LUXURY E–COMMERCE: THE CHALLENGES FACING ONLINE SHOPPING
BY NICOLE ZENIOU
KEY ΤΑΚΕΑWAYS
The Era of Online Disruption: Luxury e-commerce platforms are navigating a challenging and transformative period, reshaping the digital landscape.
Evolving Consumer Preferences: Shoppers are increasingly price-conscious, with shifting values driving their purchasing decisions.
Revival of Physical Retail: The allure of in-person shopping is making a notable comeback, challenging the dominance of digital.
The Decline of the Multi-Brand Model? Could this mark the end of the luxury multi-brand platform boom?
In the age of online disruption even though luxury brands and marketplaces have been working hard to improve their digital presence as e-commerce providers, macroeconomic pressures and rising prices have seriously impacted their selling opportunity amid the market slowdown. Enter, a tumultuous period for pure-play luxury marketplaces with challenges at every turn.
Consumer behaviour has changed
According to the ninth annual State of Fashion report by McKinsey & Company and BoF Insights, The Business of Fashion’s data and advisory team, the economic and geopolitical challenges combined with shifts in customer values and rising costs reveal that luxury e-commerce is in for a turbulent 2025.
One of the key challenges includes consumers’ shifting luxury spending habits which have significantly changed as they have become increasingly price-sensitive. According to the BoF-McKinsey State of Fashion 2025 report, lack of consumer confidence and appetite to spend was cited by 70 percent of fashion executives as the biggest concern for the year ahead. Shoppers seem to be opting for and adopting more cost-conscious behaviours and they are also prioritising value (sans the surprising rise of dupes). All the whilst, taking into account the overarching general consensus that luxury no longer means quality - brands are now called into question and are asked to prove they are worth the splurge. To note, in 2022, consumer confidence indexes in the US, Eurozone and China hit their lowest levels since 2005, whilst consumer confidence in China hit record lows in August 2024.
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Traffic on online luxury marketplaces has thus significantly dropped. For one more reason. Post-pandemic shoppers seem to be returning to pre-pandemic levels of in-store shopping experiences and are spending much less time on cluttered digital wishlists and overloaded carts. Physical retail is thus gaining momentum as luxury marketplaces struggle to stay afloat. Their share prices have plummeted - as falling demand and rising customer acquisition costs rally - but also due to heavy discounting which eroded profits. The aftermath? Some of the biggest names in luxury e-commerce who once dominated the market, to include Farfetch, Matches and Net-a-Porter crumbled and imploded under financial strain. Has the luxury e-commerce bubble burst?, asks The New York Times.
Reshaping online luxury
According to Vogue Business’s The Future of Shopping podcast series featuring former Matches, Farfetch and Net-a-Porter exec Elizabeth Von der Goltz, there is a way out of the downfall. A downfall she justly attributes also to the increase in fierce competition in the digital space with more multi-brand marketplace models and platforms coming into existence, the rising costs of doing business online, the high return rates, the high costs of digital and brand marketing and the pressure to grow. The cure, among other, Von Der Goltz suggests would be a focus on a seamless online service and building an emotional connection with the customer via a more personal touch. For example, establishing a one-to-one connection via personal shoppers, physical events and pop-up shops - as a way to express the marketplace’s visual language but also invite the customer into the brand increasing customer loyalty. Also, she mentions that those who survive in an era where there is an endless selection of luxury sellers as well as brands, are those who focus heavily on curation. They offer and continuously invest in new paths of product discovery as well as a trusted stack of emerging designers. Add to this model AI-powered curation which will play a key role in helping customers navigate their way out of the multi-brand maze - and thus capture a share of their wallet.
To conclude, consumer spending across online luxury retailers has indeed suffered significant declines throughout recent years. However, the downturn can be overcome should e-commerce players adjust their models and curate their assortments focusing on new and more defined ways to reach and establish a new consumer cohort.
ABOUT THE AUTHOR
NICOLE ZENIOU
Nicole Zeniou is a Contributing Fashion Features Editor at Bungalow 28, joining in 2024. Previously the Fashion Features Editor at Madame Figaro Cyprus, she has contributed to titles like Marie Claire Greece, Cosmopolitan Cyprus, and The Cyprus Weekly. Founder of the online interview magazine The Éditor, Nicole is passionate about blending creative disciplines and supporting international talent. She has interviewed leading fashion figures such as LaQuan Smith, David Koma, Casey Cadwallader, Lorenzo Serafini, and Mary Katrantzou.
Bungalow 28 is a tech and creative marketing agency working with fashion, luxury and art brands worldwide.