Lack of online experience at major luxury brands undermining growth opportunities

Mar 21, 2017 | City A.M.

Lack of senior experience in ecommerce and emerging markets could be holding back profitability at top luxury brands, according to research by executive search firm DHR.

The study of the world’s top 50 luxury goods businesses found that just five per cent of board members have experience in ecommerce, and only 16 per cent have experience working in emerging markets, leading to calls from DHR for more varied knowledge on boards.

Other recent research has shown that the luxury sector’s traditional focus on bricks-and-mortar retail could be misguided. The profitability of luxury goods sold online was found to be higher than any other traditional sales channel by the Boston Consulting Group (BCG). Meanwhile McKinsey & Company forecast that the online share of worldwide luxury goods sales will be 18 per cent by 2025, which would make luxury e-commerce worth around €70bn (£60.71bn).

Gerlinde Berger, partner at DHR International, said: “Sites such as Net a Porter have made it clear that luxury shoppers are more than willing to shop online, and growing affluence, particularly amongst younger, more digitally savvy generations have made it vital that retailers have a presence online which fits in with more mobile purchasing habits.”

She added: “In order to fully integrate the online strategy with the overall business there needs to be more expertise and experience within e-commerce at the most senior level. At many luxury goods companies online is kept in a silo.”

Luxury goods companies may also be failing to capitalise on opportunities in emerging markets due to lack of experience. With BCG estimating that 30 per cent of global luxury purchases last year were made by Chinese consumers DHR recommended that firms should hire more directors with first-hand experience of working in fast-growing economies.