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Hard Luxury Awakening to E-Commerce Opportunity

Many high-end watches and jewellery brands are still hesitant to sell online, but that’s slowly starting to change.
Arizona Muse stars in Boodles' Autumn/Winter 2017 campaign | Source: Courtesy
By
  • Sarah Shannon

LONDON, United Kingdom — Even as luxury fashion's last e-commerce holdouts, like Chanel and Céline, say they will start to sell core products online, some high-end watches and jewellery brands still believe consumers won't spend on "hard luxury" items they can't touch and feel.

But e-commerce is one of the few growth opportunities in a stagnant luxury market and there are signs that attitudes are shifting.

“It is currently one of the big topics for hard luxury. We talk about 9 percent of luxury good sales are online, but for hard luxury its 4 or 4.5 percent and that includes jewellery, which is much bigger than watches,” said Rene Weber, a watch industry analyst at Swiss bank Vontobel. “If we talk about real high-end watches online, it is almost non-existent. A lot of people started last year — the first brands seen on Net-a-Porter and their own websites, but it’s really just a starting point.”

Some luxury watch brands still view e-commerce as the home of counterfeit goods and unauthorised “grey market” sellers, who buy stock that authorised dealers can’t shift and sell at a discount.

Hard luxury brands, particularly in watches, are also heavily reliant on wholesale and have relatively small direct-to-consumer businesses, despite the advantages of higher margins and greater control over customer experience. British watchmaker Bremont was the first luxury watch brand to sell on Yoox Net-a-Porter’s men’s site Mr Porter back in 2013. But the watchmaker has just four of its own boutiques versus 185 authorised dealers.

“The thought of cutting those [wholesale] guys out is a big call to make. We feel our retailers are doing a very good job and I don’t want to be competing with those retailers [online] to some extent,” said Bremont co-founder Giles English. “But ultimately there comes a point where you want to give the client what he wants and if they want to buy direct from you online, you should offer it and I think a lot of brands will slowly go that way. But the big ones, we’re all waiting to see which way it goes.”

High-end service has been key to luring big brands to online retailers.

Indeed, some of the best-known brands in the watch industry, like Rolex, have a wide wholesale network and still do not sell online. Others are coming around, like IWC Schaffhausen, the luxury Swiss watchmaker owned by the luxury conglomerate Richemont, which launched on Net-a-Porter and Mr Porter last November. Richemont, Yoox Net-a-Porter's biggest investor, is testing e-commerce on Net-a-Porter and Mr Porter with many of its brands, including watchmaker Panerai and fine jeweller Piaget.

“We have had great interest so far, with very promising sales,” Panerai chief executive Angelo Bonati said of its first-ever online offering: 25 timepieces for sale on Mr Porter. “The evolution of the international market in the digital segment is facing a new era where qualitative e-commerce platforms are growing fast and building their own reputation.”

High-end service has been key to luring big brands to online retailers like Yoox Net-a-Porter (YNAP) and China's JD.com. YNAP has made no secret of its intention to tap hard luxury with a target of €100 million (about $116 million) of jewellery and watch revenues by 2020. The appeal for brands lies in the company's high-net-worth clients — just 2 percent of customers account for 40 percent of revenues — as well as the white-glove services like express delivery and personal shoppers that its sites offer.

Earlier this year, luxury jeweller Chopard opened its first e-commerce offering in China on JD.com, which employs suited couriers driving electric cars to deliver purchases within hours. The move will "let the young clients who love online shopping know more about Chopard," said Tasso von Berlepsch, general manager of Chopard China.

By contrast, jewellery brands have been quicker to embrace digital sales and have prioritised their own websites. Cartier launched e-commerce in the US in 2010; Chopard followed in 2012; while Tiffany has been online since 2000, though the American jeweller’s online revenues have stagnated at 6 percent of net sales for the last three years.

“While we find that more and more of our clients begin their journey online, most ultimately make their way in store for the luxury experience and guidance of a knowledgeable sales professional,” said Philippe Galtié, senior vice president of global sales at Tiffany.

Jewellery brands have been quicker to embrace digital sales and have prioritised their own websites.

Even among American millennials, who frequently shop online, department stores are the most favoured channel for buying diamond jewellery, followed by independents, specialised multi-brand chains and then e-commerce, according to consultancy Bain & Company. “Diamond jewellery is still a very emotional purchase, it requires personal touch points and a story behind it,” said Olya Linde, a partner at Bain.

E-commerce has typically been popular for lower-priced products, but analysts say that’s shifting. British jeweller Boodles says five years ago the average price point online was about £1,000, while today it is £3,000. Yet the offline experience remains critical. “The excitement about a getting a real customer in a shop and our staff getting to know them will always win over e-commerce because it becomes a real relationship,” said James Amos, marketing director of Boodles, which does about £70 million in annual sales. Just over 1 percent of this come from e-commerce, thought Amos predicted this number could hit 2 or 3 percent.

While not all brands are embracing e-commerce with vigour, many are starting to show prices online and which store holds their stock, as well as engaging people with live chat-based customer service representatives and social media. The highest end of the watches and jewellery market may never move online, but e-commerce could reach 20 percent of total hard luxury sales by 2025, said Vontobel Bank’s Weber.

“It is still the case if you want to buy a 100,000 Swiss franc watch you probably will not buy it online, but we will see more prices directly on the internet and we will see more [transactional] websites available. We’re slowly seeing a change in the industry.”

Editor's Note: This article was revised on November 7, 2017. A previous version of this article misstated that IWC Schaffhausen does not operate its own direct e-commerce business. This is incorrect. IWC Schaffhausen has direct e-commerce in the USA and in China, with further roll outs planned.

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