Digital will play a decisive role in luxury beginning in 2015

By

Dominique Muret

Published
Dec 1, 2014

The investments made this year by big brands in new technologies and e-commerce should already begin to bear fruit in 2015, and forecasts for the coming years are promising, according to a report by Juan Manuel Mendoza, a luxury goods expert from Credit Suisse, who is responsible for the Swiss bank’s Asian equity funds as well as serving as fund manager for its Luxury Goods Investment Funds and Global Prestige Fund.

“Brands only invested in e-commerce and mobile applications to boost sales in 2014. We expect significant results from this investment in 2015 to 2018. The leading brands in digital, such as Burberry, recorded double digit growth. We anticipate growth in online sales of around 20-30%, mainly driven by emerging countries and the United States," said the Mendoza.

Between 2008 and 2013, online sales grew at an annual average rate of 28%. 

"Luxury goods consumers’ digital experience is getting better. For luxury brands, this is drastically reducing the barriers to entry for new markets such as China," emphasized Mendoza, who underscored the fact that the country has 39 cities with a larger population than Hong Kong. However, most brands don’t have stores in these megacities. 

In this context, fashion houses are no longer seeking to focus on opening a growing number of increasingly large stores, but instead are focusing on the best locations in the world, while relying more on the expected growth of their e-shops, as well as e-commerce platforms, such as the Chinese giant Alibaba, JD.com and Vipshop, etc. 

On one single day: November 11, Single’s Day in China, Alibaba's sales reached 9.3 billion dollars, or 6.5 million (£4.1 million) per minute—and a great many of these transactions were made via smartphone, said the manager from Credit Suisse. 

And Despite the slowdown in luxury goods sales in China, the Chinese remain the largest consumers of luxury goods. "A brand bag costs on average 40% cheaper in Paris than in Shanghai, due to tariffs," said Juan Manuel Mendoza, who forecasts, with the current weakness of the euro, "excellent results for Christmas for European brands in the European stores." 

He also forecasts 6% growth in global sales for luxury goods in 2014 and 7% in 2015, while luxury industry profits are expected to increase by 9-10% in 2015, "given that the digital strategy (the online channel) should start to play a significant role in the business of different brands. For the labels in France and Italy, it could be that the right moment has arrived," concluded the expert.