luxuryecomm blog

By Charles Whiteman, SVP Client Services, MotionPoint

Historically, the luxury retail industry has been slow to adopt e-commerce. And who can blame these reputation-savvy companies? The web can often lack the civility most premier brands covet -- to say nothing of e-commerce’s mass-market sales approach, which lacks an intimate, consultative sales experience.

But things are changing. About 60% of luxury brands now sell online, far more than in years past. Indeed, luxury retailers “have come to believe that the future of their business and a route to global expansion lie online,” a 2015 New York Times business feature said.

What’s with the industry-wide pivot? Brands are learning that today’s new generation of luxury customers are younger, digital-savvy, pressed for time -- and above all, very practical. As a result, the luxury e-commerce industry is seeing much larger growth than many other sectors. (In fact, e-commerce has been called “the ‘next China’ for luxury in terms of opportunity,” one analyst recently said.)

Selling online is paying off. Luxury e-commerce sales will reach $21 billion by 2020, says a recent McKinsey report. Much of this growth will unfold in emerging markets.

Based on our research and experience localizing luxury and premiere brand websites for global markets, we’ve identified four markets that are largely untapped by the online luxury industry, have strong economies and a demonstrated appetite for online shopping.

India

Recent economic growth has bode very well for India’s consumer spending, particularly its luxury e-commerce.

The country is already the world’s second-largest luxury e-commerce market, after China. Its population is embracing smartphone and tablet shopping more quickly than most emerging markets: seven out of every 10 Internet connections are mobile devices. And India’s 300 million Internet users are doing more than browsing -- they’re transacting.

One report says the luxury e-commerce space here will hit $25 billion this year, with an annual compound growth of 25%. Our experts believe most sales will happen in the high-end watches, accessories and apparel categories.

And despite being the world’s No. 2 luxury e-commerce market, there’s not much competition in the space, our experts say. Indeed, only 30% of the 500 leading international luxury brands have a presence in India. (In contrast, China has 70%.) That’s good news for first movers.

Between the country’s rising middle class and favorable FDI rules, India is a solid e-commerce market for luxury brands to consider.

Iran

According to a recent TechCrunch article, Iran’s e-commerce industry has thrived for years, operating in a self-sufficient state due to years-long economic sanctions. Nearly 40% of Iranians shop online at least once a month.

And as sanctions are lifting, so are the number of foreign brands engaging the market via e-commerce. “More international brands are flocking to Iran, therefore the availability of various products is increasing and so is the demand,” an expert told TechCrunch.

First-mover luxury brands can win big here. Tehran is already one of the world’s fastest-emerging luxury travel destinations, and brands know it. “It’s very wealthy,” Bulgari’s CEO Jean-Christophe Babin recently said, “and you have a population in Iran, which has been used to luxury. Iran will be the next big thing in the Middle East.”

And with good reason. Compared to other countries, Iran’s population has higher disposable incomes than most. The International Monetary Fund reports that the country’s per-capita GDP is $16,500—more than China, India and Brazil.

Thailand

With luxury expenditures of $2.5 billion, Thailand represents the largest luxury goods market in Southeast Asia. Most of this is attributable to low housing costs and high disposable incomes. More than 20% of Thailand’s population earn more than $150,000 annually. These consumers are between 30 to 34 years old -- prime targets for luxury spending.

Another increasingly affluent section of the population? Residents between 35 and 39 years old. They represent about 19% of the population.

Combine this affluence with robust Internet penetration (nearly 55%), and a mobile adoption rate that’s positively jaw-dropping (150%), and you’ve got a market primed for luxury e-commerce engagement. And mobile e-commerce, too: analysts believe m-commerce is the “last explosive sales channel” for luxury retailers.

Poland

Other nations are still struggling with sagging economies, but Poland isn’t one of them. The market’s “GDP per capita based on purchasing power exceeded $24,000 and reached 65% of the Western European (eurozone) level of income,” Brookings recently reported.

This is a greater achievement than you might think: it’s the first time Poland has had such regional economic parity since the 1500s.

This year, Poland’s luxury expenditures will hit about $3.4 billion. Its overall e-commerce spending will grow to $12 billion during this time, indicating a clear opportunity for luxury e-commerce.

At 67%, Poland’s Internet adoption rate is very good, too. We believe Poland is an ideal frontier for clients who want to enter an economically stable and safe central European market.

 

Charles Whiteman is senior vice president of client services at MotionPoint Corporation, the world’s #1 enterprise localization platform. He may be reached at cwhiteman@motionpoint.com. MotionPoint is headquartered in Coconut Creek, Fla.

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