Luxury brands and online platforms: A challenging fit after Farfetch's decline

While the digital landscape has become increasingly influential in the retail and services sector, luxury brands often find that online platforms are not the most suitable channels for their products. One primary reason is the limited number of true luxury brands, and these exclusive entities typically prefer to maintain a direct-to-consumer (DTC) model. There is a reason why brands such as Louis Vuitton, Hermès and Chanel do not sell their collections on third party websites.

The Financial Times this week said “Farfetch’s unravelling points to a fundamental problem in creating a platform for luxury goods. Unlike the fragmented universe of drivers, rental accommodation, beauty products or food delivery, there are not many luxury brands that really matter.”

Luxury brands have historically thrived on their exclusivity and a carefully curated brand image. Directly engaging with consumers allows them to control every aspect of the customer experience, from the first point of contact to the delivery of the product. This approach ensures that the brand's values, heritage, and unique selling propositions are communicated precisely as intended.

Online platforms, on the other hand, operate on a more democratic model, providing a marketplace for a wide range of brands across different price points. For luxury brands, this environment may dilute the sense of exclusivity and premium positioning they aim to uphold. Placing their products alongside more accessible brands might undermine the perceived value of luxury items. According to the Financial Times, approximately ten major brands, including Nike and Adidas, accounted for the majority of Farfetch's traffic.

Moreover, luxury brands often prioritise personalisation and tailor-made experiences, which can be challenging to achieve on third-party platforms. Direct sales allow them to gather and utilise customer data to create bespoke offerings and strengthen the relationship with their clientele. This level of customisation is challenging to implement within the standardised framework of many online marketplaces.

Security and brand protection are additional concerns for luxury brands. Counterfeiting, unauthorised sales and discounting can pose significant risks to the brand's reputation and erode consumer trust. By selling directly, these brands can implement robust security measures and authentication processes to safeguard against such threats.