THE PENNSYLVANIA STATE UNIVERSITY SCHREYER HONORS COLLEGE DEPARTMENT OF INFORMATION SCIENCES AND TECHNOLOGY LUXURY FASHION: FROM BRICK & MORTAR TO E-COMMERCE GRACE MORGAN SPRING 2020 A thesis submitted in partial fulfillment of the requirements for a baccalaureate degree Information Sciences and Technology with honors in Information Sciences and Technology Reviewed and approved* by the following: David Fusco Assistant Teaching Professor of Information Sciences and Technology Thesis Supervisor David Fusco Assistant Teaching Professor of Information Sciences and Technology Honors Advisor Marc Friedenberg Assistant Teaching Professor of Information Sciences and Technology Faculty Reader * Electronic approvals are on file. i ABSTRACT With the massive growth of e-commerce over the years, it seems like there is no store that is not online. The idea of transforming a physical store into an online e-commerce format may seem like it would not be a difficult task for brand. However, what if the brand had a deeply rooted history that was centered around the feeling of exclusivity and their store was centered around the idea of desirability? This thesis aims to take a closer look at the intersection of e-commerce and luxury fashion industry, an industry centered around creating a feeling of exclusivity. It will take a look into the beginnings of e-commerce and its ubiquity. It will also look at exactly what the concept of luxury is and what the modern-day luxury fashion industry looks like. Next, it will delve into the luxury fashion industry’s adoption of e-commerce, beginning with the industry’s initial hesitance towards embracing e-commerce. Finally, it will analyze what luxury e-commerce will look like in the coming years and how it is expected to grow and change. ii TABLE OF CONTENTS LIST OF FIGURES .................................................................................................... iii ACKNOWLEDGEMENTS ......................................................................................... iv Chapter 1 Introduction ................................................................................................. 1 1.1 Methodology.................................................................................................. 2 Chapter 2 A Brief History of E-Commerce ................................................................. 3 2.1 The Beginnings of E-Commerce .................................................................... 3 2.2 E-Commerce Begins to Grow ......................................................................... 4 2.3 The Internet Changes Everything ................................................................... 5 2.4 E-Commerce Enters into the New Millennium .............................................. 6 Chapter 3 A Brief Overview of Luxury Fashion ......................................................... 7 3.1 The Concept of “Luxury” ............................................................................... 7 3.2 The Luxury Fashion Industry ......................................................................... 8 Chapter 4 The Luxury Fashion Industry and E-Commerce ......................................... 10 4.1 The Luxury Fashion Industry’s Initial Hesitance Towards E-Commerce ...... 10 4.2 Luxury Fashion Begins to Embrace E-Commerce ......................................... 12 4.3 E-Commerce Use Begins to Grow Amongst Luxury Brands ......................... 13 4.4 Luxury Fashion Brands Translate Their Luxury Image to E-Commerce ....... 15 4.4.1 Inclusion of Videos............................................................................... 16 4.4.2 Developed Product Descriptions .......................................................... 17 4.4.3 Quality E-Service ................................................................................. 17 4.5 Luxury E-Commerce’s Growth Throughout the Years .................................. 18 Chapter 5 Future Trends .............................................................................................. 20 5.1 The Predicted Growth of Luxury E-Commerce ............................................. 20 5.2 Predicted Trends for Luxury E-Commerce .................................................... 24 5.2.1 A Personalized Online Shopping Experience ....................................... 24 5.2.2 The Rise of Mobile Online Luxury Shopping ...................................... 25 5.2.3 Using Data to Build Relationships with Consumers ............................ 26 5.2.4 Digital Video Storytelling to Engage Consumers ................................ 26 5.3 The COVID-19 Crisis ..................................................................................... 27 Chapter 6 Conclusion ................................................................................................... 29 iii BIBLIOGRAPHY ........................................................................................................ 31 iv LIST OF FIGURES Figure 1. Predicted S-Curve for E-Commerce as a % of Total Luxury Revenue ........ 21 Figure 2. Luxury Online Shopping Popularity for Different Generations ................... 23 v ACKNOWLEDGEMENTS I would like to thank for Professor Dave Fusco for his guidance along the way as I completed this research. I would also like to thank Professor Marc Friedenberg for his guidance during a particularly difficult time in completing this thesis. Finally, I would like to thank my parents, Kathy and Dave Morgan, for being both the greatest parents and continuously encouraging me to be the best version of myself. Over the years, they have reminded me that there is nothing that I cannot achieve if I put my mind and hard work into it. Also, thank you for showing me what it means to be Penn Stater and how one-of-a-kind this university is. Penn State forever. 1 Chapter 1 Introduction The luxury fashion industry that is known today began in the 1920s, just around 100 years ago. Back then, there was no Internet, and no one would have been able to predict the impact of the Internet would have on this industry. Long gone are the days when shopping for clothes solely entailed going into a physical store to purchase such items. In today’s world, the rise of the internet has led to the rise in use of e-commerce websites for online shopping. The intersection between luxury fashion and technology is more prevalent than ever, especially in terms of e- commerce. Convenience, ease of use, and the ability to shop internationally have all been cited as reasons as to why consumers choose to shop online (Nielsen, 1999). Consumers are starting to place a significant amount of value on the convenience and instant gratification that comes with shopping online. E-commerce sites are causing a shift away from traditional brick and mortar stores, as well as causing a shift within in the world of luxury fashion. Luxury fashion brands have been amongst the most resistant sectors of retail to launch into the use of e-commerce. The reason these brands have avoided the use of e-commerce is that they felt like it would weaken the luxury brand’s image, as well as lessen the sense of exclusivity that these brands try to cultivate (Beauloye, 2019). However, this is no longer the case. Luxury fashion brands are starting to realize the opportunities that e-commerce presents to increase their business and satisfy their current consumers. Digital entrepreneur, luxury marketer, and expert in digital luxury Florine Eppe Beauloye said, “E-retail sites are opening the doors to the world’s best luxury boutiques — boutiques that are open 24/7, without geographical borders. So, this 2 channel is both the next big challenge and a big opportunity for luxury brands,” (Beauloye, 2019). This thesis intends to take a deeper look at the adoption of e-commerce by luxury fashion brands to understand the shift that is happening from traditional brick and mortar stores to e- commerce sites as a means of purchasing luxury goods. To do this, this research will look at luxury e-commerce from both the business side, as well as the consumer viewpoint. This thesis will continue next with the methodology that will be used for conducting this analysis. From there, it will discuss the history of e-commerce in order to first understand this entity separately. Further, it will explore the intersection of e-commerce and luxury fashion, including the history, how luxury fashion is utilizing e-commerce, and the trends seen from this intersection. Finally, this research will conclude with a discussion and analysis on the future trends that are expected to emerge from luxury e-commerce. 1.1 Methodology For this thesis, a secondary information and data analysis review will be utilized as the primary means of research. Various articles, publications by companies, and scholarly papers and journals were reviewed and analyzed for information and data points relating to luxury fashion brands’ adoption of e-commerce. These sources were very beneficial as they often incorporated information from experts in this field, information from luxury fashion brand owners, data and visuals that were helpful in understanding more about this topic. All of this information useful for garnering a more thorough insight into luxury e-commerce. 3 Chapter 2 A Brief History of E-Commerce To begin, it is first important to understand what e-commerce is in its simplest form. Electronic commerce1, or e-commerce, is defined to be “the buying and selling of good or services using the internet, and the transfer of