The Effect of E-commerce on Luxury Brands, Equivocation Between Exclusivity and Omnipresence
Thesis By Anna Yun
Submitted in Partial fulfillment Of the Requirements for the Degree of Bachelor of Science in Business Administration
State University of New York
Empire State College
2018
Reader: David Starr-Glass
Statutory Declaration / Čestné prohlášení
I, Anna Yun, declare that the paper entitled:
The Effect of E-commerce on Luxury Brands, Equivocation Between Exclusivity and Omnipresence was written by myself independently, using the sources and information listed in the list of references. I am aware that my work will be published in accordance with § 47b of Act No. 111/1998 Coll., On Higher Education Institutions, as amended, and in accordance with the valid publication guidelines for university graduate theses.
Prohlašuji, že jsem tuto práci vypracoval/a samostatně s použitím uvedené literatury a zdrojů informací. Jsem vědom/a, že moje práce bude zveřejněna v souladu s § 47b zákona č. 111/1998 Sb., o vysokých školách ve znění pozdějších předpisů, a v souladu s platnou Směrnicí o zveřejňování vysokoškolských závěrečných prací.
In Prague, 27.04.2018 Anna Yun
2
Acknowledgment:
Given work becomes a reality with help of many people. I would like to acknowledge and thanks all of them.
Firstly, I would like to express my special gratitude and thanks to my mentor Professor Starr-Glass for sharing knowledge, unwavering support, and patience with the deadlines throughout this project work.
I would like to thank my family and close friends for life-long support, encouraging and believing in my abilities.
The contribution of every individual mentioned above have been crucial in the carrying out this project.
3 Table of Contents Abstract ...... 5 Chapter 1: Introduction...... 6 Chapter 2: Theoretical Background of E-commerce ...... 9 2.1 Definition of E-commerce ...... 9 2.2 Development of E-commerce ...... 10 2.3 The Concept of Digital Marketing and E-Commerce ...... 13 2.3.1 Product...... 15 2.3.2 Place ...... 17 2.3.3 Price ...... 18 2.3.4 Promotion ...... 19 Chapter 3: Concept of Luxury ...... 21 3.1 The Concept of Luxury ...... 21 3.2 Luxury Brand Management...... 23 3.3 “Exclusivity” and “Omnipresence” ...... 24 Chapter 4: Luxury Brands Online ...... 27 4.1 Luxury brands on e-commerce platform ...... 27 4.1.1 Louis Vuitton ...... 29 4.1.2 Gucci ...... 30 4.1.3 Burberry ...... 31 4.2 The Luxury Pyramid ...... 32 Chapter 5: Case Study ...... 35 5.1 Introduction to Yoox Net-a-Porter Group...... 35 5.2 Luxury WebPage ...... 36 5.3 SWOT Analysis ...... 39 5.4 Efficiency of the online retailing platform ...... 42 5.5 Key Success Factors ...... 44 5.6 Online Brand Communities ...... 46 Chapter 6: Conclusion ...... 49 6.1 Conclusion ...... 49 References ...... 52
4 Abstract
Given work is focused on the implementation of the electronic commerce on the industry of luxury brands. Nowadays, luxury companies are faced with the challenges of implementing traditional mass marketing strategies on the digital platforms and emphasizing the factor of losing exclusivity of the luxury products. Therefore, is is necessary for businesses to understand the consumer behaviour online as well as ubiquitous factor of the e-commerce. The primary purpose of the study is to analyse how luxury companies overcome the issue of presenting themselves as an exclusive on the omnipresent environment of the digital world. It is achieved by providing key success factors that develops the most suitable approach in the balancing between high social classes and mass classes. Furthermore, Chapter 2 and Chapter 3 are the theoretical parts of the research that familiarize the reader with the e-commerce and luxury concepts while, the last chapter provides the analysis of the case study of the most successful online retail company Yoox Net-a-Porter. Findings clearly demonstrate the possibility to luxury brand companies to maintain the sense of exclusivity by providing the most suitable service on the online platforms. The most appropriate factors that are need to be taken into consideration while operating online are qualified service, return policies, official webpage, effective team, online brand communities, and the product range.
5 Chapter 1: Introduction
Luxury has always been symbolized with the elegance, comfort, high price, and excellent quality. The industry of luxury products differs from the everyday goods, as it is altogether another product sector. From the economical point of view, the luxury fashion industry is considered to be one of the most profitable and valuable segments worldwide with more than 249 billion euros revenue in 2016 (Duncan, 2016). The primary function of the high-class industry is to maintain the difference between social classes of royals, aristocrats and past civilizations (Onkonwo, 2009). In all cultures, people have a desire to have a specific position in the society that appears through the lifestyle, clothing, jewelers, expensive cars and other goods. However, concerning fashion industry, it is not only about materialistic aspect. Coco Chanel, most known
French fashion designer, and businesswoman said: “Fashion is not something that exists in dresses only. Fashion is in the sky, in the street, fashion has to do with ideas, the way we live, what is happening” (Griggs, 2011). Therefore, the way we perceive the luxury industry has changed with the appearance of the Internet because it has changed the lifestyle of people and the way people view the world in general.
Nowadays, e-commerce is rapidly growing industry in every society, and luxury brands are facing the challenges of using the mass marketing strategies and at the same time accentuates the exclusivity dimension of the goods that make it necessary to companies to change their ordinary rules and behavior in the digital world (Okonkwo, 2010).
Luxury brands have always been focusing on selling limited and exclusive goods, only for the high social class. However, the presence of the luxury brands on the Internet platform and availability to buy products online makes the communication between consumer and seller available to a mass base. Brands are losing the niche consumers, limited supply sense, and the premium price is not justified due to lack of the physical
6 contact in the store, with the assistant, and general ambiance. On the other hand, e- commerce and its’ rapid growth are essential, and it is necessary today to integrate web media into the communication strategy (Nyeck and Houde, 2006). In this way, luxury brands can take advantages and all possibilities to make their Internet marketing strategy more effective by telling the consumer their brand story, main ideas, and inspire people. Some of the luxury brands are having a high online activity and success in the digital world, for instance: Louis Vuitton, Burberry, Chanel, Gucci, and Dolce &
Gabbana (Munster, 2014). However, some fashion houses such as Hermes and others are still worried about online presence as it damages the exclusivity sense which is one of the most crucial aspects of the luxury industry. Due to an increase in Internet usage, shopping convenience and accessibility of goods that are central factors for luxury institutions, brands have to create new strategies for the transition into e-commerce
(Okonkwo, 2010).
According to the research conducted by Altagamma-McKinsey Online Observatory, almost half of all luxury shoppers are driven by online experience and influenced by what they find online. For the year of 2013, digital presence of luxury brands generated around 15 percent of offline shopping and impacted 30 percent of other sales (Dauriz et al., 2013). Nowadays, millions of people carry digital devices such as computers, tablets, and phones. Technology insists on interacting with the fashion more online, and people become engaged in it. The numbers are unlikely to decrease because digital universe is rapidly expanding and every luxury house have to face with it one day.
The only way to maintain the balance between ubiquity and exclusivity of the fashion luxury brands is to understand how to circumscribe psychological and physical values
(Vigneron & Johnson, 1999). To have success, luxury brand companies have to create
7 the right online strategies that require an intensive analysis of all necessary and influencing factors (Henning, 2012).
The given study aims to analyze how luxury brand houses use e-commerce, sell online, and how they point marketing strategies using the Internet. Moreover, it is crucial to conduct the analysis of the sense of exclusivity and ubiquity of luxury fashion brands on the Internet. The survey provides significant possibilities for the luxury brands using
Internet marketing strategies, and the way companies can improve and learn from their competitors to be more successful in the digital world. Every luxury company that has low activity on the Internet should be engaged in making marketing strategy particularly online to increase sales and value of the company. Furthermore, the research paper will analyze how Yoox Net-a-porter Group, the world’s leading online luxury retailer, which works mostly with luxury brands such as Dolce & Gabbana, Gucci, Armani, etc. can maintain success in the digital world. The given electronic commerce company serves more than 180 countries and has approximately 4300 employees worldwide (Yoox Net- a-porter Group).
8 Chapter 2: Theoretical Background of E-commerce
Given chapter will discuss the term “E-commerce,” how the Internet and World Wide
Web was developed, the process of adoption of e-commerce and the digital marketing.
It is important to mention that e-commerce has brought new opportunities and possibilities to the market as well as obstacles and difficulties that lead to the changes in organizational strategies of businesses. Also, key marketing strategies have changed within the start of using the Internet, and basic concepts of marketing become more challenging for companies, and therefore new practices and theories have to be adopted.
2.1 Definition of E-commerce
E-commerce has appeared in the mid-1990s and shapes various industries in many ways. It has become a new way of doing business. For instance, Amazon was a speedily developing source of bookselling, Internet search engines were taking place more often in providing relationships between Web users that use websites and better and more useful results, and the eBay that was a leader among auction sites (Schneider, 2011).
The way the business is conducted cannot stay the same anymore. E-commerce has numerous definitions in different publications. The differences in defining the term e- commerce are dependent on the personal perspective of the individual researcher.
The most basic definition can be that e-commerce is a process of selling and buying products or services over the Internet. Chong in his article has added to the term of selling and buying on the Internet platform, the idea that e-commerce serves as a base of the exchanging information (Chong, 2008). Bauer and Glasson in 1999 made own contribution and extended the term by including “the assistance of computer and telecommunication networks that use the Internet technology.” Moreover, they provide
9 the argument that the difference between e-commerce and discipline of Information
System is that digital communication does not obtain the communication among users, but it more a stand-alone information system (Bauer and Glasson, 1999). Definition of
Clarke that was presented in the article of “The past, present, and future of business to business e-commerce” includes the element in which electronic commerce is “support services for trading.” It envelops trading support services for goods and services, products, information management of the organization and statistical reports (Clarke,
2005).
Separating the e-commerce into types of the business processes is useful. There are five main categories of electronic commerce: business to consumer (B2C), business processes, business to business (B2B), consumer to consumer (C2C), and business to government (B2G) (Schneider, 2011).
Summarizing the information, e-commerce has broader meaning rather than simply buying and selling products or services on the digital platform. However, electronic commerce and businesses online are transposable due to use of new technologies appearing on the market.
2.2 Development of E-commerce
Electronic commerce has become a large part of the economy that exists today. It has changed the way people conduct business, organize, buy and sell business activities.
According to Schneider (2011), e-commerce development has two primary forms of development: first wave and the second wave. Schneider while describing the first
10 wave, mentions the fact that electronic commerce in business sphere has existed many years before the 1990s. For instance, banks have been practicing the wire transfers, also called as an electronic fund's transfers (EFTs). In those transfers, on private networks, banks sent the account exchange information.
Another type of electronic commerce, presented by Schneider, is an electronic data interchange (EDI). In the years of 1960s, business management realized while working with other companies; there are many invoices, purchase orders, bills of shipping, and other documents that are needed on a daily basis. All those documents had the same set of data and employees were typing every transaction into the computer, printing it in paper forms and when the mistakes, for example in data, occurred workers were spending time and money to start doing documents again. Businesses have found out that every transaction, such as invoices, orders of purchase, and bill of lading included the similar information of description, quantities, numbers. Therefore, the standard format (templates) for electronic transmission information has appeared to avoid mistakes and reduce the costs of printing and mailing (Schneider, 2011). Companies such as WalMart and General Electric, US Government were first starters of using EDI for better processes of purchase and developing better relationships with the suppliers.
Evans and Wurster (1999) in their article “Getting Real About Virtual Commerce” refer the first generation of e-commerce to the “landgrab.” When the new digital marketplace has been created, many companies found out that the electronic commerce had great potential in the nearest future and decided to develop that way. The issue was that the companies could not achieve the desired profit because most of them were dependant on the external investors. Also, in the beginning, the Internet was pure, the speed of
11 connection was slow, unstructured, most of the websites were in the English language because e-commerce was a U.S. phenomenon, and the efficiency of electronic commerce was relatively low (Evans & Wurster, 1999).
The “Second Wave” of development of e-commerce happened after “Dot-Com Boom” that happened between 1997 and 2000, and approximately 12000 online businesses started to operate with the support of investors’ money that was more than 100 billion dollars (Schneider, 2011). The speed of the Internet was increased, and the price was still low. The companies moved from “landgrabing” to capturing own territory, and those key players were forced to focus on the strategies to achieve the competitive advantage (Evans & Wurster 1999). For every company, it has become necessary to use the internal resources for adoption and development of electronic commerce. The benefits of the e-commerce must be visible and significant, so the businesses are motivated and inspired to move from the simple model to a more complex level of electronic commerce (Stockdale & Standing, 2004). The Second Wave is characterized on the international level occupying many countries and languages. Two main impediments to doing successful business on the digital platforms are the translation of language and currency conversation (Schneider, 2011).
Electronic commerce and businesses online are motivated and driven by achieving better revenues and adding value to the organization. According to Chaffey (2009), e- commerce can be improved in two ways: first, by increasing the customers’ loyalty through making a better relationships, raising the number of customers and getting lifetime purchasing cycle, and second, the reduction of primary costs such as costs of transportation, staff costs, and stationery expenses.
12
Competitiveness Drivers Efficiency/Cost Drivers
Customer Demand Increasing speed with which supplies can be obtained
Improving the range and quality of Increasing speed with which goods can offered services be dispatched
Avoiding losing market share to Reduced sales and purchasing costs business already using electronic commerce
Reduced operating costs Table 1: Drivers of e-business adoption (Chaffey. 2009).
In the given Table 1, Dave Chaffey (2009) presents two main categories that drive electronic businesses’ adoption - Competitiveness Drivers and Efficiency/Cost Drivers.
According to the conducted research, both drivers are crucial and essential equally for conducting business online.
2.3 The Concept of Digital Marketing and E-Commerce
Nowadays, the Internet allows better communication and sharing of the information.
Information is considered to be the main advantage of the Internet as it is easy to find, study, and share. Businesses including luxury brands are adopting proper electronic commerce strategies for better profitability and more importantly to enhance competitiveness among other related businesses (Xu & Quaddus, 2009).
Digital marketing or sometimes it is called e-marketing can be viewed as a modern day business practice that allows businesses to sell information, goods or ideas by using the
Internet. Dave Chaffey, the famous business consultant, determines digital marketing as an “application of the Internet and related online technologies to achieve marketing objectives and support the modern marketing concept” (Chaffey, 2009). Internet appears
13 as a channel of the communication and distribution to the mass audience, and this is a consequence the unwillingness and disinclination of luxury brands to use it (Okonkwo,
2009). Based on the studies of Thompson and Corner, with the rapid growth of the technology of Internet has a high potential and in this way, it reduces the cost of the products and services and the extension of the boundaries in geographical terms in bringing seller and buyer together (Thompson & Corner, 2005). In traditional marketing, the aim is to create and increase the demand for the product, and within the introduction of e-commerce, the whole situation has changed, the focus is now more on customer perspective rather than on supplier perspective (Sheth & Sharma, 2005).
Therefore, digital marketing and the general principle of marketing differs not only in the way that it operated online, but it is more than this.
At the beginning of the creation of the Internet, the aim was to merely to communicate with the customers via email and get the response from them. That is the part of direct marketing. Nowadays, the Internet is a reliable marketing tool for every company compared to the other marketing instrument. The term Web 1.0 that exists in the digital word is the one-way communication that means that only consumers create and consume the information in the World Wide Web (Berthon, Pitt, Plangger & Shapiro,
2012). Whereas, Web 2.0 term means communication and collaboration of information between customers and companies. In the Web 2.0 practice, consumers by themselves create the content by posting photos, videos, writing blogs, and supporting and following other Internet users (Tuten, 2008). In this way, companies must involve the brand customers in participation to benefit the business. Social media such as Facebook and Twitter mainly contributes to the conversation. The aim is to make clients involved in demotion and promotion of brands through the reviews, discussions, conversations, and evaluations among consumers on the online platform. It is important to mention that
14 the costs of distribution and involvement are minimum because every activity is processed on the digital platform through social media and other tools.
According to Stockdale and Standing (2004), electronic commerce and new technologies are not the main reason why the market exists, the fundamental principles of marketing stay the same while technologies online only facilitate and assist businesses.
Regardless the fact that every e-commerce marketing strategies has different strategic planning, Allen, and Fjermestad (2001) suggests that traditional P’s of marketing such as product, price, place, and promotion frameworks can present a better analysis of the strategy. Therefore, in the next chapters, the paper will present a closer view of the four central P's of digital marketing.
2.3.1 Product
In the traditional marketing theory, the product is the absolute anything that is offered to the market for consumption, use or acquisition to satisfy specific needs and wants of a customer (Kotler, 1991). In the digital marketing, the information appears by itself a viable product. The right chosen information can significantly increase the attractiveness of the product.
Innovative technologies have brought the possibilities that are decreasing the collecting costs as well as distributing information about products and consumers. The process of navigation of information in e-commerce that was presented by Evans and Wurster
(1999) has a significant meaning regarding collecting information about products and willingness of consumers to buy products. The sellers and online businesses are helping shoppers to navigate in their choices through the variety of navigation tools such as
15 advertising, branding, and merchandising. However, the Internet today includes a massive amount of data that can be used by millions of consumers directly and without any cost.
In that way, the navigation process appears as an independent business on the digital market. Shoppers have access to the endless information and can search more comprehensively. Suppliers have to understand that information about the product can be provided by the third party. For instance, the search engine Yahoo! has become one of the players in that business. The navigation has three main dimensions: reach, affiliation, and richness. First means how many potential customers the business can have and how many products the business can present for them. The Affiliation represents the interests of the business, and the Richness means the information the business company provides to the customer or gather about the customer. Given dimensions allows businesses to have a competitive advantage among similar businesses (Evans & Wurster, 1999).
Electronic commerce has changed the way how the product is delivered. Shoppers are having more choices, can compare with other related products in few clicks instead of doing it in a traditional marketing concept that is time-consuming and makes transactions non-stop from every location on the planet. E-commerce creates the better communication with the potential buyers that allows them to understand the needs of customers, and change the product that could completely satisfy the market (Alrawi,
2007). Furthermore, the life cycle of the product is decreased while using electronic commerce and the process of testing of the product is shortened as well. Also, the brand is directly dependent on the idea that value-added characteristics of an item influence
16 the perceptions of a customer, so the e-commerce can be used as a tool to create brand identity and strengthen brand awareness (Chaffey, 2002).
2.3.2 Place
The Internet has the intense effect on the “Place” marketing theory the most out of fundamental four p’s of marketing theories. It has happened because the electronic commerce offered various opportunities for enlarging the number of customers and reshaped the marketplace completely. The purchase decision of a shopper can be made everywhere where the Internet connection exists (Allen & Fjermestad, 2001). Electronic commerce allows businesses to sell more of their products on the market (Chaffey,
2002). The main difference between digital and physical world is the number of
“eyeballs” that view the web page (Evans & Wurster, 1999).
According to Gosh (1998), the e-commerce allows businesses to bypass, for example, retailers in the value chain and sell directly to customers. Therefore, the value chain is interrupted. For instance, Amazon.com allows publishers to sell directly via the website and in that way to avoid physical distributors. Evans and Wurster (1999) in their writing claims that the small companies can enter the market and skip the levels in the supply chain that historically depends on the competitive advantage.
According to Rayport and Sviokla (1994), the Place element of the digital marketing has two main aspects: case when the transaction occurs and infrastructure that allows that transaction to occur. For instance, the first aspect can include the fact that auction on the screen replaces the face-to-face one and the second aspect might include replacement of car lots to the computers.
17 Some organizations that can offer a variety of products to the customer first could have the success. The Internet marketplace can strengthen electronic retailers that are willing to become a “category killers.” Category killer in the physical place can be, for instance,
Walmart company. However, in the digital market, category killers are those businesses that have less of a physical space, expansion that would be unchallenging on the
Internet, and stores can present the customization of the offering to customers. The website must be convenient for the potential buyer instead of being navigated through numerous pages to find what the buyer needs (Gosh, 1998). The example of the successful category killer on the Internet market is the Amazon.com; the largest Internet retailer mostly focused on the bookselling. The website offers approximately 5 million volumes and “located” on around 25 million screens of the computers. Whereas, the largest physical bookstore in the United States that called Barnes & Nobles can offer only 200000 titles (Evans and Wurster, 1999).
Electronic commerce creates a broader marketplace for businesses to develop. Also, it provides possibilities and various opportunities to distribute and expand the product at a lower cost (Allen and Fjermestad, 2001). Instead of investing money to build infrastructure, within e-commerce the virtual market space can accompaniment traditional marketing approaches.
2.3.3 Price
Price is considered to be the most flexible strategy comparing to other elements the essential marketing mix. The price is the only one element that generates revenues in the company, while other elements generate costs (Allen & Fjermestad, 2001). In the
Internet marketplace, within the more significant amount of the exchanged information,
18 potential buyers can easily compare prices of the particular product and make their choice (Allen & Fjermestad, 2001). Therefore, there is a significant increase in price competition in the given area and standardization of prices across borders.
According to Klein and Quelch (1996), there is two main counteracting effect of the
Internet on the price element. The first aspect is that the companies by using technologies can manipulate and discriminate prices between different countries. If the suppliers do not be careful about it and the buyer once determines the discrimination, it could lead to severe consequences. Therefore, those factors lead to the price standardization across borders.
At the same time, It has become possible that technology can offer a lower price for services and administrative costs. Costs of the products can be decreased through the proper coordination of sales and distribution processes, and production (Alrawi, 2007).
2.3.4 Promotion
Electronic commerce develops a different way of communication between supplier and consumer. Business has no limits on the digital platform, products can be offered more, and the information becomes more accessible to receive and communicate. According to Evans and Wurster (1999), promoting products on the digital marketplace has numerous advantages. For instance, the Internet gives the opportunity to enterprises to build a relationship with the consumer directly and at lowest costs. Businesses can combine traditional ways of collecting information (focus groups, testing of a product) and data collected from electronic commerce (target market demographics, sales information) to build a unique connection for every customer. The persuasion of a target
19 audience to buy the product can be done by using the social media advertisements, web media, blogs, and e-mail (Allen & Fjermestad, 2011).
Brand reputation in the digital marketing remains the important role in choosing the product. Before buying the product, the buyer is tend to search the websites of the familiar brands (Klein & Quelch, 1996). People usually associate the certain brand with some beliefs, feelings, and personal experiences (Evans & Wustrer, 1999). According the research by Kane (1999), almost 50% of people are buying brands online that they had bought before in stores, offline. Thus, branding is important in purchasing products online as it has the attribute of reliability among customers.
In the digital marketplace, the promotions can be distributed less costly and less time- consuming, for example, by using e-mails, comparing to the traditional marketing strategy (Allen & Fjermestad, 2001). However, as for disadvantages of online promotions, the consumers do not tend to share the information is a full context due to the fear of this information being used in an unpredictable intention. To increase the willingness of buyers to share the information more, the allowance of businesses to create additional value to the product must be made (Evans & Wurster, 1999). In that way, promotion strategy on the digital platform requires more effort to gain the satisfaction of customer needs.
20
Chapter 3: Concept of Luxury
In the given section, the primary focus is on the basic concepts of what are the luxury brands, the definition, and its implementation. Also, it is essential to distinguish the difference between ubiquity and exclusivity that every luxury brand has and the e- commerce and online marketing that influence customers to buy through the Internet platforms.
3.1 The Concept of Luxury
In today’s marketplace, luxury fashion brands occupy the dominant position. The concept of luxury is a complex system, and initially, it is built on the perceptions of the buyer, and the meaning of the term is determined by the motives of the consumer both personal and interpersonal (Vigneron & Johnson, 2004).
According to the research that was conducted by Bain & Company that studied around
10000 consumers, they concluded that over the last 20 years, the number of luxury brand customers had increased dramatically from 90 million of people in the year 1990 to almost 350 million at 2013 (D’Arpizio, 2014). The luxury brand produces a unique experience for an excessive price that exceeds the value of the product, and every brand has own culture and story to tell.
As it was discussed before, luxury is characterized by extremely high price, outstanding quality, and exclusivity. According to the Phau and Prendergast (2000), the luxury concept is a subjective aspect in which luxury businesses have to enter the competition on bringing about the exclusivity factor, the brand awareness, excellent quality, and known brand identity. Furthermore, every luxury brand is enlightened by their own and
21 particular idea, the global vision, the particular taste, and the standards that they promote that gives the sense of pleasure and comfort to the luxury customer (Kapferer,
1997). Another concept is the concept of “rarity principle” states that the prestige of a brand get destroyed when more people have the products of the given brand (Phau &
Prendergast, 2000).
Based on the studies of the famous expert on brand management Jean-Noel Kapferer, the expert on brand management, luxury is a reference of a good taste and luxury management should not only depend on expectations of customers because brands should be an appendage of the ruling class (Kapferer, 1997). As for the management practices of luxury brands, in the digital world, the value of luxury refers to the quality, usability, and how unique the good when using online tools (Danziger, 2011). People tend to value luxurious goods as a resource that allows to define their identity and relience to the high social class.
Numerous luxury brand clients are the regular users of the social networks. However not all of them are potential customers of the luxury houses, they can be brand advocates (Danziger, 2011). The luxury concept has an abstract meaning while luxury brand and the luxury product is different because the brand is constitutional and the product is not. To be concrete, there are few definitions of luxury from different perspectives. From the economic point of view, a luxury good is a good for which demand rises significantly more compared to the income rise (Varian, 1992). In a symbolism point of view, according to Roux: “Luxury brand is characterized by a symbolic, imaginary or social added value, which differentiates it from other brands”
(Roux, 1991). Every luxury brands must have a sharp image, and therefore luxury brand must be symbolic in its every component and in this way share their ethics and central values of a story of the luxury brand with the customer or potential customer.
22 3.2 Luxury Brand Management
Luxury companies on a digital platform have specific difficulties to present their main ideas on the official website comparing to the physical store (Okonkwo, 2005). Main attention of the strategic luxury design online is based on the belief that the luxury store online is not available to masses, it is created for only “few” people that can have access to it. For the management of the online luxury business, the basic rules stay the same; the focus must be on the emotional connection with a customer, on brand image, experience, and buyer insight (Clauser, 2001). However, the rules cannot be obeyed online in the same way as it is done in a physical store. Essential elements that transfer the prestigious atmosphere to the online luxury stores, presented by Uche Okonkwo
(2005), are visuals, sound, smell, usability, and personalization.
There are numerous reasons to believe that social media marketing activities benefit luxury companies and posterize as a useful tool. Starting characteristics, according to
Okonkwo, “it is a pull marketing approach where customers are drawn to information and purchases rather than a push approach where customers are driven by advertising”
(Okonkwo, 2009). Next aspect to mention is that clients are deciding what message to accept or reject, which content to follow and experience what they what to experience.
The consumers of luxury brands are not looking for information that comes in one-way interaction; today people want two-way communication, they want particular kind of engagement, sharing, dialogue, personalized relationships with the brand, and the entertainment (Okonkwo, 2009). Digital environment allows luxury brands to build intimate and specific relationships with the customers and demonstrate the value of a
23 brand on a higher level. The online tool that includes social media is “the most powerful marketing tool which drives luxury businesses forward to the next century” (Okonkwo,
2009).
The online brand management is considered to be more complicated system comparing to the offline environment outside the digital market. Luxury brands have to pay close attention to what people say on the online forums, groups that have a relationship to the luxury brands because on the digital platform people tend to communicate (electronic
WOM) more intensive (Harris & De Chernatony, 2001). Another aspect that management should take into consideration is that the online customers tend to scan instead of reading the information (Harris & De Chernatony, 2001). The Internet is a considerably new trend, and Clauser (2001) presents the statement that luxury businesses have not yet reached their potential in a full context and it is the main reason why numerous luxury customers are reluctant to the buying luxury goods online.
3.3 “Exclusivity” and “Omnipresence”
Within globalization, digitalization, and technological progress the competition among luxury brands transferred to the new, more severe level. Therefore, for the luxury market, it is crucial to keep exclusivity, particular identity, premium pricing, and recognizable style. In most cases, exclusivity factor performs as a central and most important characteristic of every luxury product (Okonkwo, 2009). The advancements in luxury industry establish various options to a potential consumer and cause the rise of competition among businesses (Ryan, 2009). The only way to succeed in the fierce competition is to maintain a stable luxury brand identity. It can be achieved through
24 various factors, such as premium prices, unique and well-known style, and exclusivity
(Chevalier & Mazzalovo, 2008). Given aspects provides benefits for both consumers and companies in the way it determines the sense of belonging and social status of a luxury customer.
The Cambridge Business English Dictionary describes “exclusivity” as the “state of being expensive and of a high class, and therefore only for people who are rich or a high social class” (Cambridge Business English Dictionary). The power of exclusivity that uses luxury brands drive the actual demand. Some brands base on the Word-of-Mouth-
Marketing (WOM) strategy, especially on the online platform. According to Henning -
Thurau (2004), electronic WOM concept is defined as “the positive and negative statement made by potential, former, or actual customers about a product or a company, which is made available to a multitude of people and institutions via the Internet.”
Given strategy can take various forms, for instance, the reviews of the consumer on the related websites and forums, posts on social network websites, and comments on the individual websites. All in all, for the luxury brands, it is a challenge to create and maintain exclusivity as it is a long-term asset; there must be reputation, history of a brand, and no essential sales language to associate within the higher class. This concept is an effective marketing tool to create value for the target audience (Chevalier &
Mazzalovo, 2008).
Omnipresence or sometimes it is called ubiquity means to be everywhere. Ubiquity term is defined as “the fact that something or someone seems to be everywhere” (Cambridge
Business English Dictionary). Nowadays, having a ubiquitous digital aspect is crucial
25 among the competitive luxury brands. Also, the concept serves as an essential tool in competition among companies.
The digital transformation influence both how organizations create and adapt value to the customer of a brand and how it makes a profit from it (Iansiti & Lakhani, 2014).
Life becomes faster every day, and it has become essential to people to have everything at any time. The real world is ubiquitous, and businesses that operate on online platforms are required to be universal and consider cultural and geographical aspects of their practices to find any customer responds. It is an essential factor for online business communities, including luxury communities, to be able to maintain the relevance of a brand image and take into consideration cultural differences in different regions (Iansiti
& Lakhani, 2014).
26 Chapter 4: Luxury Brands Online
Given chapter on Luxury Brands Online will demonstrate how most successful luxury brands such as Louis Vuitton, Chanel, and Jimmy Choo present themselves on the digital platforms, on what those communities focus on in their strategies. After, the difference between online shopping and in-store shopping of luxury products will be discussed and explained. Finally, the last part of the chapter will represent main reasons why people avoid luxury shopping online today.
4.1 Luxury brands on e-commerce platform
Nowadays, there is a worldwide need for luxury business growth, and brands are trying to put more emphasis on the online sales and marketing. However, luxury brands still have a skeptic view on doing business in the online marketplace (Atwal & Williams,
2009). As it was discussed before, the main reason why luxury brands are hesitant of engaging in selling online is that luxury stands for inaccessibility, exclusivity, and rarity of a product comparing to the Internet marketplace where everything is accessible to all
Internet users (Kapferer & Bastien, 2009).
While the aim of luxury brands is to maintain “exclusivity” of their products, Internet world provides the channel of communication and distribution of information to the mass consumption (Okonkwo, 2009). Therefore, the reluctance of using the Internet platform of luxury brands is obvious. In order to demonstrate the incompatibility of the relationship between Internet and luxury brands, table 2, that is presented below, shows main characteristics of the luxury and Internet features.
27 Internet Features Luxury Marketing Features
Communication Globally accessible Mass media is limited, sponsoring, special events (Chevalier & Mazzalovo, 2008)
Distribution International, buying Service, location of experience, limited service, stores only in accessible (Okonkwo, prestigious venues, 2009) consumption experience, price is not displayed (Okonkwo, 2009) Table 2: Internet Features and Luxury Marketing Features
Electronic commerce has a high potential to every business sphere, and companies have to realize and appreciate the opportunities in the online marketplace. The advantages can be, for instance, reaching the market in a worldwide perspective, optimization of new processes of the businesses, and so on. The Versace, the famous Italian luxury company, has created their website to communicate with the online users, using the site only as a communication channel and not selling on the platform at all (Astound, 2014).
For the luxury customer, purchasing products online has specific risks such as financial, making online transactions using the credit card, and product risk like dealing with counterfeiting. The customers have a preference to physically touch and feel the product in the luxury shop (Henning & Wiedmann & Klarmann, 2012). However, the digital market is more attractive to potential buyers because they can easily compare the prices and explore alternative products, and experience a product availability. Therefore, customers always choose the most suitable and convenient buying style (Xia & Burns &
Hou, 2013). Also, customers of luxury goods have a high sensitivity to the altitude of the salesperson in the store, so people prefer to buy online to avoid employee pressure
28 (Xia et al., 2013). As for the gender role in online purchasing, male consumers tend to do shopping online less than female consumers. Moreover, people from 18 to 30 years old prefer to buy products online more frequently than elderly customers (Besler, 2007).
As it was discussed before, an Internet marketplace for luxury brands has an enormous potential of being the fastest sales channel in that industry (Besler, 2007). The Web experience is perceived by three main characteristics: functionality, psychology, and contents (Constantinides, 2004). The next sub-chapters of the work will shortly describe top three leaders in the online luxury area that have reached the reached a success of having a global audience and maintaining the feeling of exclusivity experience
(Henning et al., 2012).
4.1.1 Louis Vuitton
Louis Vuitton is one of the original luxury brands that entered the digital market and present their online strategy that successfully incorporates financial, functional, individual, and social values as perceived by a potential customer (Henning et al.,
2012). The first online interaction of a brand to a customer is a homepage of a luxury fashion brand. At the moment, Louis Vuitton acquires the attention of the customer via the introduction of a homepage that features the Macromedia of the Hollywood celebrity, Emma Stone. She is modeling with the Louis Vuitton goods, without any background music.
29
Source: louisvuitton.com, accessed on April 2018. As another tool of communication, Louis Vuitton uses social networks such as
Facebook and Twitter. Social networks allow people the distinguish themselves from other people through connecting with the brand (Henning et al., 2012). Al in all, the official website of the company has excellent navigation, visuals, and focus on the brand story.
4.1.2 Gucci
The shopping experience of the Gucci brand, it is innovative regarding the presentation of a product on the official website. The short video clip is presented on the main page of the brand. The interactive animation serves as one of the primary visual tools that enrich the online selling atmosphere (Okonkwo, 2005). The simplified navigation system, strong appearance on the social network platforms, and brand heritage make the atmosphere more functional to the consumers (Henning et al., 2012).
30
Source: gucci.com, accessed on April 2018
4.1.3 Burberry
Burberry has created an innovative concept of “Art of Trench” that has made the company one of the most successful luxury brands concerning the generated content
(Henning et al., 2012). As for the official website, the usability of the page creates the offline presence of a brand, information about a product can be easily found and the focus of the company is on the non-monetary values. At the moment, on the official page, the words “The Heritage of Trench” and the picture of a model in a trench coat directly communicate with the customer about the central innovative concept of the
Burberry luxury brand. It gives the electronic shopper a high impact and ushers the customer into the atmosphere of the luxury shopping (Okonkwo, 2005).
31
Source: burberry.com, accessed on April 2018
4.2 The Luxury Pyramid
Figure 1: Bastien and Kapferer’s Luxury Pyramid Model, 2008.
Given Luxury Pyramid is presented by Bastien and Kapferer (2008) where main luxury segments of business are illustrated and identified (Figure 1). On the base of the pyramid is consist of the “masstige” items ( the term is created by a conjunction of words “mass market” and the “prestige”). The luxury companies provide masstige
32 products to the broader audience. The products such as small accessories, belts, sunglasses are the most popular items out of masstige ones. Thus, the masstige goods are the luxury products for the massive amount of people.
Next “premium” level of the presented pyramid represents the masstige products that are distributed more selectively. For instance, the goods such as luxury brand’s fragrances refer to the given group of products.
The level above the “premium” is called “core business” of the luxury brand. It is simply means what the luxury company is famous for. The distribution of the luxury goods is a highly selective. The target audience is more limited than on the lower levels of the pyramid. In most of the cases, the prices of the luxury product of the given category are priced on the level that is above the average income of a consumer. Most of product of the luxury brands relied to this level.
On the top of the luxury pyramid, the “art” level is presented. The products of this line are unique and bring specific sense to the luxury brand. For example, Haute Couture relates to the given category. Haute Couture, translated from the French language means
“high fashion,” and it is an elite fashion production (Lakenya, 2017). Most of the items of high fashion are not wearable for most of the people, and the prices are usually above all other products from the lower levels of the pyramid.
Therefore, the luxury goods from the “art” level of the pyramid mostly bring the prestige to the company, and the products on the bottom of the pyramid bring the substantial amount of the money. It is challenging for luxury brands to maintain the
33 balance between being prestigious and generating money. Selling on the online platforms can threaten the luxury brands because of the distribution exclusiveness.
34 Chapter 5: Case Study
Given chapter of the study presents the case study of Yoox Net-a-Porter Group. The decision of choosing given company as a case study for the given work is based on the ability of the online company to have success in maintaining exclusivity and omnipresence of the luxury brands on the digital market.
Then the chapter demonstrates the efficiency of the official webpage, SWOT analysis of the company and the efficiency of the online retail.
5.1 Introduction to Yoox Net-a-Porter Group
Yoox Net-a-Porter Group (YNAP) is an electronic commerce platform that has the leading position in online luxury retailing. The global company is the result of the merger, in October 2015, of the Yoox Group and the Net-a-Porter Group, given two companies before merging had been on the market since 2000. The headquarters are located in Milan, Italy, and other operational offices of the YNAP are located in the
United States, China, Europe, Japan, and the Middle East. YNAP represents two categories of the stores: multi-brand online stores (Net-a-Porter, YOOX, The Outnet, and Mr. Porter), and online flagship stores (armani.com, valentino.com, justcavalli.com, and others.).
The company carefully selects the luxury stores worldwide to provide the unique diversity of the brands to the customers. As it was mentioned before, the website displaces the luxury pieces of most known designers of luxury brands such as Armani,
Chloe, Emilio Pucci, Lanvin, Moncler, Saint Laurent, Moschino, Stella McCartney,
Alexander McQueen, etc. All the physical boutiques are located all around the world, on
35 completely different locations, and the YNAP platforms provides the opportunity to customers to have the access to every store online, make the purchase right from the store with the delivery to their doors (Ynap.com).
Some of the most important statistical and financial information of the YNAP company are demonstrated in Table 3 below.
Factors Values (approximate)
Net Revenues 2.1 billion EUROS
Countries Served 180
Employees 4500
Client Base per month 3 millions
Average Order Value 328 EUROS
Operational Languages 11
Orders per month 9.5 millions
Physical Distribution Centers 8
Customer Care Centers 11 Table 3: Financial and Statistical data for the year 2017 of ynap.com. Accessed on April 2018.
5.2 Luxury WebPage
The first and the essential point of the contact if the luxury brand online and a customer is a homepage of the brand (Okonkwo, 2005). The design and the customization of the website significantly influence the perception if a shopper of the uniqueness of the luxury products. Most important components of the webpage of a luxury store are the language, methods of the payment, currency, information of a product and range, communication, etc.
36 Ynap.com provide the opportunity to the customer to choose the language between
English and Italian on the main homepage (right on the top, see picture below).
Source: ynap.com, accessed on April 2018, Official Webpage
Moreover, when, for instance, the shopper clicks to the multi-brand store - yoox.com, the customer can choose the country from the list of 102 different countries, and the website automatically translates the complete webpage to the language of a chosen country. The same system works for every store of the YNAP e-commerce company.
However, the subsequent analysis of the webpage will consider yoox.com online store only.
Regarding the communication of the webpage with the customer, yoox.com and the other analogous online stores of the YNAP company, are focused on the old and new visitors. For example, for the new potential customer, the “frequently asked questions
(FAQs)” section gives the opportunity to engage with the website through the questions
37 and answers that might hesitate to purchase the products. The given section contains the information and questions about the shipping and returns policies, refund system, payment, technical help (yoox.com). As for the returning users, the company has created the widgets that are designed to navigate the shopper and present the most matching stores based on the previous research requests and the orders. It is crucial to engage the shopper from the beginning and reassure with the vital information before making the purchase.
As for the currency of the luxury products, it depends on the chosen country. The most used currencies are US dollars and Euros. As for the exception, for the United
Kingdom, the website provides prices in pounds.
The sizing system of the cloth represents a challenge for the online businesses because in different countries the sizing of the cloth is different. Some designers are not using the most common range of sizes from XS to XL. Therefore, the sizing system of the website is presented in four global sizing scales: French, Italia, UK, US. Also, in the section of FAQs, the detailed guidance of every type of cloth is created to help the customers.
As an example of the navigation of the website (see picture below), the blazer by luxury designer Balenciaga is presented. It is seen, the system of navigation is simple in use, the design is sophisticated in black and white colors, size guide on the right side helps to compare to the other global sizing scales, and detailed pictures with the possibility to zoom the chosen product are the key elements. Below the pictures of the product, the website presents the composition and details of the item and information on shipping
38 times and costs. Also, on the bottom the page, the website generates the selection of other products, the sectors are called “you may also like” and “more by this designer.”
Source: yoox.com, accessed on April 2018.
5.3 SWOT Analysis
SWOT analysis is a planning tool that enables individuals to evaluate the business and develop the excellent business strategy. SWOT abbreviation stands for the strength, weaknesses, opportunities, and threats. Given the type of analysis is used to organize the data correctly, determine issues, solutions to the issues, and propose opportunities of the business (Hamon, 2015). Strength and weaknesses are considered to be the internal factors of the company, while threats and opportunities are external factors of the company.
39
The first aspect is the strength of the Yoox Net-a-Porter online business, the company operates on the e-commerce platform, so the advantages of it are the global reach of the customers, operating for various geographical regions, and a wide range of products that gives the ability to meet the different needs of the luxury customers. Also, the convenience of purchasing online to the customers eliminates the need to be present physically in the store. Driving less means producing less of the harmful substances to the environment, the result is being more eco-friendly (Allen & Fjermestad, 2001). In support of sustainability, YNAP commits the sustainability developments and promotes the YOOXYGEN online market that is dedicated to the sustainable fashion only
(ynap.com). The most valuable advantage that the online businesses have is a cost difference comparing to the traditional office-based business. The fees for the setting webpage are significantly less than the payments for the lease and other physical attributes. The return policy, for instance, Yoox provides the possibility to return the item within 20 days of the delivery date (yoox.com).
The weaknesses, the internal problems of the YNAP includes the absence of the direct interaction between customer and seller. Given issue involves every electronic business.
Especially for the customers of a luxury store, the inability to touch and feel the product becomes a more complicated issue to establish trust (Kapferer & Bastien, 2009).
Another weakness of the Yoox Net-a-Porter is the lack of the awareness of a brand while entering new markets. For instance, Net-a-Porter is not a brand, and it is crucial for consumers to be aware of its existence prior shopping on the website. Next weakness is the absence of the contact among the customers to get reviews on the website. From the author's personal shopping experience using yoox.com platform, lack
40 of communication and sharing of experiences among other users served as insufficiency of complete satisfaction with the online store.
YNAP as a part of the growing digital market has numerous opportunities. First, the opportunity for future collaborations. At the moment, YNAP does not involve the complete luxury market; there are brands such as Louis Vuitton, Fendi, and others that do not present their products on the Yoox Net-a-Porter online platform. Next opportunity for the company is to include more of children, home, beauty and expand men’s market (Mr.Porter). Most of the items presented in the online shops are belongs to the women clothing. Therefore, diversity of the assortment of the products can help the business to grow by increasing the sales to the existing customers as well as to the different group of customers and, also, it can help in entering new markets. Another opportunity is the chance for the less known and new designers to rise in the luxury fashion industry through the using a stable platform. The last opportunity for the given business is the rapid growth of the luxury industry in the emerging markets such as
Russia, Brazil, India, etc.
The last part of SWOT analysis is Threat that the company can have. The main threat the YNAP can face is the increasing competition in the digital market from the competitions such as Farfetch.com, Asos.com, and TheOutlet.com. Given online stores offers similar types of the items and growth of those businesses can significantly harm the YNAP company. Next threat is the currency fluctuation, by using international business transactions such as exporting, paying to the foreign account, and importing - the currency value can have a critical impact on business. The fluctuations of market influencing everything in business operations, it makes difficult to predict future losses
41 and the profits. Another threat the YNAP is faced with is the logistic difficulties in different countries because in every country shipping terms differ. The last threat is the fraud and the problems with the security of the website. The YNAP is an online platform, and like any other online activity, it can be hacked by the IT specialist for many different reasons. Also, dissatisfaction with the product of a customer can relate to the given aspect of threat and can lead to the loss of the potential customers.
5.4 Efficiency of the online retailing platform
One of the most important factors that relate to the purchase and service efficiency for the luxury customers is the how fast the interaction between buyer and the shop goes
(Kapferer & Bastien, 2009). Without any doubts, it is the crucial factor for the online businesses. Nevertheless, there are other essential factors of the efficiency of the luxury shopping online. The way how the online business provides service has a significant meaning for the customers. For instance, based on my personal experience shopping with Net-a-Porter store, after a purchasing the product, for instance, from New York, after a couple of days, the product arrives in a personalized package from the store with a small picture card of the New York City. The small act like this makes the customer feel unique and sophisticated.
Especially for the stores that offer luxury items, it is crucial to provide the same atmosphere and experience of purchasing online as purchasing offline to the customer.
The experience of shopping on of the YNAP luxury stores is similar to the shopping in the physical or department stores: personalized guide, detailed images, possibility to add several products to the shopping cart, and simple checkout procedure with the set of terms and conditions that applied to every luxury customer. Also, the sophisticated
42 design, colors, pictures, and videos on the webpage create the right ambiance to the visitor of the website.
Another critical factor is a product; the product makes the online platform to be considered as the luxury and the opposite, the luxury platform identifies on what level the brand is located. For the luxury buyers online, having a vast product range and unique items from the most known designers is crucial. Every store that is part of the
YNAP group has the educational content that introduces the brand and the brand story of each designer to the e-commerce shoppers. In this way, online platform engages the customer with the brand and the content.
As for the payment method, the company provides different methods of payment and security. There is a possibility to pay with every type of a credit card and paying systems such as PayPal (net-a-porter.com). To secure the shopping experience, the website has created the Secure Socket Layer (SSL) technology. Given system protects and encrypts the information that is sent over the Internet. Also, the online stores are registered with the cybertrust that keeps the data private during the transit between the web-browser and the web-server (ynap.com).
For today, every luxury retailer is trying to find the fastest way to deliver and ship the product. Every YNAP store offers delivery within 3-5 working days to any country from the list. However, based on the latest news, the company has introduced the same- day delivery program for London, Manhattan, Connecticut, and Hong Kong cities
(ynap.com). Also, the YNAP provides the service for Extremely Important People (EIP)
43 that is called “You Try, We Wait and At Home Shopping Consultations for EIP”. Given program for some customers brings the feeling of exclusivity and personal approach.
Luxury products are associated with the high price, so the opportunity to return the item plays a vital role for the luxury customers. Customers are sensitive to the quality of the luxury product more than to the price (Besler, 2007). By buying luxury products, people spend thousands of euros, and they want to be sure that the products can be returned without any problems. Therefore, the free return policy makes the shopping for the first time more attractive to the customer. YNAP stores state that there are 30 days to return one or more items of the delivery date.
It is not an easy task to get the loyalty by a customer on the online platform because e- commerce shopper can find one jacket in many other online retailers. Also, usually wins the one that offers the most relevant experience of the shopping: gives better terms and conditions of returns, delivery, present easier navigation system, and better product range.
5.5 Key Success Factors
Considering the luxury experience of shopping with the ynap.com, it is visible that the main factors of the success of luxury electronic commerce are the qualified service, return policies, the functionality of the homepage, effectiveness of the team, and product range.
44
The provided service to the customers is one of the most important factors that serves as a key to the royalty of the luxury buyer. The online luxury industry is a rapidly growing within 25% of the growth a year, but ynap.com growth much faster (ynap.com). It happens because of the level of the service and the unique products. Besides, the online business provides the service of the “click and collect,” it allows the buyers to purchase the products from any store of the website and try them and return without any extra fees. As it was discussed before, the same-day delivery program and the program for
EIP demonstrate the ability of the company to provide the most convenient and fastest approach, while the competitors such as Farfetch.com and others are still in the process of proposing the same-day delivery program to its customers. It brings YNAP group to the leading position among other luxury online retailers. Given factors are definitely the key factors of the success of the company.
The other success factor of the YNAP group is the appropriate website that provides e- commerce shoppers the specific and exclusive experience and feelings. The website is a crucial part of selling the luxury items online (Okonkwo, 2007). The recreation of the atmosphere of the luxury store is called web-atmospherics. According to the Okonkwo
(2007), the right web-atmospherics results in higher purchase and customer loyalty.
YNAP puts enormous effort into making the atmosphere of the online stores as much luxurious and straightforward as possible. It is achieved through the functional navigation system, visuals, and sometimes sounds.
45 Next element is an effective and professional team of the e-commerce business. YNAP officially calls its team as a “Global Dream Team.” The success of a corporation directly linked to the effectiveness of the management and the employees. Yoox Net-a-
Porter company employs over 4500 people worldwide, employees are representatives over 75 nationalities with the average age of 33 years old, and approximately 60% of the workers are women (ynap.com).
As for the product range, YNAP is a company that owns several online luxury stores.
Therefore, the sum of presented designers and fashion house of the all online stores such as yoox.com and net-a-porter.com, has the most extensive unrivaled product offer on the market among other online luxury retailers.
To demonstrate the trust and loyalty of the YNAP customer, company on the official website presents some interesting facts to the visitors. First is that there are customers who spend more than 1 million euros on shopping annually. Next is the watch valued at the price of 133,000 euros was sold in one of the multi-brand stores of YNAP. Using the
WhatsApp social network, the 80,000 euros watch was sold in the Middle East
(ynap.com). Given factors describes how the customers are trustful and willing to assign the huge amount of money to the company of Yoox Net-a-Porter.
5.6 Online Brand Communities
In the today’s digitalized world, people can have direct access to every store, find every product, and share their experience and opinions on the forums and specific websites with other people. The presence of the luxury brands on the online platform is rapidly growing with the digitalization of the world, and the Online Brand Communities
(OBCs) requires serious consideration on behalf of the marketers that focus on the
46 digital marketplace (Ouwersloot & Odekerken, 2008). Online Brand Communities are the communities that are not bounded geographically and structured based on the social relations of people that have the preference for the particular brand (Muniz & O’Guinn,
2001). There are two main types of the relationships of the Online Brand Communities.
The first type states the relationship between the fashion brand and the buyer while, the second one is the relationships between the members of the communities (Muniz &
O’Guinn, 2001). The second connection in practice appears as a more important and valuable one. The potential buyer is a part of the specific community has a chance to acquire the useful information and learn the experiences of the established members. As for the primary motivation for customers being the part of the community is the searching the information (Muniz & O’Guinn, 2001). Given factor has the effect on the image of the fashion brand and the increasing of sales.
OBCs is one of the most influential tools to affect the behavior of the potential customer, and it can appear as a critical instrument of marketing strategy. Therefore, for businesses OBCs provides the opportunities to influence the purchasing way of acting of the customers and learn the customer’s needs and wants by observing their suggestions, opinions, and the information (Ouwersloot & Odekerken, 2008).
According to the Muniz and O’Guinn (2001), Online Brand Communities include three main indicators. The first component is a connection between the members and the sense of being one group, the collective sense of a community. Given sense makes people feel different from other brands outside of the community. The second aspect is a traditions and certain norms that are aimed to protect the culture of the group of people. The last indicator of OBCs is the obligations of the members to the community.
47 It can be seen when the community has any kind of difficulties, the sense of responsibility has an impact on the collective acts of the community members.
For numerous luxury brands, by sharing the ideas and possibility to make comments,
OBCs are creating the trusting relationship between the businesses and their customers
(Okonkwo, 2010). Those communities provide the opportunity to people to communicate with each other without any limitation in time and place.
In the case of YNAP company, Online Brand Communities plays a crucial role in the main market strategy of the store. The strategy involves the brand presence on the social networks such as Instagram, Facebook, Youtube and Twitter. However, the YNAP and its multi-brand stores is only a platform for selling today. Thus, the concept of the company is unique because given platform is a connection bridge to the exclusive designers and products. YNAP can be viewed as a community itself that involves luxury stores, bloggers, artists, stylists and others. For instance, the Instagram page of Net-a-
Porter has more than three million followers that clearly demonstrates the level of engagement of the customers.
48 Chapter 6: Conclusion
Given chapter will present the central concluding section. First is the conclusion that is drawn from the primary aim of the study and research question. The part includes the finding of the research. The next part develops an implementation of the study to the practice, leading findings and propose the future directions to the company and luxury online businesses as a whole.
6.1 Conclusion
The study provides the research on the implementation of the electronic commerce on the luxury industry (clothing). Given work was developed on the relevant academic literature on e-commerce theory, digital marketing, concepts of luxury, luxury brand management and luxury brands online. Also, the case study on Yoox Net-a-Porter discusses the key elements of overcoming the issue of keeping the exclusivity of the products and the Internet ubiquity. The key components of the successful presence of luxury brands online are the product range, the service, the website, and the Online
Brand Communities. Luxury electronic commerce platforms are aims to provide the most sufficient data and possibilities to the customer to get the unforgettable experience from the process of buying on the online platform by providing the exclusive service.
In the omnipresent environment of the Internet marketplace, the given key success factors keep the exclusivity of the luxury products. The essential points of the selling luxury products online comes from the side of the stores and from the side of the buyers. For today, the fashion brands on the online platform are challenge the whole industry of fashion, and also put effort on educating the potential customer.
49 The literature presented in the first chapters clearly presents that there are various uncovered issues. Some authors have identified that the luxury have to avoid the presence on e-commerce, whereas the others researchers have stated that the Internet presence has a great potential as a communication channel for the luxury brands. Also, the paper presents the advantages and success factors of the luxury brands that are independent boutiques being present online such as Louis Vuitton, Gucci, and Burberry.
Some successful brands are using celebrity endorsement, entertainment videos, or sophisticated design to achieve the target audience.
One of the most significant factors of luxury brands both independent or in cooperation, is the opportunity to become present worldwide and capture the international audience.
Also, the presence on the Internet platform serves as a tool for the developing the brick and mortar shopping and increase the value of a brand by making the certain the brand more known. Electronic commerce develops the offline shopping in the way that it provides the chance to the new established designers and the brands to appear on the market more known, more famous for the bigger sized audience and given factors, in fact, has a crucial importance for the different brands in various countries. On the other hand, the opposite within the physical shopping, it has an impact on the shopping online. It happens when the customer is satisfied with the product of a luxury brand in the physical shops and the shopper is more inclined to become more loyal to the online shopping of those brands. The luxury customers are satisfied with the quality of the product they are willing to revisit the store both physical and online.
The case study of Ynap.com presented in the work discovered some findings. YNAP company is an excellent example of the successful online platform distributing luxury
50 fashion products. It has a high-leveled personalised service such as programs for the significant people and one-day shipping that encourage luxury customers to purchase for the first time or purchase the luxury products again. Another aspect, given online platform is a multi-channel platform that helps to discover new designers and improve the buying experience. Also, the key factors of the simple navigation, return policies, design of the webpage, and range of the products are presented in the YNAP stores on the most effective and high level.
In addition, it is crucial to understand the rapid growth of luxury and digital industries and working on the development and new innovations of the omni-channel strategies.
For instance, the new challenge for the luxury brands online can be the mobile commerce or creating the concepts of the futuristic online luxury stores such as online showrooms, and so on. For today, every luxury stores of the YNAP family have launched the free applications that allow shopper to familiarize with the brand and shop in a few clicks. However, the mobile commerce is need to continue to innovate and develop. As for the future of the luxury shopping online is the using various small warehouses to distribute the products globally and in the fastest way possible.
51 References
Allen, E. & Fjermestad, J. (2001). E-commerce marketing strategies: an integrated framework and case analysis. Logistics Information Management, Volume 14. Number 1/2. 2001. pp. 14-23
Alrawi, K. (2007). The internet and international marketing, Competitiveness Review. An International Business Journal, Vol. 17 No. 4, 2007,pp. 220-233
Astound, C. B. (2014). How we were doing Luxury. Retrieved on April 2018, from http://astoundcommerce.com/blog
Atwal, G. and Williams, A. (2009). Luxury Brand Marketing – The Experience is Everything! Journal of Brand Management, Vol. 16 No 5/6, pp. 338-346.
Bastien, V. & Kapferer, J. (2008). Luxe Oblige, 6e edn, Groupe Eyrolles, France.
Baur, C. and Glasson, B. (1999). A classification framework for electronic commerce research"
Besler, C. (2007). Getting to know the U.S. luxury consumer (II). Retrieved April 2018, from https://journal.hautehorlogerie.org/en/article/getting-to-know-the-us-luxury- consumer- ii/
Berthon, P., Pitt, L., Plangger, K., & Shapiro, D. (2012). Marketing meets Web 2.0, social media, and creative customers: Implications for international marketing strategy. Elsevier, Business Horizons
Cambridge University Press. (2017). Cambridge Online Dictionary. Cambridge Dictionary online. Retrieved December 2017, from https://dictionary.cambridge.org/dictionary/english/exclusivity
Chaffey, D. (2009). E-business and e-commerce management – Strategy, implementation and practice. Fourth Edition. Prentice Hall
Chevalier, M., and Mazzalovo, G. (2008), Luxury Brand Management: A World of Privilege, Singapore: Wiley.
52 Chong, S. (2008). Success in electronic commerce Implementation, A cross- country study of small and medium-sized enterprises, Journal of Enterprise Information Management, Vol. 21 No. 5
Clarke, R. (2005). The past, present and future of B2C e-commerce. Statement for a panel session "Let's go shopping". Retrieved March 2018, from www.anu.edu.au/people/Roger.Clarke/EC/B2C-0509.html
Constantinides, E. (2004). Influencing the online consumers’ behaviour: the Web experience. Internet Research, Vol. 14, No (2), pp. 111-126
Danziger P., (2011). Luxury Trend Report. Affluent Consumers and How They Use the Internet, Social Media and Mobile Devices: an In-depth Profile of the Online Luxury Customer. Retrieved December 2017, from http://www.unitymarketingonline.com/cms_luxury/luxury/luxury3/Internet_ Social_Mobile_Media_1-26-2011.php
D'Arpizio, C. (2014). Luxury Goods WorldWide Market Study Winter 2014. Retrieved March 2018, from http://bain.com/publications/articles/luxury-goods- worldwide- markey-study-winter-2014.aspx
Dauriz, L., Michetti, A., Sandri, N., & Zocchi, A. (2013). Digital Luxury Experience: Keeping up with changing customers. Retrieved December 2017, from http://www.mckinseyonmarketingandsales.com/digital-luxury-experience-keeping- up- with-changing-customers
Duncan, E. (2016). Global Luxury Goods Industry – Statistics & Facts. The Statistics Portal
Evans, P., Wurster, T.S. (1999). Getting real about virtual commerce, Harvard Business Review
Gosh, S. (1998). Making business sense of the Internet. Harvard Business Review
Griggs, J. (2011). Art and Fashion in the 20th Century: Coco Chanel.
Harmon, A. (2015). SWOT analysis. Salem Press Encyclopedia.
53 Harris, F., Chernatony L., (2001). Corporate branding and corporate brand performance. European Journal of Marketing, Vol. 35
Hennings, N., Wiedmann, K.-P. and Klarmann, C. (2012). Luxury brands in the digital age – exclusivity versus ubiquity. Marketing Review St. Gallen.
Hennig-Thurau, T., Gwinner, K., Walsh, G. and Gremler, D.D. (2004). Electronic word- of-mouth via consumer-opinion platforms: What motivates consumers to articulate themselves on the Internet? Journal of Interactive Marketing, 18(1), pp.38–52.
Iansiti, M. and Lakhani, K. (2014). Digital Uniquity: How Connections, Sensors, and Data are Revolutionizing Business. Harvard Business Review.
Kane, M. (1999). Registers are ringing online. ZDNet/Yahoo! News. Retrieved March 2018, from http://dailynews.yahoo.com/h/zd/19991207/tc/ 19991207043.html
Kapferer, J.-N. (1997). Strategic Brand Management. Great Britain: Kogan Page.
Kapferer, J. N., & Bastien, V. (2009). The Luxury Strategy – Break the Rules of Marketing to Build Luxury Brands. London: Kogan Page.
Klein, L., Quelch, J.A. (1996). The Internet and international marketing, Sloan Management Review, Vol. 37 No. 3.
Kotler, P. (1991). Marketing Management: Analysis, Planning, Implementation, & Control. Prentice-Hall, Englewood Cliffs, NJ.
Lakenya, K. (2017). What Does Couture Mean - Definition and French Translation. The Dapifer
Muniz, A. M. and OʹGuinn, T. C. (2001). Brand community. Journal of Consumer Research, Vol. 27, No 4, pp. 412–432.
Munster, R. (2014). Engagement of E-marketing by Luxury Brands, including an Empirical Study
54 Nyeck, S. and Roux, E. (1997). WWW as a communication tool for luxury brands : compared perceptions of consumers and managers. 24th International Research Seminar in Marketing, Communications and Consumer Behavior
Nyeck, S. and Houde, S. (1996). L’implantation des entreprises de luxe sur le www: un état des lieux. Décisions Marketing
Okonkwo, U. (2005). Can the Luxury fashion brand store atmosphere be transferred to the Internet? Brand Channel.
Okonkwo, U. (2007). Luxury Fashion Branding. London: Palgrave Macmillan.
Okonkwo, U. (2009). Sustaining the luxury brand on the internet. Journal of Brand Management, Vol. 16
Okonkwo, U. (2010). Luxury Online – Styles, Systems, Strategies. London: Palgrave Macmillan.
Ouwersloot, H, Odekerken, S., G. (2008). Who’s who in brand communities—And why?. European Journal of Marketing, Vol. 42, No 5/6, pp. 571–585.
Phau, I. and Prendergast, G. (2000). Consuming luxury brands: the relevance of the “rarity principle”. Journal of Brand Management
Rayport, J., Jaworski, B. (2002). Introduction to e-commerce (2nd Ed). Mc Graw Hill, Singapore.
Rayport, J., Sviokla, J. (1994). Managing in the marketplace. Harvard Business Review, November, pp. 140-50.
Roux, E. (1991). How the luxury brands are positioned. French Marketing Review
Ryan, F. (2009). Technology will boost consumers’ global power. Caribbean Business, Vol. 37, No 9
Sheth, J., Sharma, A. (2005). International E-Marketing: Opportunities and Issues. International Marketing Review
55 Schneider, G. (2011). Electronic commerce. Ninth Edition. Course technology. Cengage Learning SGP: World Scientific Publishing Co.
Stockdale, R. & Standing, C. (2004). Benefits and barriers of electronic marketplace participation: an SME perspective,.The Journal of Enterprise Information Management
Thompson, F., Corner, J. L. (2005). Perceived Risk, the Internet Shopping Experience and Online Purchasing Behavior: A New Zealand Perspective. Journal of Electronic Commerce in Organizations
Tuten, T. (2008). Advertising 2.0: Social Media Marketing in a Web 2.0 World. Praeger
Varian, Hal (1992). Choice. Microeconomic Analysis (Third ed.). New York: W.W. Norton
Vigneron, F., Johnson, L. (1999). A review and a conceptual framework of prestige- seeking consumer behaviour
Vigneron, F., Johnson, L. (2004). Measuring perceptions of brand luxury. Journal of Brand Management, Vol. 11, No 6, pp. 484-506
Xia, L. A., Burns, C., Hou, Y. (2013). Comparing online and in-store shopping behavior towards luxury goods. International Journal of Retail & Distribution Management, 41, No 11/12, pp. 885 – 900.
Xu, J., Quaddus, M. (2009). E-Business in the 21st Century: Realities, Challenges and Outlook. SGP: World Scientific Publishing Co., Retrieved March 2018, from http://site.ebrary.com/lib/kaubib/Doc?id=10422509&ppg=301
Yoox Net-a-porter Group – Ynap.com. Retrieved April 2018, from http://www.ynap.com/
Yoox Company - yoox.com, Retrieved April 2018, from http://www.yoox.com/
56