This year marks a milestone in luxury etailing. Both Net-a-Porter and Yoox marketplaces turn 20 in 2020 – some achievement when designers had initially rallied against selling their goods online. 

Now owned by Cartier-to-Chloe umbrella company Richemont, Yoox Net-a-Porter Group proved that there was a consumer appetite for buying both luxury (and later) beauty products online – even though it flew in the face of received industry wisdom. 

Online shopping for luxury goods and beauty products was considered either unseamly or too chancy, with shoppers urged to feel or test the goods in store – but Covid-19 dramatically changes the landscape. 

No brand now has the luxury to ignore online

As offline-to-online trends accelerate as a result of the Covid-19 pandemic, those beauty and luxury brands who had neither an ecommerce presence, nor the digital investment to drive consumers to buy online will lose out, perhaps never to recover. 

The sanitation crisis has impacted these sectors like no other, with implications reshaping long-held business practices for marketers and challenging established business practices. 

Lockdowns, social distancing and self-isolating have made it less desirable – even impossible – to visit physical retail locations. While the crash in international travel has compounded the situation by depriving both luxury and beauty brands access to the very lucrative travel consumers both in the terminal and on Bond Street. 

As a result, even Boston Consulting Group’s most optimistic forecasts predict 2020 luxury retail sales will fall by between 25%-45% on 2019 figures. 

Many brands were caught off guard, but others are leading with even bigger digital ambitions. 

The new digital roadmap for luxury and beauty brands

“With Covid-19 driving increased demand for health and beauty products, many retailers are planning further inroads into the category via enhanced online services and product lines,” said Florence Wright, Senior Retail Analyst at Edge by Ascential.

She predicts that beauty brands will be forced to diversify and focus online to expand reach and boost growth. The online share of sales made in the health and beauty sector is expected to rise to 16.5% globally by the end of 2020, increasing to 23.3% by 2025.

Little wonder that brands including L’Oreal and Charlotte Tilbury are investing online. L’Oreal says that ecommerce sales were up 53% in the last quarter and now accounts for 20% of its business; Charlotte Tilbury’s DTC model proved attractive for fashion and fragrance group Puig, which is acquiring a majority stake in the British beauty brand.

In luxury fashion, Burberry notes that “digital was the fastest-growing luxury sales channel in 2019, growing 22% versus previous year and representing 12% of all luxury sales” – a trend that has accelerated because of enforced store closures in early 2020.

Reimagining the brand experience online

Expect this to continue, even as the world reopens. Luxury and beauty brands, particularly, know the value of experience, which is why pre-pandemic, nearly three in four luxury customers said they wanted a close relationship with a physical store and the community that an upmarket brand attracts. That is around twice as high as the average shopper, according to GlobalWebIndex.

Flagship department stores such as Selfridges are investing in digital and virtual experiences. The Oxford Street retailer has introduced gifting advice online, beauty tutorials on Instagram and personal shopping sessions via video. “We want to bring Selfridges into the comfort of people’s homes,” said Meave Wall, Selfridges’ stores director.

Luxury and beauty brands must contemplate such online marketplaces alongside direct-to-consumer ecommerce offerings, balancing the cost per acquisition of each channel with data and brand equity that a direct relationship brings. 

How performance marketing can help pop pent-up desire

It is why they must transform their brand experiences into powerful omnichannel offerings and encourage online sales through promotion, particularly online. 

Here, we’re seeing another sharp shift in brand behaviour, with the most digitally-focused of the luxury and beauty companies investing in performance marketing – once considered cheap and ‘off brand’. Not so, now, with performance seen as a key part of the equation, particularly for those luxury shoppers who want to buy now. 

Some 20% of activity on our platform is now performance-led, and quickly growing as we introduce cross-funnel solutions for brands. There is a lot of pent-up demand, particularly in China, the world’s largest luxury market, and India, and performance marketing campaigns that are on brand and with high quality creative will drive shoppers to digital stores. 

It should be no surprise: guaranteed performance marketing outcomes are crucial to ensure ecommerce activity is as effective as possible at a time when marketing budgets are being reviewed and squeezed, and consumer spending constrained. 

Safety first – but full-steam ahead: why digital is no longer a dirty word

One overriding consideration for luxury advertisers is brand safety – and being seen in the right environments, which is perhaps one reason why they over index for magazine media spend. According to Mary Meeker’s yearly digital report, media consumption and media investment have finally caught-up over the last couple of years. Magazines and TV have lost audiences to the Internet, but research on the beauty and luxury industry shows a different picture as a report by Zenith indicates the beauty industry is still overinvesting in magazines.

Yet it isn’t all about spending on the social giants, and the inherent challenges such as fake news and inappropriate placements they present: online premium publishers offer the quality and context of the glossies in brand safe and appropriate ways. And, via platforms such as ours, offer those targeted audiences at some scale. 

Flagship shops and concessions in physical locations will always retain power and mystique, though many smaller stores in less glamorous locales may increasingly be mothballed. It’s why luxury brands must build seamless omnichannel strategies and invest heavily in their flagship digital properties, as well as the online path to purchase.