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In 2024, luxury e-commerce faced harsh criticism. The pandemic-era boom has given way to a painful downturn in which rising marketing costs, excessive discounting, outdated technology management, and increased competition have hurt profitability and exposed deep-seated weaknesses.
MatchesFashion went into administration earlier this year, shortly after being sold in a fire sale to Frasers Group. Farfetch’s stock price plummeted 98% and it was on the brink of bankruptcy, but was rescued by South Korea’s Coupang. Richemont sold Yoox Net-a-Porter to luxury e-tailer rival Mytheresa in October, ending a years-long effort to take some weight off its struggling business.
In this week’s podcast, Mytheresa CEO Michael Kliger and Moda Operandi Co-Founder and Chief Brand Officer Lauren Santo Domingo join BoF Founder and CEO Imran Amed on stage at BoF VOICES 2024 . Together they explore what went wrong with luxury. The e-commerce sector, how it’s weathering the ongoing luxury downturn, and what’s next for the industry.
“We did not expect such a significant slowdown in ambitious demand, but we were well prepared,” Kriger said.
Key insights:
At the end of the day, what separates the winners and losers in luxury e-commerce is readiness, Kriger said. Mr. Mytheresa also “felt the pressure,” but the business was better suited to deal with an environment of high inflation, high interest rates and the retreat of middle-income shoppers. Kriger added that he still believes in the viability of the e-commerce model for luxury goods. “There are consumers who want to shop like that.” “Rumors of our demise are greatly exaggerated,” Santo Domingo added. Despite difficult market conditions, some customers are still continuing to spend. E-retailers need to find ways to create attraction and attract shoppers to their platforms through curation, storytelling, and other forms of differentiation. “They want more of an experience from us than just access to a product,” Kriger says. “That’s why brands want to work with us. Mytheresa also invests in optimizing its marketing funnel to identify customers who are more likely to remain loyal over the long term. “We’re not bidding for traffic. We’re not bidding for revenue. We’re bidding for our customers,” Kriger said. . The company builds algorithms that predict whether a customer is likely to return based on past purchases, address, payment type, and time of purchase, and focuses marketing efforts accordingly.
Additional resources:
BoF VOICES 2024: What’s Next in Fashion: Designers Simon Port Jacquemus and Glenn Martens, H&M CEO Daniel Herbert, e-commerce executives Lauren Santo Domingo and Michael Kriger, and more Industry insiders from the industry spoke about the key challenges and opportunities in business and fashion in general. McKinsey, on the other hand, provided an outlook for 2025.
