By Jukka Aminoff
Financial Times Luxury Business Summit 2016 in San Francisco revealed some interesting aspects of the luxury industry. How is the luxury industry being disrupted by tech companies? Many of you might believe that fast fashion and premium brands are the ones, which are shaping the global industry. That is not the case. New business models are on the rise within the luxury industry, which are shaping the industry as a whole.
The Internet plays a vital role in the luxury industry because it enables to create different business models. Therefore, there are now three business models in retail, which were discussed during the summit, and these models are:
Pre-order model is targeted for pioneer consumers who want to own newest creations. Pre-order luxury brands are selling a small number of their masterpieces because they want to keep the brand rare. But there are also other benefits. Pre-order model can be used by luxury startups, which might not have the required financial muscles. Pre-order can even mean a single dress or a piece of jewelry. A very cost effective model to move forward.
Traditional e-commerce means that a brand produces a certain amount products, and might also re-produce new batches if the collection is successful. The traditional e-commerce is accounted for 10 percent of the total sale of luxury goods. Hence, consumers still want to buy luxury from shops because they want to receive the full consumer experience. Leading luxury brands are using e-commerce efficiently because it provides an alternative marketing and sales channel.
Secondhand e-retail tells the whole story of the luxury industry. Perfectly managed luxury collections keep their market value all of the time because luxury items are true masterpieces, which can even increase their value over time. Therefore, the internet provides a powerful marketplace for secondhand luxury e-retailers who want to collect certain masterpieces, like cars, watches, wines, fashion, jewelry, furniture and many others. This is also the reason why the luxury industry is one of the best ones in enhancing ecological thinking in the business world. Quality is long lasting.
These three business models give the impression that luxury buyers are searching for unique creations and items because they want to embrace their individuality. The luxury industry is very vibrant, and digitalization gives lots of opportunities to the whole industry. We are living very exciting times indeed. Watch the Financial Times video concerning these new business models from here.