Luxury Goes Online
Though consumers are slowing their spending, when the global economy stabilizes, luxury online retailers may be the first to benefit.
That’s because, though late to jump on the e-commerce bandwagon, luxury goods companies cater to the growing number of ultra-affluent shoppers who prefer to buy their Dolce & Gabbana dresses, Louis Vuitton handbags and Hermès ties online.
That’s according to a June 2008 study released last month by Google in conjunction with Stevens, PA-based luxury-market research firm Unity Marketing. Both aimed to determine the impact of the Internet on shopping behavior.
And as a company that relies on revenue from search ads, Google also wants to prove to luxury retailers that advertising online this holiday season is worthwhile.The study says that those who prefer to shop online are richer, younger and spend more on luxury goods overall than those who prefer to shop in brick-and-mortar stores.
This is key to online retailers that rely on the rich. Though the Dow Jones Industrial Average has dropped below 10,000 the ultra-affluent are still expected to spend.
Still, spending—both online and off—is about to drop. On Oct, 8, Discover Financial Services released the results of its U.S. Spending Monitor, which dipped for September. Of the 15,000 Americans surveyed, 56% rated the economy as poor, and nearly 70% think it’s getting worse. And 51% are expecting to spend less on discretionary purchases in the next month. Those surveyed were chosen randomly.
Although the Google/Unity Marketing survey was conducted before the stock market’s historic slide, those behind it believe it still reflects the agenda of the ultra-affluent, or those with a net worth of $1 million or more, plus a yearly income of $250,000 for married people and $175,000 for single people. The study surveyed 1,000 people, aged 24-64.
They were then divided into two groups: those who made their last luxury goods purchase on the Internet and those who made their last luxury purchase in-store.
Somewhat surprisingly, those who last partook in Internet shopping earned more per year on average—$1.3 million, compared with $460,000 for in-store shoppers. Their average net worth was also much higher: $21.7 million for online shoppers, compared with $3.4 million for in-store shoppers.
They were also younger—40.3 years old, on average, compared with 44.3 years—and they spent more on luxury goods within the last year ($114,632 on average for online shoppers, compared with $23,000 for in-store shoppers).
Luxury goods expert Pam Danziger, president of Unity Marketing, says the disparate numbers have a lot to do with efficiency. Presumably, the richer you are, the less time you have to spend shopping. Doing it online is more convenient. “Time is the ultimate luxury,” says Danziger.
Department store Saks Fifth Avenue is so confident in its ability to grow online that it has signed a deal with New York-based E4X—a company that develops easy-to-use Web systems for brands that want to begin selling goods in countries other than their own—to launch a Saks e-commerce site in Canada.
Other luxury retailers on the forefront of e-commerce, according to Danziger and her partners at Google, include Christian Louboutin—designer of those coveted red-bottom shoes—and knit suit maker St. John. Louboutin recently moved one of his personal appearances–very popular among devotees–to his online boutique run by SaksFifthAvenue.com. And St. John keeps its followers busy with an online store run by Neiman Marcus, and also includes lots of insider knowledge on its Web site, ranging from runway clips to an online lifestyle magazine published four times a year.
As Dean Baker, co-director of the Center for Economic and Policy Research, says, it’s hard for those making $60,000 a year to cut back on consumption that much. But for those with a salary of $1 million a year or more, they have the ability to trade down: from business class to economy, Louis Vuitton to Coach. “They have room to fall.”
Joelle’s tips:
The source: Why Spending Online May Bounce Back First Lauren Sherman, 10.08.08,
Related Articles: This Holiday Season Luxury Shoppers Will Take the Lead in Internet Shopping
On Line Luxury Websites: Â Net-a-porter /Â Vivre / Blue Fly
