Gucci’s parent company Kering is looking to strengthen its hold on eCommerce functions and bring more of it in-house to gain a better control its image and consumer data. According to a report on Reuters, the company is looking make more of its collaborations with third-party external retailers into “online concessions”, where it has more control over its product assortment to their presentation.
The article on Reuters added that currently, the digital team at Kering is over 80 people strong, with the count being only four just two years ago in 2017. Meanwhile, the article also added that including business on third party sites, the company’s total online sales calculated at retail represented about 9.4% of the group’s 2018 revenue.
The group also said in its Q1 financials that it was seeing strong progress with eCommerce penetration globally. Its flagship brands such as Gucci saw eCommerce drive 6% of its retail sales, and Saint Laurent also said its eCommerce growth was indeed accelerating. The results came only months after the company announced that it wanted to strengthen its omni-channel capabilities, late last year. It also outlined its aim to bring in-house is its eCommerce function by 2020 as eCommerce was said to be the fastest growing channel for all Kering’s Luxury Houses.
In a conversation with Marketing, Alva Chew, founder of Stridec Worldwide, said the move was a positive one as business should have more direct control over how its brands and products are positioned, presented and sold across the internet. “Online marketplaces are designed to show a diversity of products and services, which many times go counter intuitive to a brand’s desire to offer a finely crafted product experience. This is true for all brands, and more so for a luxury one,” Chew said. He explained that the promotional nature of online marketplaces may potentially detriment a luxury brand’s perceived value and price point.
Kyriakos (KZ) Zannikos, managing partner at ECHO commerce consulting and founder of Digital Commerce Intelligence added the move made sense as high-end luxury brands are not just selling high-quality products at a steep price, but rather, a personalised, tailored experiences to customers. To ensure the right experience is had, the brands need to have full control and create true customer relationships.
“Kering seems to be making a business decision that’s driven by its intent to control its customer experience better than currently available for it to do so through marketplaces,” he said, adding that pricing at this sector is a “major dynamic” of the image and quality guarantees that luxury are positioning. With all the above said, Kering’s move away from a wholesale model to a concession model could potentially give the company back the control it needs to manage the customer experience and the relationship it aspires to have with customers. Zannikos added:
There’s a reason these brands have their own single stores in the high-street.
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Not mutually exclusive
Nonetheless, Zannikos also explained that many online marketplaces in luxury have now evolved to provide a higher level of personalisation. And given that the luxury sector also splits into a few tiers (with brands which are mid or low tier targetting global mass reach), certain online luxury marketplaces can provide a very effective sales and marketing channel.
There is a big market out there for customers looking for affordable luxury and the online marketplace is a perfect model that play.
But having ones own branded eCommerce channel does not necessarily mean giving up on or rejecting the marketplaces. The two are not mutually exclusive, said industry players.
“It cannot be denied that marketplaces will continue to attract massive consumer traffic and interest and it would be foolish for any brand to not consider leveraging it. And very often, marketplaces are the easiest and fastest channels to enter a new market,” Chew said. By understanding how consumers on marketplaces behave and respond to purchases, a luxury brand can make use of marketplaces to build initial product/brand awareness – especially amongst consumers totally new to the brand – before leading them towards the full brand experience on its own branded eCommerce platform.
Freda Kwok, strategy director at Germs Digital added that luxury businesses can consider adopting a hybrid approach for optimal brand presence. Marketplaces are no doubt still preferred by customers for easy accessibility to a wide range of brands, coupled with regular promotions, discounts and loyalty rewards programmes. But, luxury brands need to give customers a reason to visit their owned platforms, and this can be fulfilled through scarcity and exclusivity, or by providing elevated brand content.
“For example, one way of balancing this could be pushing standard offerings in marketplaces, and limited edition or new collections on in-house platforms (first),” she said. Nonetheless, she added that the tighter controls over digital shopping touch points by Kering will allow for a better craft tailored experience towards each of Kering’s respective brands’ personalities.
“This consistent and distinctive journey is a crucial differentiator in today’s crowded marketplace, and I believe it will serve them well,” she added.
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