In the post-pandemic era, a remarkable resurgence of physical luxury stores is reshaping consumer dynamics. Online purchases, notably through multi-brand e-tailers, are witnessing a downturn, as luxury brands distance themselves from these platforms. Explore the key insights into this shift and the evolving landscape of luxury retail.
Altagamma, the association representing Italy’s premier luxury labels, highlights a narrowing gap between the sector’s wholesale and retail channels. This poses a significant threat to multi-brand fashion e-tailers, previously considered market frontrunners. Forecasts predict a stable revenue for physical multi-brand stores in 2024, while multi-brand e-tailers are expected to face a 1% decline. Direct e-tail sales by luxury labels, while projected to grow by 4.5%, showcase a modest performance. Conversely, a robust 7.5% increase is anticipated in luxury goods sales through physical mono-brand stores.
The surge in 2022 sales for luxury labels in physical and online stores (26% and 20%, respectively) continues in 2023. Physical stores are thriving with growth rates between 9 and 13%, while online sales see a 5% decline. A study by Bain & Co. and Altagamma predicts an 8 to 12% fall in department store sales in 2023, marking a significant shift.
The pandemic-induced boost in e-tail during 2020 and 2021 is now giving way to a natural acceleration in physical mono-brand store performance. This resurgence is driven by renewed socialization, increased tourism, and a plateau in digital channels.
Luxury brands are redefining e-tail as a digital service supporting physical stores, emphasizing the integration of online and offline solutions. This evolution positions stores as experiential destinations for cultural mediation.
A renewed enthusiasm for physical stores is observed among younger consumers, with Millennials and Gen Z leading the way. Despite Gen Z’s weakening purchasing power, they are driving a shift toward experiential shopping, favoring in-store experiences over online purchases.
The declining profitability of e-tailers is attributed to luxury brands focusing on their e-shops and stepping away from multi-brand platforms. Claudia D’Arpizio, partner at Bain & Co., notes that the discounted resale market, often prominent on multi-brand platforms, is being undermined, and promotional channels are gradually being reduced.
In this transformative landscape, pure players in the e-tail space must revise their business models. Emphasizing tighter cost control, catering to a flexible clientele, and embracing digital tools are crucial for e-tailers to thrive in the evolving luxury market in 2024.
