Online marketplaces are still on the rise with shoppers continuing to look for safer, more convenient ways to shop as the pandemic continues. In fact, data shows that digital, third-party marketplaces are seeing an 81% increase in gross merchandise value year-over-year thus far in 2021.
Why the shift toward online marketplaces? With in-person shopping off the table for much of 2020, digital marketplaces proved valuable for customers looking for new means of product discovery and delivery. These additional touchpoints mean one more way to drive traffic with target audiences. As a result, brands in the luxury space are leaning into the online marketplace movement as well. In fact, Bain & Company projects that as much as one-third of all personal luxury purchases will take place digitally by 2025, with those revenues reaching an estimated $136 billion.
Luxury online marketplaces like italist, for example, are capitalizing on this shifting consumer behavior. By aggregating the inventory of over 250 independent boutiques, italist allows online shoppers to purchase luxury items sold by boutiques in Milan, Florence, and Rome—at Italian retail pricing, which can be 40% lower than global averages—without having to travel.
“COVID-19 has deeply impacted the luxury sector, especially in-person shopping and travel to places like Italy—a destination for luxury shopping. We were already translating that experience into a virtual space, so the pandemic only underscored our mission,” said Diego Abba, italist’s CEO.
Other luxury marketplaces like Farfetch are also seeing an uptick in growth. Serving more than 190 countries and territories, the average Farfetch order in the first quarter of 2021 totaled a remarkable $618, with digital platform GMV growth up 60% year-over-year. Net-A-Porter and Matches Fashion, two other luxury clothing marketplaces, are proving themselves as strategic (and profitable) ways for luxury brands to approach omnichannel retail as well.
If you ask Ricardo Belmar, founder of Retail Razor, luxury brands overall have been slow to adopt eCommerce and sell through marketplaces—but COVID-19 gave them a reason to reconsider. He believes that online marketplaces will continue to thrive in the luxury space.
“The luxury shopping journey will continue to begin and run through digital channels for consumers as it does with other products, so brands and retailers will interact with customers digitally to augment their relationships and grow lifetime customer value long-term,” he said.
However, other eCommerce experts, like Paul Munford of Lean Luxe, believe that online marketplaces should be carefully considered when it comes to Veblen goods.
“Luxury retailers have to consider that third-party, online marketplaces mean having a less direct relationship with consumers,” he said.
For some, the tradeoff of expanded reach to global audiences is worth that risk—especially with recent spikes in COVID-19 cases that could lead to another round of in-store shopping restrictions. One thing is certain: The massive shift to online shopping continues—and online marketplaces are helping foster product discovery and driving sales. The luxury good space is no exception.
“Every retailer needs a strong grasp on marketplace strategies to compete in today’s digital-first economy,” said Adrien Nussenbaum, co-founder and U.S. CEO of Mirakl, a marketplace platform.
McKinsey State of Fashion report data echoes this claim: “In 2021, the COVID-19 pandemic will accelerate industry trends with shopping shifting to digital channels. Well-performing fashion companies share at least one of two key characteristics: Digital strength and an Asia-Pacific focus.”