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Published On: Fri, Jun 12th, 2015

A Decade from Now Ecommerce Transactions will Account for Nearly 20% of Luxury Sales

Luxury items like designer clothing, exotic automobiles, custom furniture, high-tech gadgets, and jewellery are typically purchased at local outlets, as many people are more comfortable buying expensive products when they can try them out or view them in-person and then take them home the same day, rather than viewing an online product description and then waiting several days to several weeks to receive the item via online shipping methods.

However, recent sales forecasts revealed at the Financial Times Business of Luxury Summit indicate that could be fast-changing, as it is estimated that ecommerce transactions could account for about 18% of all luxury sales by the time the year 2025 arrives, according to data from McKinsey & Company.

Online Luxury Sales Rising Faster than Expected

McKinsey analysts have been predicting ecommerce luxury sales for more than a half a decade. In 2009 they predicted that ecommerce would account for about 2 percent of luxury sales by this year, a figure that would equate to $4 billion in online luxury sales during the course of the year. However, that figure actually turned out to be rather conservative, as statistics have shown that ecommerce is now accounting for about 6% of luxury sales in 2015, and the sector is expected to facilitate $14 billion in online transactions by the end of the year.

Photo/donkeyhotey  donkeyhotey.wordpress.com

Photo/donkeyhotey donkeyhotey.wordpress.com

Furthermore, the sale of luxury items online has increased by more than 25% each year since that initial prediction in 2009, which is a growth rate that has quadrupled that of the offline sales. The increased online sales could be partially attributed to a larger number of brands putting their luxury items online through self manageable solutions like the Magento ecommerce platform.

Some Countries Experiencing More Online Luxury Sales than Others

The recently revealed analysis has also shown that luxury ecommerce is more popular in some countries than in others. While the average percentage of luxury sales conducted online across the major markets is at 6% this year, that figure is higher in the UK, where 11% of luxury purchases are made online. Shoppers in China and Brazil are also huge buyers of luxury items online, and China may just be the biggest online buyer of luxury items, as the nation’s huge population base, extensive wealth, manufacturing sector, and complex alphabet make it difficult to measure just how many luxury items are being purchased by the Chinese online each year. Other Asian countries like South Korea and Japan, while highly advanced technologically, are still only buying luxury items online at an average rate, as are consumers in the US and Italy.

Level of Luxury Plays a Role

The analysts at McKinsey & Company also specified that the number of online luxury sales varies by the level of luxury being bought. For example, while only about 3% of ecommerce sales are transactions involving extremely expensive items, the more affordable items account for about 8% of yearly ecommerce sales. This suggests that many consumers are still hesitant to or not fond of spending exuberant amounts online, and would rather conduct such transactions at a physical store location.

Regardless of the number of luxury sales made online each year, research suggests that more than 90% of luxury buyers spend a great deal of time browsing and shopping on their mobile devices, and about 70% of them use social networking sites at least once a week.

Thus, brands selling luxury items online are encouraged to tailor their site to mobile devices and engage in social media to attract more buyers.

Guest Author: Lolita Di

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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  1. Magecom says:

    Didn’t expect that sales in luxury sector would increase so quickly. Interesting that the highest % is in UK.

  2. Luxury eCommerce transactions on the rise - Magento Agency says:

    […] New sales forecasts revealed at the Financial Times Business of Luxury Summit indicate that eCommerce transactions could account for around 18% of all luxury sales by 2025. […]

  3. Christopher Dittmer says:

    We’ve been seeing this trend over the past few years…on one hand, traditional ‘luxury’ brands have been investing in newer, more accessible brands that can cater to a rising middle class of aspirational customers to capture revenue without alienating their existing customers who ascribe to the exclusivity of their products.

    On the other side of things, ecommerce payment providers have been quick to adjust their payment offerings to cater to aspirational fans of luxury brands. PayPal with BillMeLater, Stripe with split payments and subscriptions offerings…one of the more unique offerings I’ve seen is Affirm, an SF company that offers installment payments, but with no compounding interest or accruing principal. They claim to be easy and gimmick free, and so far the couple times that I’ve used them, that’s proven to be the case.

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