The luxury of choice: 5 keys to success on multi-brand online platformsMonday, June 28, 2021
From plucky upstarts to fixtures of the mainstream shopping scene, online retail platforms have become a growing pillar of sales for premium and luxury markets. While the effects of the global pandemic stalled historic growth in these markets overall, online retail remained strong. People still wanted to shop, even if they couldn’t do so in physical stores. Online sales accounted for 31% of wider apparel and footwear sales in 2020 – up from 21% in the year before – and around 20% of luxury apparel sales.
As physical stores reopen, there are no signs that demand for online retail options will diminish. In fact, the continued growth trajectory of online sales platforms – and specifically multi-brand platforms – is supported by clear market, consumer and brand trends. The enforced behavioural change of lockdowns has created a seismic shift in the way consumers shop, and up to 70% of uplift is expected to remain online. Where in the past online channels have perhaps been something of an after-thought for brands, they now should be at the core of brands’ sales strategies.
Perhaps this shift was always inevitable – generational shift is a significant driver of continued online growth, with digital native Gen Z expected to make up a sizeable portion of luxury apparel consumers by 2025. Add to this the fact that traditional store-based wholesalers have suffered from significant rationalisation, and brands are having to seek new routes to market through online ag-gregators alongside their direct-to-consumer (D2C) operations.
For smaller businesses, these multi-brand online platforms are the new department stores, enabling them to increase their reach, raise awareness of their brand, and helping them to scale quickly. Meanwhile, established brands are looking for online platforms that are distinctive, and which will allow them to engage specific audiences they would otherwise find hard to reach through their own D2C or wholesale channels.
Opportunities in the online retail landscape
Broadly speaking, there are four online operating models – a brand’s own D2C site, wholesale sites – for example, Matches and Yoox Net-A-Porter Group, marketplace sites and e-concessions such as Farfetch, and resellers – Vestaire, StockX and the like. The evidence suggests that all these online channels will continue to grow, not at the expense of one another, but by gaining share from offline channels.
The challenge for premium and luxury brands, therefore, isn’t whether online platforms should be a consideration, but rather, which will prove most effective. While D2C platforms are expected to grow in parallel with multi-brand online options, there are advantages to investing in both. D2C channels often cater to already loyal customers, and offer brands higher margins and the associat-ed customer data, but will require time and investment to develop the technological capabilities they need to succeed to capture the attention of new audiences.
In the meantime, online multi-brand platforms offer distinct advantages. In general, these sites have higher traffic, drawing consumers who want to browse several brands rather than shoppers who are focused on one brand. Their broader consumer reach – both in brand awareness, and in ability to reach distinct customer segments – can be seen as a major addition to their value.
To get a sense of how important multi-brand sites are to the online sales ecosystem, even D2C-native brands factor in multi-brand platforms as necessary to their business models: On average, these brands estimate between 30% and 40% of their online volume will go through multi-brand platforms, as they aim to reach specific demographic groups and consumers with particular fashion preferences they could not reach directly. For brands not yet advanced in their own D2C offering, volume through multi-brand platforms can be as high as 80% or 90%, making these sites an essen-tial part of the online retail eco-system.
The 5 Cs of finding the right route to market
Each multi-platform site offers access to a different customer base, provides a different consumer journey, and can fulfil different brand needs. Choosing the right platform partners, therefore, is not simply a question of economics, but a balancing act of considerations, which must be approached with wisdom to create a sales framework that offers breadth of coverage as well as access to targeted niche consumer groups.
As previously stated, multi-brand platforms can offer access to distinct and differentiated customer bases, some of which a D2C site wouldn’t be able to reach. Knowing which customer segments are desirable for a brand – whether a particular demographic or those who are highly engaged in a specific target community – and which platforms are engaged with these consumers, will be a factor in deciding which multi-brand offering is most appropriate.
Multi-brand platforms particularly lend themselves to curious consumers, allowing brands to position themselves in spaces where people can ‘discover’ them as they browse and explore before purchasing. These kinds of customers also often use online platforms (as well as their associated social media channels) as sources of inspiration and places to uncover news and trends. The right multi-platform site will, therefore, be able to lend the strength of this engagement and hype to a brand. Their technical capability to customise media and comms campaigns is another factor in determining how appropriate they are as a host platform.
Good curation is key for many brands to ensure their image is conveyed in a premium way. How a site presents its content can create a halo effect for a brand, and the right multi-brand platform will offer well-judged brand adjacencies. Hybrid content/e-commerce sites like Hypebeast, for example, combine editorial, which showcases the fashions, with a marketplace, which allows consumers to purchase them there and then. By creating a strong edit, sites like these both give consumers a distinct proposition, and are able to curate a brand within specific customer segments i.e. ‘new luxury’ versus ‘mainstream luxury’.
To this end, partnership is vital. Online platforms should be collaborative in selecting the best assortment of products for the platform and able to provide feedback on the performance of the range. A good multi-brand platform will have a demonstrated ability to tell brand stories through editorial content that’s both tailored to the audience and respectful of the brand’s image.
And of course, last but not least, economics are necessarily an essential consideration. Success on both sides will make for a happy partnership, with a clear commission structure in place, for example, for the brand, but also a sustainable sales model for the platform, creating fertile ground for a fruitful working relationship.
There is no ‘one-size-fits-all’ model; what is best for one will not be appropriate for another, and most brands will sell via a variety of platforms to fulfil these five considerations according to their own sales priorities.
The way consumers shop has fundamentally changed, and while it is obvious online retail is here to stay, it’s multi-platform sites which offer brands the biggest chance to grow and to evolve their customer base. They’re a vital part of the online retail ecosystem both now and into the future. Get the balance of routes to market right, with the right partners, and the sales effect will cascade, opening up new consumer segments. Brands who make shrewd decisions now about their multi-platform retail partners will be well set to ride the wave of that growth for years to come.
To hear more of our recommendations on the right routes to market, please contact our team.
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