GLOSSY | Hilary Milnes
LVMH and Kering, both French conglomerates that each own robust stables of high-end fashion brands, have finally realized their customers have moved online. That realization, however, has played out into two very different approaches for digital luxury.
“Both Kering and LVMH have understood that online is the way of the future,” said Rony Zeidan, founder of the agency RO NY. “But LVMH has taken a provocative stance with flagship, multi-brand, luxury retail, while Kering is keeping its brands’ online initiatives separate.”
Kering, in its calls with investors, its announcements and its annual reports, has stated clear intent to support its brands in endeavors to build out online stores and e-commerce and cross-channel capabilities, but LVMH’s digital guidance for its brands has been vague. As a result, LVMH-owned brands like Dior and Céline have dragged their feet to launch e-commerce. On the other hand, Kering-owned Gucci and Yves Saint Laurent — which back established sites — saw their online sales grow by 22 percent and 75 percent, respectively, in 2016.
Apparently, LVMH was planning something else. On Wednesday, news officially broke that LVMH will be launching a multi-brand marketplace in June. The site, 24 Sèvres, will sell 150 luxury brands online, including Louis Vuitton and Christian Dior, which currently aren’t sold through existing online luxury marketplaces like Net-a-Porter and Matches Fashion. The launch of 24 Sèvres is the first major initiative under Ian Rogers, LVMH’s chief digital officer who was brought on from Apple in 2015.
LVMH doesn’t break out online sales, but industry analysts estimated in September that, overall, e-commerce only accounted for 5 percent of the company’s revenue. Kering said its online sales jumped by 60 percent in the first quarter of 2017, during which it posted an overall revenue increase of 31 percent, to $3.8 billion.
While the overall luxury sector is expecting a small year-over-year growth of 3 to 4 percent between now and 2020, online sales for the industry are expected to drive the bulk of that growth, rising 20 percent year-over-year in the same time frame.
Kering has recognized the opportunity for growth online, citing it as a priority across its group of brands.
“Tomorrow’s luxury isn’t based on heritage and artisanal excellence; there must be creativity,” Kering CEO Francois-Henri Pinault told investors in April. “But creativity is not good enough. The implementation must be huge. Each team has to deliver to our customers, and organic growth will be amplified by the growing role of e-commerce in a cross-channel approach.”
The behind-the-scenes support of a parent company has proven critical for luxury brands looking to modernize. Customers can’t tell this guidance is taking place, and that’s part of the appeal.
“Kering has moved faster to drive its brands. It’s going to remain brand-specific and continue to put its support there,” said Rachel Spiegelman, CEO of the agency Pirch. “It’s an overarching ‘master plan’ message that then plays out on the brand level, where the power ultimately lies.”
The approach has seen major payoff for Kering’s biggest brands, Gucci and Yves Saint Laurent. Gucci sales hit 20-year record highs in the first quarter of 2017, with organic sales jumping 48 percent to $1.44 billion. Yves Saint Laurent revenue jumped 35 percent.
“Supporting your individual brands to succeed digitally is a strong strategy because the customer today is educated and will go to a brand directly when they want to shop it,” said Robert Burke, CEO of Robert Burke Associates. “The Gucci and YSL brands are extremely strong right now, so having robust websites for these brands is critical, because the brand awareness is there. People are searching for it.”
Kering is also driving a group-wide effort to funnel marketing dollars online. Pinault announced in February that 40 percent of the company’s marketing spend would go to digital efforts. While Gucci is nearly there, at 35 percent, other brands have had to do heavier lifting to get on board. Balenciaga is tripling its digital marketing spend, while Bottega Veneta is focusing on digital under its recently appointed CMO, Lisa Pomerantz.
The digital push is part of Kering’s effort to drive more millennial customers to its brands. Gucci’s efforts, having done Instagram and meme-driven campaigns, have resulted in a spike in millennial customers by 70 percent.
“Gucci and YSL have demonstrated how a luxury company can be relevant online,” said Jian DeLeon, editorial director at Highsnobiety. “On the LVMH side, as a company, they lack that digital relevance.”
Digital isn’t off the radar for LVMH, however. LVMH hired Rogers as its chief digital officer in 2015, but so far, his work has been focused on the launch of 24 Sèvres, a holistic, marketplace approach, rather than an impetus on digitizing individual brands.
“Having a chief digital officer focuses the online strategies, and ensures that an online venture is done the right way and is taking into consideration the 360-degree online approach,” said Zeidan. “It’s just like having a CEO for a company that keeps it focused and ensures all touch points are met.”
Both Rogers and LVMH president Bernard Arnault have acknowledged that LVMH’s emergence in the world of luxury online marketplaces is late to the game. But it’s not its first venture in the space: eLuxury.com, a similarly formatted online marketplace owned by LVMH, shuttered in 2009.
“LVMH is taking a massive risk, but they didn’t give up on this strategy,” said Spiegelman. “They just didn’t get on when the time was right, at first. But if they get the curation and the experience down, I think we’ll see that customers will respond to that.”
For LVMH, which is currently scaling back its brands’ presence in department stores, a driving factor is a control over unified distribution, according to Burke.
“LVMH has the capital to invest in this, and brands want to control distribution and not be reliant on another wholesale business,” said Burke. “It’s not really an either-or when it comes to which strategy will win, Kering’s individual brand strategy or LVMH’s marketplace. They’re different. But what drove them here is a move to rely on their own distribution, not department stores.”