Luxury goods conglomerate LVMH’s plans to launch its own multi-brand ecommerce site in March may herald the age of the ‘brand marketplace’.
A recent report in the Financial Times outlined reported plans for LVMH to launch an online marketplace for their iconic luxury brands.
If true, we believe that this will be a positive move for LVMH, the luxury goods sector and that we will see the formation of emarketplaces for specialist sectors throughout 2017.
The evolution of this ecommerce strategy really began about five years ago when brands discovered that they could make a lot more money by selling direct to the end user at a much higher margin. This approach worked well for them at the time but it still represents a very small part of the market that buy goods on emarketplaces. However, a report by McKinsey & Company has predicted that online sales of luxury goods will triple to €70 billion by 2025.
Although eBay and Amazon are the dominant players, there are specialist marketplaces and e-tailers, like Net-a-Porter that have been successful, in quite a short space of time, by offering lots of brands – all focussed on fashion.
This move by LVMH, to create a brand marketplace, is a response to the realisation that becoming an e-tailer is going to be enormously beneficial to the conglomerate. LVMH will be able to sell their iconic brands at higher margin and have control of the process for little extra cost – and they are not having to give 50 per cent of their margin to the retailer.
LVMH just has to figure out the logistics of fulfilment to the end user, which are not that difficult these days – with lots of options available for delivery to the customer.
This represents the first big move in the luxury goods industry where distributors have recognised that they need to have more of an online focus and act as retailers.
However, we don’t think that this represents a threat to the standard business model, because retailers are still going to buy iconic brands and LVMH will bring other brands onboard to build something akin to Net-a-Porter. This will ultimately be beneficial to the customer and will be a positive evolution of LVMH’s ecommerce strategy.