By Alexander Otto, Head of Corporate Relations at Tradebyte
Fashion was the worst-performing sector in e-commerce in 2023 according to industry figures. According to data from Wunderkind, 64% of UK consumers admitted to cutting back on non-essential items last year. As the UK’s cost of living crisis continues to curb shoppers’ spending, the rise in material prices, energy and transportation has negatively impacted profits for retailers across the broad.
One area of the fashion market, however, has fared far better than its counterparts. Despite global economic and geopolitical headwinds, luxury fashion remained resilient, particularly compared to mid-market and budget brands which experienced significant year-on-year losses.
Not hampered by the threat (and reality) of recession, IMRG data reveals how premium fashion retailers accelerated their growth during this period, seeing a 5.5% increase in February compared to last year.
IMRG also notes that the average basket value for premium clothing retailers has increased since last year. Indeed, in January 2023 it was £93.38, rising this year to £126.75, while last February was £99.41, and in 2024, £135.02.
But what’s behind this accelerated growth from luxury retailers and what can we learn from it? We look at the year ahead for luxury fashion, exploring the strategies and factors contributing to its success, as well as emerging trends within the sector.
Rising interest in second-hand luxury products
The growing interest in second-hand luxury products – a direct response to consumers’ increased demands for sustainability – is one factor accounting for the market’s accelerated growth. According to Bain & Company, the second-hand market could end up accounting for as much as 20% of luxury brand revenue by 2030. This has, and will continue, to offer new possibilities for retailers to collect and resell pre-worn luxury items, bringing a plethora of benefits.
Although the market for second-hand luxury products has grown, valued at more than €30 billion in 2022, many luxury brands have yet to fully enter the space. As a result, we suspect more will embrace the trend for pre-owned premium products in 2024, complementing their efforts to achieve more sustainable sourcing.
This popularity offers new possibilities for retailers to collect and resell pre-worn luxury items, with more e-commerce retailers incorporating sales of second-hand products on marketplaces.
Luxury and premium brands move online and enhance digital strategies
Luxury brands have been leaning into digital, a trend which will continue into 2024. According to McKinsey, nearly a fifth of luxury sales will be online by 2025, reaching around $75 billion. This is bound to be boosted by the growing concept of social selling, which allows brands to connect with customers in real time via live shopping and native checkout.
Put plainly, luxury brands and premium goods attract clients with higher budgets. This audience is prepared to spend more money and will likely choose the online retailer that seems most trustworthy and gives the best experience when purchasing.
We’ve already seen several luxury retailers embrace these requirements and expand how they engage with customers online. Gucci is one prominent example and has been at the forefront of social commerce in recent years, leveraging platforms such as Instagram (and WeChat in the Chinese market) to engage with audiences and customers to create an extension of its brand.
Blurring the boundaries between the physical and the digital with experiential commerce
Furthering the idea of ‘experience,’ we’ve seen luxury retailers start to curate offline experiences via themed cafes, restaurants, and other pop-ups. Some years ago, Burberry sparked this trend by building an in-house cafe at its flagship London store, and we’ve since seen similar concepts such as Ralph Lauren’s cafe skyrocket in popularity, with visits amassing hundreds of views on social media apps like TikTok, drawing customers to both its stores and other sales channels.
Taking this one step further, Fendi recently collaborated with Puente Romano Beach Resort in Marbella in a tie-up between haute couture and high-end hospitality, remodelling the hotel to sync with its 2023 summer collection.
The growing trend of luxury brand integration into marketplace portfolios
Seeking to expand their target group and online reach even further, marketplaces will continue to scope luxury brands to add to their portfolio in the coming year. This creates an opportunity for luxury brands to cover wider ground – no doubt contributing to their success – but also for marketplaces to expand their offerings and cater to a whole new audience.
British department store Debenhams’ marketplace launch a few years ago is a good example, enabling it to scale its assortment to thousands of new products in just a couple of months. This allowed it to keep up with changing customer demands and offer a wider range of products, mainly focused on luxury goods. As such, Debenhams was able to stay true to its brand identity while also developing and expanding it.
Luxury fashion on the up and up
Prospects for luxury look better in the coming months than for the wider fashion sector in an otherwise uncertain market. The accelerated growth luxury retailers have experienced can be attributed to a few of the factors highlighted above, as the online presence of luxury and premium goods expands in response to a rising market segment and increasing demand.
About Tradebyte:
Tradebyte empowers fashion and lifestyle brands and retailers to digitalise retail and drive growth. Its innovative software solution and modern ecosystem for digital commerce helps more than 1,000 leading brands and fashion retailers such as Puma, Asics and Guess to enable platform operations that drive seamless direct-to-consumer (DTC) experiences.
The DTC e-commerce platform and network enables brands to unlock potential, reach new audiences on digital sales channels domestically and internationally, and grow their reach. Seamlessly integrating and selling across Tradebyte’s network of 100+ top fashion and lifestyle marketplaces such as Amazon, Otto and Zalando, they can attract new customers and increase revenue.
Founded in 2009, Tradebyte has been an independent subsidiary of the Zalando Group since 2016. Zalando is both a shareholder and a key retailer for Tradebyte.
Published 10/04/2024
