Luxury Brands Are Selling to Direct Customers

Source : Gucci

Source : Gucci

In the fashion industry, it is not easy for a brand to establish a network of global retail store to reach potential customers as it costs a lot and also require complicated efforts. Hence, many brands rely on multi-brand retailers to be their main source of connection to consumers.

GROWTH OF THE DIGITAL ERA

Thanks to the growth of e-commerce and social media, brands are capable of connecting and selling directly to their customers, transitioning the balance of power between brands and retailers. Brands can control their own consumer experience and have more power over their relationship with clients. By using digital platforms and tools , brands are open to new channels which help to broaden customer reach resulting in driving their financial performance.

INVESTING IN DIGITAL BUSINESS

A report from Gartner L2 showed that companies like LVMH, Kering and Richemont obtained increased annual sales from their brands’ directly operated stores and e-commerce over the past years. The investments the brands made years ago in their digital businesses are paying off, directly operated store are still the main source of revenue but e-commerce is driving a lot of the growth.

Source : Gartner

Source : Gartner

DIRECT SALES COME WITH A COST

The margin of the products are better as brands do not have to give a cut of sales to retailers. They also get a lot more control over their image, the presentation and the story behind the products online or in-stores. Most importantly, brands get more detailed customer data that they don’t usually get from their wholesale partners. However when brands do sales directly, they need to handle own logistics and costly returns. They also have to pay for ads and manage ways to drive traffic.

To brands, the returns of investments in direct sales are worthwhile.  It is crucial today for brands to develop a bigger direct customer business because customers have to understand the brand as a whole from inside out.


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