Digital is upending the luxury retail landscape, with sales growing at 28%. While a number of leading brands have embraced digital, most companies still have not made digital a core part of their growth strategy. Customers are looking for faster service and more personal experiences - though that doesn't necessarily mean speaking with a sales person. The best performers are investing in digital capabilities and technology, and they are already seeing the rewards. Luxury retailers who do not figure out how to make digital an integral part of their strategy risk losing out to those who have.

1. Digital Luxury Experience 2012
From customer experience to impact

2. Exhibit 1
In 2011, online sales hit €6.2 billion and will reach €15 billion in 2016
Online sales
€ billions
15.0
6.2
4.9
20102 2011 20163
Percent of
total luxury1 2.6% 3.2% 5.3%
market
1 Personal luxury goods: Apparel, accessories, jewelry and watches
2 Consolidated value vs last year estimate of € 4.5 billion driven by pre-closing data
3 Total market growth 2011-2016 assumed equal to 8%, based on hystorical data
SOURCE: McKinsey & Company, Altagamma

3. Exhibit 2
Almost 15% of total sales are directly influenced by online channels
Impact, 2011
Percent € billions
of market
Pure online sales 3.2% 6
Offline sales directly
generated1 by 10-11% 17-18
online experience
Offline sales
influenced2 by 20% 34
online experience
1 Researched online, product decision changed online and purchased offline
2 Researched online, product decision confirmed online and purchased offline
SOURCE: McKinsey & Company, Altagamma

4. Exhibit 3
Digital sales of monobrand websites grew by 37%
2011 vs 2010 growth
Percent
37%
32%
28%
25% 28% Average
growth rate
17%
Mono- Full Off Event Department
brand price price stores
Multibrand websites
SOURCE: McKinsey & Company

5. Exhibit 4
Approximately 50% of total market is generated by full price websites
2011
100% = €6.2 billion (total online luxury sales)
Department store
websites
14%
26%
Multibrand
Multibrand full price 49%
event 18%
Full price
Monobrand websites
23%
19%
Multibrand
off price
SOURCE: McKinsey & Company

6. Exhibit 5
Customers look for personalized pricing and lean processes
Respondents to the question “What element would encourage
you to buy more luxury items online?”
Total respondents: 2,500 in 5 countries
Personalized
~40%
discount
Simpler
purchase ~19%
process
Exclusive ~16%
products
SOURCE: McKinsey analysis on Digital Luxury Experience market survey 2012

7. Exhibit 6
Almost three-quarter of respondents search for product comparison
Respondents to the question “What are your key reasons
to search online?”
Total respondents: 2,500 in 5 countries
Compare
72%
products
Search for
specific 57%
products
See product
54%
range
SOURCE: McKinsey analysis on Digital Luxury Experience market research 2012

8. Exhibit 7
In the same product category companies reach different digital
performances based on their online-ability index
Digital sales1 index
1
Hospitality
0.75
0.60
0.45 Fashion
0.30
0.15
0
1 2 3 4 5
Online-ability index
1 E-commerce + directly generated sales
SOURCE: McKinsey analysis on Altagamma questionnaire; expert interviews; company reports

9. Exhibit 8
There is a strong correlation between digital sales and investments
Indexed numbers
Best performer vs
market average Digital impact1
3
Digital x4
organization
Digital
marketing & x 1.5
sales spending 1
Digital
x2
touch points
Market Best
average performer
1 Digital impact defined as e-commerce + in-store sales directly generated by online decisions
SOURCE: McKinsey analysis on Altagamma questionnaire; expert interviews; company reports