Ecommerce Rewrites Luxury and Beauty Market

Undoubtedly, e-commerce increases in importance for all industries - from power tools to books, medical supplies to toys, e-commerce is a source of sales like never before. With advancements in technology, proliferation of portable internet devices and increased functionality of social networks, it is safe to assume this retail channel will continue to grow with force.

But two of the most important spaces for online retail are beauty and luxury. Take Estee Lauder Companies for example. In 2012 web sales increased worldwide, reporting 20% growth in the US, 34% in the UK, 40% in China and a whopping 55% in Germany. They've cultivated about 340 marketing and e-commerce sites in 50 countries since 2001. Total sales climbing 10.2% to $9.7 billion earned them the No. 58 spot on Top 500 list of internet retailers. Where those numbers only make up 5% of their total sales for the year, there is no question that web presence is becoming continually important for the sector.

This focus on e-commerce, however, could mean something quite different for luxury clothing brands. Online retail funding for custom-made clothes doubled last year to $328.7 million. Why are venture capitalists investing so much in this market? Because its booming. Custom clothing startups like J.Hilburn Inc., American Giant and Bonobos Inc. are gaining share in the US e-commerce market- winning customers because cutting stores from the supply chain allows for lower price points than department stores who often marked up 3x from factory to store. Putting it in perspective: a men's dress shirt from J.Hilburn sells around $125, the same shirt from Zegna on Neiman Marcus website sells for $325-$435, even though the fabric is sourced from the same Italian mill.

Lesson: Zegna and other lux brands need to differentiate themselves from this market to give (particularly Millennials) consumers a reason to spend the extra money since they are providing extremely similar services at fractions of the price. I say this is important particularly for the Millennial audience because, where they may be in school debt, they are the largest group purchasing apparel, spending 8% more than those ages 35-44. Millennials are willing to spend, sure, but are also aware of their debt and happy to find a deal, which is why sites like Gilt and Rue la la are so popular with this demographic.

Additionally, online sales are not limited to a computer. 41% of Millennials have made a purchase using their smartphone. We are seeing an influx of purchasing from tablets and smartphones across all demographics, and if companies aren't optimizing they are losing sales. And this is not just in the US- growing mobile device usage in emerging markets like China, India and South Africa create excellent opportunities for cutting edge luxury and beauty brands to increase sales and develop prefernce from Millennials, a fiercely loyal group.

Digitization of Wine

Wineries are beginning to incorporate more technology into their marketing communications. For example, there are now digital wine menus with videos about products in restaurants, sales teams are using iPads to conduct business with more dynamic content, and QR codes are cropping up on wine bottles to direct consumers to descriptions and reviews.

These advancements are incredibly important for the wine industry, particularly as they continue to foster a relationship with millennial men and women who make up 20% of all wine consumers. Rather than consulting a sommelier, millennials turn to the internet and interactive packaging to gain knowledge about their wines, and are extremely open to trying new wines. Since 65% of millennials report that they are only apart from technology for an hour or so a day, it is imperative that the wine industry moves into this space. 

Generally, wholesalers use speck sheets or tastings of their wine to present it to retailers, but digital presentation is on the horizon. Wine store owners feel that digital could be a useful way to access information and promote wine to consumers during the lag time often found between ordering and receiving the product. Owners also expressed that speaking with winemakers and winery owners interests them the most when wholesalers present their wines. And this doesn't just work for retailers. Stores like Total Wine & More are offering in-store iPads showing food pairings while consumers browse their selection. They developed this offering because they've seen an increase in customers wanting more information about their wines outside of the taste. They want to know where it comes from, see the vineyards and understand the process. 

Digital is also an advantage for vineyards. In Napa, CellarPass and VinoVisit.com are trying to create the OpenTable of wineries by creating smartphone apps that help visitors plan tours in wine country. Not only do the websites and apps help reach new audiences, but also aid in vineyards staffing and preparations. At the moment, CellarPass is processing 30,000 guests a month and the app has had 6,000 downloads since its launch in March. 

Example: Jordan Winery and Vineyard

Sales team used iPad presentations to push their brand to retail outlets and distributors. With a few taps on the screen, a sales representative can move seamlessly from the sales pitch to the order form.

The winery even shot custom videos for its major retailers, which then provided their online and in-store customers with a window into the Jordan harvest or techniques. These videos can also be used in restaurants as digital wine lists or in store. 

Jordan is a digital leader in the industry and their climbing sales attest to the necessity for wines to get in the mix with their technologically savvy consumers.