What is luxury e-commerce?

E-commerce is an established feature of the retail marketplace. How is this evolving for specialist brands with luxury goods and services?


The rise of e-commerce has changed the retail marketplace for consumers and businesses. The fact companies like Amazon can exist with such a small number of physical stores is testament to this.

However, not all brands or sectors of the marketplace have so readily embraced the technology. In the past, luxury and designer goods retailers didn’t exhibit the same desire to compete in the online space. Today, their priorities are changing as consumers look to the internet for their shopping needs.

This trend is prevalent across the globe, with the UK’s Office of National Statistics finding that online shopping is continuing to grow across all brands and markets. According to the organisation’s research, e-commerce spending in September rose 15.2 per cent over the same time in 2014 and 4.5 per cent over the previous month.

Luxury e-commerce defined

Broadly speaking, luxury e-commerce still follows similar trends to regular online shopping developments. The difference between conventional and luxury retail occurs in the type of goods and services sold. According to a report from Deloitte, it’s difficult to define what constitutes a luxury good or service.

Despite this, the consultancy stated the definition involves a combination of exclusivity, established premium branding and high price points – three features that challenge the cheap availability often promoted by online stores.

How will these trends develop?

As with the rest of the e-commerce industry, the luxury sector is expected to see notable growth. McKinsey & Company suggested that online sales of luxury goods and services could reach its tipping point over the next five years, with these purchases gathering significant momentum.

The organisation found that, currently, luxury brands account for just 6 per cent of all e-commerce revenue, a number that is expected to double to 12 per cent by the end of 2020. In a decade’s time, McKinsey & Company’s forecast expects this to reach 18 per cent, or $106 billion per year.

These trends are expected to remain fairly stable for each individual brand. McKinsey & Company suggested that luxury e-commerce demand is likely to follow an S-curve in most cases. The three stages that comprise this evolution include:

  • Ramp-up: The initial investment in e-commerce and investigation of its potential.
  • Scale-up: E-commerce operations are now a notable contributor to total revenue.
  • Plateau: The 20 per cent threshold generally represents the end of e-commerce revenue within a brand.

Which markets will be most receptive to luxury e-commerce?

Deloitte investigated the global market for luxury goods in general, finding that the Asia-Pacific (APAC) region has a disproportionate level of demand for these products. Surprisingly, Chinese consumers aren’t leading these trends. While the nation is still the world’s third-largest consumer of luxury goods, it’s second in this part of the globe.

Instead, Japanleads  APAC countries in luxury good consumption, and holds the No. 2 spot in the world behind the US. However, Deloitte suggested the economic factors for consumers in the area may reduce growth in this market.

The consultancy also discovered that e-commerce trends are changing the way luxury goods are sold to consumers in these markets. In 2013, 5.3 per cent of all luxury good sales occurred over the internet, with Deloitte expecting this proportion to increase at a compound annual growth rate of 23 per cent.

The UK is currently the fastest growing market for luxury e-commerce, tracking well above the global average with 13.6 per cent.

Deloitte also pointed out this drive is mostly consumer created, as luxury brands were hesitant to merge their existing ideals of exclusivity and prestige with a service that often promotes the opposite.

There’s also a split within the luxury e-commerce market that dictates consumer responses. Deloitte acknowledged that aspirational luxury brands often possess online stores that outperform their physical counterparts.

Other options for luxury brands looking to retain their opulent status include only selling goods that are now out-of-date, preserving the exclusivity and prestige of their existing product lineup.

What else will change the consumer experience?

Google investigated the moment-to-moment experiences of the shopping journey that affect the way consumers respond to brands and their products.

Dubbed micro-moments, these events represent the instances that are most important to shoppers, especially digital ones. Google found that, even when consumers are in a company’s physical store, they are still likely to connect to e-commerce platforms or other sites via mobile devices to validate their decisions.

Up to 82 per cent of people consult their smartphones while shopping in physical stores, cementing the role e-commerce has in influencing consumer behaviour.

According to Google, the key motivators in these cases are the need for immediate action and the demand for relevant information. Mobile technology is capable of satisfying both of these requirements, making them an essential step on the customer journey that businesses need to prepare for.