What is the future of luxury e-commerce?

The luxury retail sector is set to make a comeback after a lull during the pandemic, with reports indicating that the market is expected to grow annually by 5.40 per cent (CAGR 2022-2027). Interestingly, there has been a shift in luxury retail after the pandemic, with online sales of luxury goods on the rise. 

Luxury retailers have historically been hesitant to move online but many transitioned to the e-commerce space during the pandemic. Two years on, many luxury retailers are happy to make their online transition more permanent, following a surge in online customers, and buoyed by predictions that sales from this segment could steadily rise in
the future. 

According to research, Generation Z and Millennials will account for 45 per cent of the global personal luxury goods market by 2025. Consumers are increasingly expecting to interact with their favourite brands online, and it is predicted that 25 per cent of luxury purchases will be made through the web in the next three years.

Consumers are also more demanding than ever, whether online, in-store, or a mix of the two. In response, retailers are revamping their efforts to create a seamless omni-channel supply chain that integrates ordering, storing, delivery and returns, no matter where the product is purchased. 

But that isn’t enough. Retailers must also rethink their supply chains with the goal to build a portfolio of options, risk tolerance and capabilities to support a cost-effective, flexible supply chain that meets consumers’ ever-increasing demands.

Luxury goes digital

As customers increasingly explore online mediums to shop for luxury fashion, businesses are turning to digital platforms, including social media to market luxury goods. A strong digital team that knows their products well is vital for successful e-commerce presence and resultant sales.

Equally, meeting logistics needs of customers efficiently in the high-end e-commerce space is critical, now more than ever. Providing a consistent luxury experience to discerning shoppers requires seamless logistics to deliver competitive advantage, global expansion of luxury retail, multi-channel delivery and a personalised consumer experience. 

Many logistics providers offer distribution and e-fulfilment services to drive value and customer satisfaction, however, given the nature of the luxury industry, there is a need for high-quality packing, shipping, as well as superior track and trace technology from order through to delivery.

As price and margin pressures in developed economies are pushing retailers to rationalise inventory levels, cut transportation costs, and source lower-cost goods from around the world, there is a need for reliable and cost-effective logistics with a wide geographical reach and evolved capabilities when it comes to deploying technologies such as GPS tracking and RFID, especially in the fashion retail space. 

Optimising the customer experience

It takes a lot of people behind the scenes to orchestrate truly great customer experiences that generate memorable outcomes. This couldn’t be truer for the luxury retail industry, which relies on bespoke services. That means information is just as important – possibly more – than the flow of goods. Personalisation is becoming more important than ever. Even an iconic brand like Chanel, which does not sell online conventionally, has partnered with online luxury retail platform Farfetch for in-store tech innovation to enhance the customer experience.

We work with online luxury retail platforms like Farfetch to ensure that high value items can be fulfilled from a variety of locations. Its global presence provides companies with the opportunity to unleash innovation to the fullest and explore new and exciting markets around the world 

When it comes to the supply chain, deep local knowledge and experience are critical. Together with substantial capabilities, resources and automation, it can drive better deliveries and customer satisfaction. The logistics industry is already moving from traditional warehousing to automated processes to boost throughput, cut costs, and meet growing customer demand. 

Logistics robots are also diversifying and achieving proficiency that matches and exceeds human capabilities. This can be a huge boon for luxury fashion, as it looks to gain more traction in the future. A more robust supply chain and a customer-centric approach will ensure that online luxury retailers move beyond their gilded physical stores and reach their intended audience. 

Olivier Laurent is the country manager of DHL Global Forwarding Abu Dhabi