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Luxury shoppers flock online, but stores aren’t going out of style
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Luxury consumers shopped online more than ever in the past year, forced by coronavirus-related restrictions to stay away from city-center stores and airport duty-free concessions. But while the shift toward e-commerce might seem to herald the dominance of the digital, the physical store could still have a role to play in the future of luxury.
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Since the coronavirus pandemic began its spread across the globe a year ago, luxury-goods stores have had to roll down their shutters for a good part of the year as governments attempt to limit contagions. International travel, too, has been curtailed on a massive scale–and with it, the big business of luxury travel retail.
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Conversely, e-commerce sales have skyrocketed, with many if not most brands reporting increases in online revenue.
Online sales at Gucci's parent company Kering, for example, more than doubled in the third quarter, the last period it reported on. They rose by two-thirds at German premium-apparel company Hugo Boss AG in the same period, and increased by triple figures at Swiss group Cie. Financière Richemont SA in the second half of its fiscal year. As a whole, online luxury sales almost doubled in 2020 to account for 23% of the market, Bain & Company said in a recent report with Italian trade association Altagamma.
Of course, the context for such soaring e-commerce growth is a pandemic-stricken year that saw the luxury sector contract by some 20% overall. But even when normality returns, the trend toward a greater prevalence of e-commerce looks indelible. Bain now sees online channels accounting for a third of total luxury sales by 2025, from 12% in 2019.
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With the effects of the pandemic continuing to be felt in 2021, RBC Capital Markets analyst Piral Dadhania doesn't expect online penetration to take a step back this year. "There's likely to be inertia in terms of consumer behavior in returning to stores before people have vaccines," he said.
Some players have proved better prepared than others for the rapid acceleration in online sales. Big fish such as French conglomerate LVMH Moët Hennessy Louis Vuitton SA have leveraged their size and the strength of their brands to weather the pandemic well, while smaller players, especially those lacking a strong online presence and overexposed to the more tourist-reliant European markets, have been left flailing.