The Luxury Sector's Slow Shift to Digital

Millennials a key driver of change

July 24, 2017

Most luxury buyers still prefer the in-store experience for the reasons they always have: Materials and fit are often important, and attentive customer service comes with the territory. But digital channels are playing a larger role in the path to purchase.

As with ecommerce in general, global online sales of luxury goods are growing faster than luxury sales overall, and that is expected to remain the case for the foreseeable future.

"Luxury brands were slow to take to ecommerce," said eMarketer's Krista Garcia, author of a new report that highlights trends in the luxury market around the world. (Subscribers to eMarketer PRO can access the full report here.) "Today consumers expect a digital presence, even from old-guard brands, and shoppers are more global than ever and not content to settle for products available only in their home countries, or within driving distance."

Worldwide digital luxury sales are a bright spot compared with in-store sales. According to a December 2016 report from Euromonitor, global brick-and-mortar luxury sales will increase at a compound annual growth rate (CAGR) of 2% during 2016–2021 vs. 8% for digital. Just like digital sales overall, digital luxury has more room to grow.

Part of the growth potential is millennial shoppers, who not surprisingly are more likely to buy online than older shoppers. A Deloitte survey found that, among millennials, digital channels made up 42% of luxury purchases, far higher than those 35 and older.

And beyond the actual point of sale, digital has an increasingly significant impact on luxury purchases. An April 2017 study by Bain & Company and Farfetch estimated that 70% of worldwide luxury purchases were influenced by at least one digital interaction. 

"Still, luxury remains very much a brick-and-mortar affair," said Garcia, noting that the Bain/Farfetch study projects that, even as late as 2025, digital purchases will make up only 25% of personal luxury goods sales.

In the latest episode of eMarketer's "Behind the Numbers" podcast, Krista Garcia discusses the changing market for luxury goods, and how luxury brands are shifting their strategies for online sales.