"...the discriminating nature of "luxury" and the openness of the Internet seem to clash"Indeed, the many challenges for luxury brands on the Internet include identifying who exactly is the online luxury buyer and how to reach and keep in contact with that buyer without losing the cache and elite quality of the brand. To captivate consumers, many recent investments have gone into retail locations (such as Prada's multimillion-dollar investment in the Epicenter in Tokyo) to create special physical environments that give the shopper a luxurious experience with individualized customer attention. Translating that experience to the web is a tough nut to crack for most luxury brands, especially when consumers are expecting the very best from these brands—or at least the very best bargain. According to Michael Peters, founder of creative/communications firm Identica, " web is all about being a smart shopper, saving time and money, and finding eclectic goods. Luxury-brand shopping should be about an experience that feels exclusive. Luxury brands don't want people to associate their products with getting a bargain online. It could be extremely damaging to the brand." Despite the dichotomy, some luxury heavyweights are trying. LMVH, the parent company that owns Louis Vuitton, Christian Dior, and Moët & Chandon, among others, is arguably the Internet pioneer of selling luxury brands on the Internet with its eLuxury.com site, launched in 2000. While the list of brands sold on the site is impressive and wide-ranged—from Jean-Paul Gaultier to Zac Posen—the shopping experience itself is about as exciting as shopping for a new cellphone carrier. Many brands, such as Tiffany & Co. and Baccarat, online don't resemble much more than a tasteful color brochure. However, a few others have begun to embrace some of the more technology-forward aspects of the web. Chanel on its website has sashayed into the 21st century by offering podcasts and videos of its fashion shows including behind-the-scenes footage consisting of dogs and Karl Lagerfeld. (No one can accuse the quintessential French fashionistas of not having a sense of humor.) But then again, some would argue that this tech-forward approach is basically fashion TV for the web. Uche Okonkwo, director and co-founder of Luxe E.t.c., a luxury-branding agency based in Paris, doesn't find many innovations happening within the realm of luxury brands on the web. "Most of the strategies currently adopted by luxury brands are on a trial-and-error basis (which is bad news)," she says. "Things will definitely change, but not for a while yet." In the midst of trial and error is the emergence of interesting business concepts that, ironically, could only be efficiently executed on the Internet. Bag Borrow or Steal is one such concept that capitalizes on the voracious appetite for handbags and accessories—reported to be US$ 4.8 billion for the US luxury handbag and small leather-goods market. For a monthly membership fee, luxury lovers can "borrow" three luxury bags a month. The venture capital-backed company features couture items such as high-end handbags by Chanel, Judith Leiber, and Chloé and jewelry by Gucci and Vera Wang for a mere $175 a month, while mid-line brands including The Sak are offered for less expensive monthly fees. In addition, the site has an "outlet" section offering slightly used merchandise for a discount off the retail price—in some cases over 70 percent off. While the model certainly promotes luxury brands, it also falls within the category of "Internet bargain." The question is, does this feed the bargain-shopper mentality by devaluing the luxury brand or does it stimulate the consumers' appetite to buy more luxury brands? As noted by Alistair Craven and Debbie Read of Emerald Management, a London-based online library of management information, the "rarity principle"—which is essentially brand erosion from the luxury brand being too available to the masses (think Pierre Cardin's decline due to over-licensing)—creates a paradox of on the one hand the luxury brand needing to maximize profits, and on the other needing to avoid over-selling and over-standardization. States Craven and Read, "To maintain their dream value and avoid the risk of commoditization, luxury brands must be desired by all…but consumed only by the happy few."
Perhaps with the exception of the high-end auto industry, the discriminating nature of "luxury" and the openness of the Internet seem to clash, leaving most luxury brands trying to figure out how to harness the Net's incredible reach to consumers while still maintaining a presence of exclusivity.