The growing investment by luxury brands in the direct distribution channels
Luxury brands are mostly sold through wholesale mode, and they have focussed less on direct selling over the past few years. According to the study by Bain & Co. in their Global Luxury Report 2019, they noted that there was a rise in the retail buyers of luxury brands (BAIN & Co. – Global Luxury Report 2019. Page 15). Luxury brands such as Cartier have continuously ignored retail selling, and they have decided to focus on wholesale selling and advertising. In the recent past, however, the brands have started focusing on the direct distribution channels. The reason they have previously targeted the wholesale model of selling and marketing is because of the nature of their products, which is for luxury and not the everyday household and daily use. The prices and the fame of the products make them out of reach of the ordinary person, thus the decision to focus on the wholesale model of marketing. This, however, has started changing with the focus on the direct distribution channels, retail stores, increasing.
The focus on the direct selling stores for luxury brands has been caused by the attention they have received from the sector. Some people are in need of the goods but in small amounts, and the only way they can get them is from the retail stores. This has led to the brands reconsidering the option of investing on the retail side of marketing the goods they had previously only marketed through wholesale. They have also realized the benefits of having the retail market, which comprises the direct selling of the products to the customers, most of who are middle-level earners and not corporates.
According to the report, “Wholesale remained the largest channel for luxury goods, accounting for 61% of all sales. Yet the retail channel continued growing steadily—rising 7% in 2019—as companies increasingly seek to control the experience they deliver to customers. Of that gain, 1% came from new-store openings, and the remaining 6% came from same-store sales growth” (BAIN & Co. – Global Luxury Report 2019. Pag, 15). Despite the investment on direct selling channels, wholesale was still by far the channel of sale with the highest amount of sales. Still, there was a noted significant growth of the retail channel, meaning there were more customers who were able to get the products they needed in small amounts such as single items but not in wholesale. The growth of direct selling has been dedicated to the opening of new retail stores for the brands (BAIN & Co. – Global Luxury Report 2019. Pag, 15). The stores help in bringing the products closer to the buyers, and this has helped in attracting more customers to it as they can reach them easily and at lower prices. The retained growth by the existing store sales is as a result of better marketing strategies that have been used to maintain the customers they had and, at the same time, attract new customers for the products they are vending.
The growth in the retail section of the luxury brands such as Cartier can be attributed to the interest from buyers who are drawn to the brand by the brands they represent. The luxury brands are mostly associated with celebrities and other famous individuals and organizations (BAIN & Co. – Global Luxury Report 2019. Page 15). The offer to sell in retail has offered the fans of the celebrities and the organizations to have access to the products. This has led to more purchases and orders in retail and thus the growing amount of interest from the sector.
Further, the report states that “Online remained the fastest-growing channel, increasing by 22% and reaching 12% penetration of luxury sales worldwide. Globally, the online channel influenced 75% of luxury transactions, and 20% to 25% of purchases were digitally-enabled “ (BAIN & Co. – Global Luxury Report 2019. Page 15). This indicates the power of internet marketing. Luxury brands have realized that the internet is a powerful tool that can be used in marketing their brands. The internet has offered a platform for marketing products, and it reaches a huge amount of potential buyers. This means that the attention and the orders they receive from the online buyers are huge, and they have started embracing it as a way of marketing the products instead of focusing on the wholesale and physical marketing of their goods and brands (BAIN & Co. – Global Luxury Report 2019. Page 15). The focus and the use of the internet as a tool of marketing has had a positive impact on the sales by the companies, according to the report.
The report further indicates that “Off-price stores and airport stores continued to log strong growth, both gaining 11%” (BAIN & Co. – Global Luxury Report 2019. Page 15). This means that the off-price stores that offer high-quality brand products as second hand at a low price attract a lot of customers and buyers who are interested in the products from the brands. Brands such as Cartier have many off-price stores that offer their products at a low price, and they help in reaching out to the customers and making the brands available and visible in the market. They have remained the main way through which the brands have been marketing the products and reaching the customers.
References
“Eight Themes That Are Rewriting the Future of Luxury Goods.” Bain, 5 Feb. 2020, www.bain.com/insights/eight-themes-that-are-rewriting-the-future-of-luxury-goods/.