{"id":465,"date":"2015-08-20T00:00:00","date_gmt":"2015-08-20T00:00:00","guid":{"rendered":"https:\/\/www.motionpoint.com\/?post_type=blog&p=465"},"modified":"2024-02-07T13:42:26","modified_gmt":"2024-02-07T18:42:26","slug":"luxury-e-commerce-4-top-emerging-markets-for-expanding-brands-part-1","status":"publish","type":"blog","link":"https:\/\/www.motionpoint.com\/blog\/luxury-e-commerce-4-top-emerging-markets-for-expanding-brands-part-1\/","title":{"rendered":"Luxury E-Commerce: 4 Top Emerging Markets for Expanding Brands (Part 1)"},"template":"","blog_categories":[4,107],"resource_categories":[],"targeted_localized_audience":[],"document_categories":[],"class_list":["post-465","blog","type-blog","status-publish","hentry","blog_categories-e-commerce","blog_categories-translation-technology"],"acf":{"blog_short_description":"Luxury e-commerce sales will reach $21 billion by 2020. Discover four markets that are largely untapped by the online luxury industry, and a have demonstrated appetite for online shopping.","news_inline_styles":"","blog_video_id":"","article_body":"

This is part 1 in a 2-part series. Part 2 will be published next week.<\/i><\/p>\n

Compared to such \u201cfirst mover\u201d retail industries as consumer electronics, books and entertainment, the luxury industry is a relative newcomer to e-commerce. Even today, with global online retail sales increasing 17% annually, \u201cabout 40% of high-end brands don\u2019t sell via the web,\u201d Bloomberg <\/i>recently reported<\/a>.<\/p>\n

Despite the thriving growth opportunity, the industry\u2019s prudence isn\u2019t misguided. These are prestige brands with a proud heritage, after all, with meticulously-crafted images and stellar reputations. For some brands, e-commerce represents the antithesis of a luxury retail offering\u2014it\u2019s a mass-market approach that lacks exclusivity and an intimate consultative sales experience. <\/p>\n

Some companies also fear they won\u2019t be able to keep up with demand, if their company launched an e-commerce site.<\/p>\n

But change has been on the wind in this industry in recent years. Why? As Omar El Ali, a Global Online Strategist for MotionPoint\u2019s Global Growth team, explains: \u201cLuxury brands learned that they needed to cater to a new generation of luxury customers. These consumers are younger, digital-savvy, pressed for time, and very practical.\u201d <\/p>\n

Or as a recent business feature<\/a> in The New York Times<\/i> put it, luxury retailers \u201cbelieve in the primacy of the customer experience \u2026 in touch, and talk. They also, however, have come to believe that the future of their business and a route to global expansion lie online.\u201d<\/p>\n

This pivot is literally paying off. According to a McKinsey report, luxury e-commerce sales are expected to reach $21 billion in the next five years. Furthermore, the luxury e-commerce industry is seeing much larger growth than many other e-commerce sectors. \u201cE-commerce has been described as the \u2018next China\u2019 for luxury in terms of opportunity,\u201d worldwide director of JWT Intelligence Lucie Greene recently said<\/a>.<\/p>\n

It\u2019s clear luxury brands are winning big online. But those that are launching e-commerce sites in international markets <\/b>stand to win even more. Indeed, global e-commerce is on track to hit $2.3 trillion<\/a> by 2018 \u2026 and most of that robust growth is hailing from overseas consumers.<\/p>\n

But which international markets are presently primed for luxury e-commerce expansion? Perhaps it\u2019s best to start with where luxury brands should not<\/i><\/b> currently expand, to help avoid costly mistakes.<\/p>\n

Avoid Most of BRIC\u2014for Now <\/h2>\n

The equilibrium of several key countries\u2019 purchasing power has been disrupted in the last two years, \u201cdue mainly to fluctuations in fuel prices and changes in the international political landscape,\u201d Omar says.<\/p>\n

As a result, online and offline luxury shopping in these markets has been greatly impacted\u2014especially in most of the traditionally luxury-booming BRIC markets.<\/p>\n

Brazil<\/h4>\n

Brazil has had a tough time in recent years\u2014it dropped by 13 ranks in 2015\u2019s global e-commerce index. The Brazilian economy is currently in recession, due mainly to plummeting commodity prices caused by the Chinese economic slowdown. The Central Bank\u2019s recently-instituted high interest rate (to fight inflation and stabilize the currency) has also been a contributor.<\/p>\n

Brazil may be down, but it\u2019s not out. \u201cKeep watching this market in the years ahead,\u201d Omar advises. Brazil has a solid internet penetration of 53% and rising, but \u201cunfortunately, the current recession\u2014and the minimum 50% tax rate on luxury items\u2014makes it very hard for luxury e-commerce initiatives to succeed in the short term,\u201d Omar says.<\/p>\n

Russia<\/h4>\n

Russia rose 5 ranks in 2015\u2019s global e-commerce index from last year, but its economy has seen better days. The recent crisis in the Ukraine\u2014and its accompanying sanctions\u2014caused a massive capital flight from the market, which caused the ruble to drop. \u201cLow oil prices further increased pressure on the currency,\u201d Omar explains, \u201craising concerns if the government could make good on its external debts.\u201d<\/p>\n

Like Brazil, Russia remains a market to watch. Its 61.4% Internet penetration rate<\/a> is on the rise, a perfect fit for e-commerce endeavors. However, its current recession has put a chill on luxury spending.<\/p>\n

China<\/h4>\n

This year, the Chinese economy continues to slow, which has negatively impacted its global e-commerce index rank. The government\u2019s attempts to improve the situation haven\u2019t been as effective as expected. While China\u2019s economy grew by 7.4% last year, that\u2019s the nation\u2019s lowest growth rate in 25 years. The government expects even less growth<\/a> this year (7%). Luxury spending is suffering as a result.<\/p>\n

A recent governmental crackdown on corruption has also affected the industry. (Luxury items are traditionally presented as gifts to influence others.) Interestingly, the crackdown has spooked many wealthy Chinese consumers into not wearing visibly-branded luxury goods<\/a>, fearing they might be associated with the corruption. <\/p>\n

To Be Continued\u2026<\/h2>\n

So now luxury brands know, as the saying goes, \u201cwhat not to wear\u201d\u2014or in this case, where not to expand. So where should <\/i>they plant their international e-commerce flags? Learn more early next week!<\/p>\n<\/p>\n

Stay tuned to learn more about the luxury e-commerce opportunity in Part 2 of this series. Can\u2019t wait till next week to learn more? Contact us<\/a> for more information.<\/i><\/p>\n","article_body_code":"","news_image":{"ID":4654,"id":4654,"title":"Hero_Markets-for-Expanding-Brands-P1.jpg","filename":"Hero_Markets-for-Expanding-Brands-P1.jpg","filesize":105654,"url":"https:\/\/www.motionpoint.com\/wp-content\/uploads\/Hero_Markets-for-Expanding-Brands-P1.jpg","link":"https:\/\/www.motionpoint.com\/blog\/luxury-e-commerce-4-top-emerging-markets-for-expanding-brands-part-1\/hero_markets-for-expanding-brands-p1\/","alt":"","author":"2","description":" \t","caption":"","name":"hero_markets-for-expanding-brands-p1","status":"inherit","uploaded_to":465,"date":"2015-08-20 00:00:00","modified":"2015-08-20 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