of online luxury goods sales is rapid across the forecast period," Mr. Sirathi said. "Chinese consumers are the largest and fastest growing nationality for luxury with their spending amount abroad being more than three times their local spending in 2013. "The demand from Chinese customers and mature customers in the U.S. has helped to build up growth," he said. "With a cross-pollination of luxury spending, there is a shift of focus on consumers from the earlier focus on their local tastes and trends that have taken a backseat."