Why e-commerce in luxury will fail

In order to fully understand the inherent contradiction in incoherence at the core of the marriage between e-commerce and luxury and why it is destined for a divorce or a failure, let us first look into these two individually.

E-commerce or e-retail has been a game changer. The valuation game in which these biggies have entered into is a completely new premise for any business. Their valuation is increasing at the cost of making losses. But the million dollar question is how are they sustaining it? They are sustaining it because of the valuation game that will fetch them a buyer with very deep pockets. The buyer will look into the transactional value and the spectrum of offerings, so the focus is that and not profit. It is a great joy run for us consumers as the unrealistic discounts offered at the cost of company money may be funded by a private equity fund in China.

But as all good things come to an end, the risk of the bubble bursting is imminent. Business models can’t run on losses. Period.

E-commerce has changed the way we shop. Even a few years back, we couldn’t even fathom buying clothes or shoes without trying them on, but today it has become the norm. It has penetrated our lives like the way mobile phones have. Shopping has never been this convenient and cost-effective.

The core reason behind the success of e-commerce in India is our love for price-sensitivity. We love discounts, we love value for our money. The entire machinery of e-commerce or e-retail runs on unrealistic deals and discounts.

And this is where the meeting of hearts between ecommerce and luxury doesn’t happen. So let us understand the premises on which luxury buying is based in India.

I have oft repeated in my columns that luxury comes from the word “luxe” which means dazzle. Anything, as long it makes you dazzle, is luxury for you and you will pay a premium for it.

Luxe is a purely experiential phenomenon as it is heavily dependent on how your senses perceive something. If your senses feel dazzled, you are convinced to shell out that premium for a luxury brand.

Exciting and convincing our senses via a laptop, tab or mobile screen is next to impossible. And that is why the ecommerce companies try the same strategy of heavy discounts that they try for premium products. Unfortunately, this story of crazy discounts opens another can of worms. Welcome to the world of luxury counterfeits that are sold online.

So with a seller’s warranty and not a manufacturer’s warranty, you never know you are getting a great deal or a counterfeit.

My friend very recently sought my advise for buying an Omega through a ecommerce website which was offering a discount of 40 per cent. But Omega was not offering that discount at any of its retail outlets. Although the price was realistic, I advised her against it as you will never know for sure without the manufacturer’s warranty, in this case Omega, whether it is an original or a counterfeit.

When you are paying a heavy premium for a luxury purchase you are paying for the experience. You walk into a luxury boutique, the way you are greeted with a smile and offered a special treatment from the word go, it is bound to make you feel good and special. The boutique manager will make you realize that you are almost on the verge of entering an exclusive and elite club with an amazing history and legacy -- it is just a purchase away. Then your senses, which are already feeling special, actually experiences the goods feel more special. For example, you are wearing the latest Omega watch that James Bond is sporting in the upcoming movie “Spectre” on your wrist and looking at the mirror, how can you not feel elated? You have already “bonded” with that timepiece. You just know this is the one. The boutique manager keeps pampering you, sometimes even with a glass of Champagne. So finally when you make the payment, it feels so justified and incidentally also “value for money”. You will revel in that Bond moment.

The entire ambience, the entire experience cannot be created online by any ecommerce company, even via simulation. No matter how much convenience or best deals you are offered, luxury shopping can’t happen without experience. It is not worth the money for the buyer and no amount of discount can replicate that experience.

So value of money as understood by e-commerce and e-retail players are not the same in case of luxury buying. In the former, it is just the hefty discounts, but in the latter, it is experiential worth of money.

So, no wonder the marriage between e-commerce and luxury is destined for failure.

Let your quest for luxury continue.

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