It used to be easy to sell luxury goods online. But that has changed.
Luxury e-commerce retailers like Farfetch (FTCH) and MyTheresa (MYTE) boomed during the pandemic. Now, they are experiencing declining demand and losses, with their market values plummeting by some 90% since their IPOs.
The Digital Dilemma
The whole luxury sector is seeing a slowdown in online sales, expected to fall by 2.5% this year, according to Bain & Company. Gucci-owner Kering (PPRUY) alone has seen its e-commerce business shrink 30% this quarter.
That’s not entirely due to shoppers. Post-pandemic, companies have shifted focus back toward physical stores, which tend to attract their most valuable repeat customers.
On top of that, brands like Louis Vuitton (LVMUY) have enhanced their digital presence in recent years, opting for direct control over third-party sales. Some luxury retailers are adapting in-person customer service tactics to the virtual world, dispatching sales assistants to communicate with customers via WhatsApp (META) or Zoom (ZM) for more personalized shopping experiences, even when shopping online.
This strategic shift, combined with the digital slowdown, has been a double whammy for e-commerce platforms.
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