The signs of the global ‘retail reckoning’ are sadly not showing any signs of stopping as we start afresh in a brand-new decade. Regardless of type, the pace of brand growth is now considerably slower overall than in years gone by. The Luxury fashion industry is also included in this, with key figures struggling to grow a in profitable way. What’s behind the market ‘shakeout’, and can the negative ramifications be left behind?

The current state of the luxury retail market

Companies such as MatchesFashion and Farfetch have found themselves entering a tumultuous stretch, facing intense pressures to grow, alongside navigating their way out of fairly steep losses. This type of growth can often come at the expense of business profitability, with online Retailers continuously looking to invest more heavily in marketing and infrastructure to quickly ship luxury products globally. In partnership with that is the increase in competition – there are more rapidly growing resale sites than ever before, with the possibility of brands acting as e-concessions on online marketplaces as opposed to multi-brand retailers in the future, ditching the age-old idea of the ‘retail department store’. The likes of Google and Instagram are now flooded with ongoing advertising, offering discounts that never seem to end in a perhaps desperate attempt to hold onto customer bases. Both of these choices are arguably strategies that do not have successful longevity, as customer acquisition costs will inevitably rise despite modern consumers now not remaining brand loyal.

What could possibly be done to create positive change?

The introduction (and consistency) of such sales also have the possibility of alienating the same luxury brands that much of the online retail world need to survive. Brands like Prada and Gucci don’t want to see their products marked down, and department stores that do just that are arguably one of the reasons said luxury brands are putting more of their resources into building their own store networks, physically and online. It could be argued many need to establish a clearer identity, with luxury retailers still figuring out their role within the industry, both off and online. It does not seem to be a coincidence that at the same time, high-end department stores (particularly in the US) continue to struggle. Have online retailers created a problem that they now must solve? Many must find a way to evolve that doesn’t require any additional investment – with online already undercutting brick-and-mortar by flooding the market and quick delivery times. The process of upscaling will only become more difficult, with consumers wanting no obligation to remain loyal to certain distributors, whilst still wanting a personalised experienced presented to them.

If luxury retailers can provide this experience alongside operating at a global e-commerce rate – they may have cracked it. But whether the most ‘wanted’ brands will want to follow suit will remain to be seen.

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