The demand for luxury goods is continuously increasing. As the population in most cities rises, the number of potential buyers increases, too. Additionally, most social classes steadily grow wealthier which is why more people can afford luxury goods. Still, luxury brands stand for exclusivity, elegance and scarcity.
But in the recent past, a conflicting development changes traditional business. The innovative approach of digitalization exerts pressure on luxury brands and still is determined as one of the most influential trends in the whole industry. The internet is accessible to everyone and represents a retail channel that sells mass products at discounted prices. Luxury industry has to find possibilities to manage the growing phenomenon of e-commerce while preserving the brand image from dilution.
But how can the luxury industry benefit from the technological innovation? Is it possible to integrate this growing and profitable mass market channel into the privacy of the exclusive luxury strategy? Anastasia Sobolev examines how the incongruences between the internet and the luxury industry can be solved. She develops an e-commerce model which offers useful solutions for luxury brands in order to expand their distribution network.
In this book:
-luxury industry;
-e-commerce;
-digitalization;
-luxury brands;
-mass media
Inhaltsverzeichnis
Abbildungsverzeichnis
1 Introduction
1.1 The relevance of the topic
1.2 Purpose of the thesis
2 Definition and theoretical principles of luxury industry
2.1 Definition of the term luxury brand
2.2 Buying behaviour of luxury consumers
2.3 Challenges for luxury brand management
3 Theoretical Framework of E-Commerce
3.1 Definition of E-Commerce
3.2 Online shopper profile
3.3 The key success factors of e-commerce
3.4 Risks of E-commerce
3.5 E-commerce business model
4 Development of an e-commerce model for luxury industry
4.1 Analysis of incongruity and challenges
4.2 Systematic elaboration of incongruity
5 Luxury e-commerce model application in the practice
5.1 Online presence evaluation of Louis Vuitton
5.2 Online presence evaluation of Chanel
6 Conclusion and outlook
Appendix I: Online activities of luxury brands
Appendix II: Statistics
Bibliography
Internet resources
Abbildungsverzeichnis
Figure 1: Positioning of luxury in contrast to fashion and premium segment
Figure 2: Luxury buying motives
Figure 3: New purchasing process based on the internet
Figure 4: Business Model Canvas
Figure 5: Dimension of customer experiences in an online shop
Figure 6: Challenges of luxury industry by implementing e-commerce
Figure 7: “Burberry Acoustic” menu on the website of Burberry.com
Figure 8: The luxury e-commerce model
Figure 9: Online insight in Bvlgari’s atelier
Figure 10: Online insight in Dior’s atelier
Figure 11: Personalisation services by Montblanc
Figure 12: Chanels’ corporate blog
Figure 13: Latest advertisement on Dior’s Facebook account
Figure 14: Gucci YouTube channel
Figure 15: Hidden prices of Dior’s High Jewellery
Figure 16: Hidden prices of Cartier’s High Jewellery
Figure 17: Hidden prices of Louis Vuitton’s High Jewellery
Figure 18: Personalisation service by Louis Vuitton
Figure 19: Registration of Louis Vuitton online shop
Figure 20: Chanels’ history library
Figure 21: Chanels’ check-out process
Figure 22: Ranking of frequenly used social networks worldwide
Figure 23: Ranking of luxury brands valuability worldwide
1 Introduction
1.1 The relevance of the topic
The demand for luxury is continuously increasing. The rising population and growing wealth of social classes has resulted in greater demand for luxury.[1] In the same way, the digital revolution has changed traditional business models by involving the new mass medium well known as the internet.[2] Online business has gained increasing importance for retailers; for instance, online sales accounted for $1.7 trillion in 2015 and are expected to rise by 5.1 percent until 2019.[3] The innovative approach of digitalisation exerts pressure on luxury brands and is determined as one of the influential trends in the luxury industry.[4] To manage the technology evolution, the luxury industry faces a number of challenges and has reacted with apprehension and resistance against selling their brands online as the luxury characteristics are not compatible with the features of the internet.[5] The opposition arises through the association that the internet is accessible to everyone and represents a retail channel that sells mass products at discounted prices, while luxury brands stand for exclusivity, elegance and scarcity.[6] Thus, the luxury industry has questioned the possibilities to manage the growing phenomenon of e-commerce by preserving the brand image from dilution in the digital world.[7] Finally, the question arises concerning how the luxury industry can integrate this growing and profitable mass market channel into the privacy of the exclusive luxury strategy to benefit from the technological innovation.
1.2 Purpose of the thesis
The purpose of this thesis is to examine how the incongruences between the internet and the luxury industry can be solved to develop an e-commerce model for the luxury industry. After the introductory remarks on the problematic, chapter two provides an insight into the core characteristics of a luxury brand and determines the luxury consumer profile. Furthermore, this chapter examines how the luxury industry differs from the mass market by determining the core challenges. The third chapter discovers the features of e-commerce by analysing consumer online shopping behaviour and underlining the benefits as well the risks induces by conducting business online. In order to understand how the e-commerce business works, the business model canvas is applied based on e-commerce activities. After the theoretical framework of luxury industry and e-commerce have been described, the fourth chapter determines and visualises at which business level the incongruences between the luxury industry and e-commerce arises and how they can be solved. Based on the observed findings, chapter 4.2.6. is devoted to developing an e-commerce model for the luxury industry. To compare the elaborated model with practice, chapter five provides an insight into the online business of two famous luxury brands to analyse the deviations. Finally, the conclusion in chapter six summarises the findings reported and provides an outlook for further research demand.
2 Definition and theoretical principles of luxury industry
2.1 Definition of the term luxury brand
While luxury is a common notion in scientific literature as well as daily business, there is no standardised definition of the characteristics that constitute the term luxury.[8] The cause is that an interpretation of luxury depends on a subjective perspective and reflects a notion of relativity. It is influenced by political-economic environment, the context as well as the moral-ethical position of an individual.[9] Essentially, luxury is associated by consumers with excessiveness and extravagance, as well as desire and admiration for ostentatious objects or experiences.[10] Both attitudes are subjected to the behavioural orientation of luxury consumption. In past societies, there was a prevailing understanding that luxury is a quantitatively-oriented privilege of aristocrats who consume goods beyond necessary to mark their superiority.[11] After the increased wealth resulting from the industrial revolution, social stratification diminished and the demand increased for qualitative goods associated with luxury in a more positive manner.[12] In this context, luxury has the characteristic of satisfying both psychological needs - such as boosting self-esteem by belonging to a privileged social group - and functional needs, such as quality.[13] For the aforementioned reasons, the term luxury brand cannot acquire a basic definition, although a differentiation between supply-oriented or demand-oriented luxury brand approaches can provide more insight.[14] The supply-oriented classification refers to the product category, whereby it makes no distinction between the notions luxury brand and luxury good.[15] Thus, products of the same brand can be a luxury unique (e.g. haute couture dress) and in another category a luxury brand (e.g. handbags) or a premium brand (e.g. perfumes). All of these categories are handled at the highest level regarding quality and esthetical properties and differ from each other only by price, scarcity, manufacturing, marketing and distribution methods.[16] The demand-oriented approach classifies a luxury brand in a holistic manner independent from the product categories by underlining the core value and symbolic identity of a brand.[17] In this context, DUBOIS/LAURENT/CZELLAR identified the following six facades describing the core essence of a luxury brand emerging from empirical research:[18]
- Very high price
- Excellent quality
- Scarcity and uniqueness
- Aesthetics and poly sensuality
- History
- Superfluousness
Based on the above-mentioned criteria, a luxury brand can be differentiated from other segments. For instance, history is a criterion that separates luxury from fashion as the former stands for timelessness and the latter focusing on the latest trend. Very high price, scarcity and uniqueness as well as superfluousness differentiate luxury from premium products. The very high price for luxury rests on intangibles, heritage and uniqueness rather than comparability. By contrast, premium can be replaced with alternatives and is based on objective superiority (see Figure 1).[19] Taking both the category-driven approach and the identity-oriented approach into consideration, LASSLOP separates luxury from other brand segments in a simplified manner by contrasting the criteria of price and brand benefit. Low price and little product benefit characterise a trademark whereby the opposite of both criteria are associated with a luxury brand.[20] However, this most widespread method in the literature is questionable in terms of whether both criteria are sufficient to differentiate luxury from premium brands, because not all consumers buy the most expensive products to receive the highest prestige, but also due to further aims (Chapter 2.2).[21] Moreover, the price frontier for luxury is not constant, varying between 100€ and 3,000€, which also argues against this simplified approach.[22]
Figure 1: Positioning of luxury in contrast to fashion and premium segment
illustration not visible in this excerpt
Source: Kapferer, J.-N. et al., Luxury, 2012, p.32
For the purpose of this essay, the definition of luxury is based on the findings regarding the definition of luxury under consideration of identity-oriented luxury criteria proposed by DUBOIS/LAURENT/CZELLAR. Thus, a luxury brand is a vision anchored in the psyche of consumers whereby specific brand benefits or either the combination of product features (e.g. high price, scarcity, high quality, etc.) are associated with best brand utility and high emotional brand experiences combined with high affinity for the respective brand and a willingness to invest a substantial sum to purchase the good. It has to be taken into account that the luxury brand definition is relative and temporary, whereby it depends on subjective as well as on situational perception of an individual.[23]
2.2 Buying behaviour of luxury consumers
The consumer buying behaviour of luxury goods recognises two main psychological perspectives based on social and personal factors. Socially-oriented behaviour stands for social recognition, namely the ambition to impress others to enhance own self-concept. By contrast, personally-oriented behaviour is driven by feelings and emotions and focusing on self-reward and self-fulfilment.[24] One of the most significant stimuli of buying behaviour is the status-seeking factor or “elitism”[25]. It is the source of the luxury sector’s growth that considering not only the happy few who can afford a luxury lifestyle every day, but it also attracts the happy many or the “excursionists” who aspire to imitate the wealthy by buying the same luxury brands.[26] In order to determine the luxury consumer characteristics according to their status-seeking ambition, VIGNERON/JOHNSON operationalised a four-dimension matrix with the use of the determinants self-consciousness and price perceptions.[27] Besides, KAPFERER developed a luxury segmentation whereby he also focuses on social functions, albeit under consideration of further factors such as status and consumer wealth.[28] To examine the buying behaviour in further detail, both classifications have been combined for this essay, identifying four different luxury consumer profiles (Figure 2).
The upper right square shows the type of wealthy consumers who seek status by buying famous brands in excessive quantities, which e.g. is associated with Russian luxury buying behaviour.[29] This kind of demonstrative consumption can be explained by the Veblen effect.[30] In this case, the consumer aims to show their wealth with the ambition to enhance or safeguard their current status.[31] Therefore, consumers are inclined to pay a higher price for a functional equivalent product to retain prestige and impress others.[32] Besides, the consumer sees the high price as evidence for higher quality or rather as a positive indicator for a certain degree of prestige.[33]
Figure 2: Luxury buying motives
illustration not visible in this excerpt
Source: Own representation based on Vigneron, F.et al., Consumer behaviour, 1999, p. 4 ; Kapferer, J.-N. et al., Luxury, 2012, p. 122; Kapferer, J.-N., Luxury branding, 2016, p. 484.
The upper left square demonstrates a luxury consumer profile showing a snob attitude, characterised by the desire of distinction. Luxury goods provide them with the feeling of uniqueness due to their nature of being exclusive and scarce.[34] This type of consumers are young executives with less wealth, although their purchasing power and status largely results from their high education. In comparison to other consumer types, they care more about strong personal experiences or modernity and high-tech devices.
The bottom right square classifies consumers of luxury with less status and wealth but with the desire to belong to prestige society. This phenomenon is common for consumers from countries with economic volatility such as China who consider luxury as security for the future and a sign of good taste. With the purchase of luxury brands, such consumer groups aim to differentiate themselves from the image of poorness and realise their integration by buying luxury goods with visible logos.[35] This consumer characterisation is in conformity with the bandwagon effect discovered by VIGNERON/JOHNSON, suggesting that luxury buying behaviour is driven by the motivation of belonging to or being associated with a social group.[36] Thus, the demand for a luxury brand grows with the number of consumers.[37] The bandwagon clientele is the bulk of luxury business and the driving force of trends due to the desire of affiliation.[38]
The bottom left square shows the connoisseurs with personal-oriented behaviour that is more influenced by the product features rather than the need to expose their wealth or seek status. For them, luxury is a history-telling product representing their ideological, self-serving values.[39] The luxury purchase is driven by intrinsic motives such as self-realisation and self-reward.[40] In striving for hedonism, luxury products are associated with pleasure and meet the emotional needs of aesthetic and perfection.[41] Hence, in this case luxury brands fulfil the function of self-identification.[42]
The evaluation of luxury buying behaviour does not consider the weighting of each examined consumer profiles, but rather it reveals that besides the status-seeking motive consumers recognise luxury as an instrument for distinction, self-identification and prestige demonstration.
2.3 Challenges for luxury brand management
2.3.1 Self-congruence and symbolic value
As underlined in the previous chapter, luxury consumers use products for self-expression and to satisfy self-concept driven motives.[43] This kind of attitude is explained with the self-congruity theory by SIRGY, whereby the need for congruence is signified by three motives: striving for self-esteem and social recognition, consistency and self-awareness.[44] In relation to the brand, the congruity theory states that a preference-forming effect can only arise when the personality of the consumed brand is in line with person’s personality.[45] The buying motives are not based on functional purpose but rather on the fulfilment of individual wishes. Luxury companies have to focus their communication on emotions and provide their luxury brands as a symbolic value to be announced as an instrument for self-concept realisation.[46] Hereby, the symbolic value of luxury brands supports customers to communicate their current or ideal self-status or it can act as stimuli for defining consumers’ self-perception by buying and using the respective product.[47] The symbolic value is a bundle of luxury brand characteristics such as quality and aesthetic (Chapter 2.1.), which must be understandable and correctly interpreted by all consumers.[48] In this context, the brand image provides orientation for consumers to recognise the symbolic value of a brand during the buying process.[49] Keller describes the brand image “as perceptions about a brand as reflected by the brand associations held in consumer memory.”[50] It shows how the public interprets the impulses of brands, services and advertisement, which strengthen the individual’s attitude towards a brand.[51] Brands whose image is characterised by authenticity and heritage are more preferred by consumers as it creates a symbolic and emotional attachment.[52] The public brand assessment can be influenced by the management in the form of brand identity creation, based on the self-image perspectives of the brand founder.[53] It should be defined as how the brand wants to be perceived by others and how the brand can remain memorable and affirmative to distinguish itself from the competition.[54] The core of brand identity creates the value proposition of a luxury brand, whereby it enables the identity transmission to the whole product range without identity contradictions of concrete product association.[55] The core of the brand is characterised by special features such as brand history, founder personality (e.g. Chanel or Louis Vuitton), sales strategy (quality, selective distribution, price setting) and known symbols that not only act as an orientation but also as a mythos of a luxury brand.[56] Nevertheless, the successful management of a luxury brand can only be realised when the brand identity is congruent with the brand image.[57] Moreover, the brand identity has to be continuously individualised, communicated and practised while remaining consistent in terms of brand values to be perceived as an authentic luxury brand.[58]
2.3.2 Target group concentration
The rarity and exclusivity dimensions of the luxury brand are not only about craftsmanship but also the selective and individual address to a clearly-stated target group. Consumers should gain the feeling of being appreciated and belonging to a selective group.[59] Adopting a distance is necessary to protect customers from non-customers by creating barriers. This can be realised by price setting, selective and exclusive distribution, as well as the aesthetical character of the luxury brand.[60] Accordingly, the luxury brand has to be desired by all to activate the sign of distinction.[61] It leads to desire leverage effect resulting from the gap between persons who know the brand and those who can afford it. Although luxury consumers want to stand out from the crowd, they also wish to be recognised as a society with good taste by non-consumers.[62] DUBOIS and LAURENT classify the consumers in three groups: the “affluent”, who frequently buy luxury goods; the “excluded”, who have no access to luxury; and the “excursionists”, who can afford the luxury but only consume it for certain events and on certain occasions, such as buying a present.[63] Besides, the “new consumers” with new expectations and new behaviour patterns should also be taken into account. This type of hybrid clients evaluate products and purchase them as a function of their situation without relying on a single brand. They show their creativity and taste rather by a mix of brands within different price segments (e.g. Zara jeans, Givenchy bag) to be more individual.[64] To attract the aforementioned audience while being selective, luxury communication has to obtain a position within the target group representing the luxury brand value. Thus, literature advises against luxury communication by using mass media addressing a broader audience.[65] Today, the business model of a number of luxury groups is to sell mass produced goods that are known as a luxury brand (e.g. Lancôme). Thereby, luxury groups simulate the rarity through sophisticated marketing communications and extensive public relation, whereby the challenge is to distribute rarity without physical rarity.[66]
2.3.3 Selective distribution
The essential aspect of retailing luxury brands is the selective distribution that respects the brand’s code and separates consumers from non-consumers.[67] The distance is realised through high prices and selective as well as exclusive distribution. As result of this selection, luxury brands face a conflict between accessibility and exclusivity.[68] On the one hand, every company seeks increased sales, which can be achieved through expansion or brand stretching. Accordingly, luxury brands have the risk of losing exclusiveness and brand image dilution. Furthermore, an increase of production and retail activities would compromise the core values, whereby luxury brands become equal with the status of premium brands.[69] The ideal model of luxury brand distribution under consideration of a core strategy is the brand representation in its own shop. This ensures the control of the image, brand protection, pricing, stock, client experiences and brand communication.[70] However, given that this approach is expensive and mostly not profitable, only a few luxury brands (e.g. Hermès, Louis Vuitton) have exclusive monobrand stores, such as flagship stores or monobrand selling points with a focus on image enhancement and market coverage. Almost all other luxury houses rely on a mixed distribution system, such as shop-in-shop selling areas located inside multi-brand stores or department stores like Harrods, where premium priced labels are placed next to private brands.[71] The further crucial factor of selling luxury brands in the store is the vital aspect of building a relationship between consumers and qualified sales personnel who are familiar with brand specifics. This “one-to-one” approach plays a significant role in the luxury universe as a luxury product is sold to someone rather than something being sold to somebody.[72] Besides, there are a number of further distribution types, such as duty-free shops, franchising network and department stores.[73] For the purpose of this essay, distribution channels will not be explored in detail.
2.3.4 Heritage vs Innovation
The history of the luxury brand is a part of brand identity and it holds importance for encouraging the emotional relation with the consumer.[74] Heritage can create a competitive advantage as it provides the brand with authenticity and distinctiveness through deeply-rooted values that are difficult to replicate.[75] The tradition embodies not only the company establishment but also the place of origin, the company founder’s identity and the values for which the brand stands.[76] A luxury brand would lose its aura if the link between the brand and its history and territory were extracted. Furthermore, luxury products are associated with hand-made production conducted and defined by a known artisan. Although nowadays the majority of models produced by several artisans have been standardised and produced in advance, the luxury industry does not use autonomous techniques but rather qualitative tools, which are more recognised as an aid for hand-made procedures.[77] In the time of globalisation and modern technology, the consumer is seeking innovative products whereby companies are forced to relate their brands with innovation for retaining customers.[78] The innovativeness is an essential feature for luxury brands as it represents a significant share of market turnover.[79] Given that heritage is rather the counterpart of innovation, it can inhibit dynamic renewal, limit the ability to re-define, position brands and strengthen them in emerging marketplaces.[80] For example, Rolex has continued to doggedly create watches in accordance with its classic design, resulting in reduced consumer attention through the lack of innovative products complying with new age.[81] On the other hand, luxury brands should not disregard their tradition values at all, because ever-changing products and structures can lead to a dilution of the luxury brand image. Thus, it is essential to create a balance between contemporary and historic values.[82] Successful luxury brands achieve this kind of balance in the form of line and brand extension to grow and be innovative without losing their core business.[83] In this respect, beyond their core business luxury companies establish additional lines/products at a lower price segment that are accessible to wider audience; for example, Armani launching Emporio Armani, Armani Jeans, etc. in the case of line extension.[84] In the case of brand extension, the range starts with exclusive products and cascades into various products (pyramid function), such as accessories, glasses and watches, down to cosmetics and perfumes. Besides, the innovation aspect brand extension approach positively affects profitability as the original trade carries the consumer's dream but cannot be sold in quantities to ensure the company’s economic growth.[85] Moreover, the brand extension is an important part of the brand’s evolution as it attracts new customers, improves the margin as well as providing an opportunity to constantly innovate and enhance the core business.[86]
2.3.5 Price management
In contrast to a traditional strategy that aims to maximise profits, from a financial perspective the luxury industry rather focuses on enhancing brand value that not only derives from the production but also from financial results.[87] High profitability is perceived by establishing the high-price image, which constitutes one of the key objectives of luxury brands.[88] Through the artificial price barrier, distribution becomes more selective and the inaccessibility increases the brand attractiveness.[89] Therefore, the degree of luxury brand awareness has to be higher than the level of accessibility to create special desire.[90] The price policy of luxury brands is aligned with the prestigious brand identity and reflects the specific aura as well as the fascination of the luxury product.[91] To preserve the image of a luxury brand, a number of scientists have determined that the price management of luxury is achieved by two regulations. First, to stand out from the mass market, the price for the luxury brand has to be higher than the price of a non-luxury brand of the same product category.[92] Moreover, prices should be characterised by continuity, i.e. they should be stable in the short term, but slightly increase in the long term.[93] The second regulation emphasises that price discounts - e.g. in the form of sale activities - should be undertaken carefully in accordance with a rigid price policy and not too often.[94] Nevertheless, luxury consumers are inclined to pay a higher price for the symbolic and functional value of luxury brands, whereby the luxury company achieves profit through a high margin.[95] On the other hand, luxury businesses face a very high break-even point, influenced by high expenses, given that production and sales activities have to be fulfilled at the highest quality level.[96] Moreover, it takes a lot of time and requires an essential investment in the luxury brand until the sales break-even point is reached.[97]
2.3.6 Globalisation, democratisation and the internet
Over recent years, the luxury industry has faced a number of changes and has grown at an annual rate of 7% between 1995 and 2013.[98] The phenomenal growth results from globalisation, democratisation, the rise of high-net-worth individuals and the prominence of the internet.[99] Globalisation is effected through the growing wealthy class in emerging countries such as China and Russia.[100] Luxury consumers have changed to world shoppers. Based on statistics, Chinese consumers account for the largest part of luxury purchases worldwide (31%).[101] Besides, half of all global luxury purchases are made by Asian tourists.[102] Tourists not only benefit from better product availability and selection but they are also attracted by a price advantage, because luxury products are more expensive in their home countries due to the high taxes for import, constant fluctuations and exchange rates.[103] Besides the extension to emerging markets, luxury companies have widened their product ranges and offer more accessible products to be modern and cover a wider market, which includes the higher-valued and middle-valued classes. Thus, the number of middle-net-worth consumers has increased with the democratization of luxury and the luxury market has gradually changed into a mass market by diluting its exclusiveness.[104] To underline this growth, BAIN & COMPANY determined that the luxury industry generated a profit of over €1.08 trillion while its retail sales value of core luxury products accounted for €249 billion in the first three quarters of 2016.[105]
Additionally, the typical selling cycle of luxury brands has been embraced by online media and innovative technology, whereby brands have built an awareness among new audiences through live streaming seasonal runway shows, providing virtual dressing rooms and placing online advertisements.[106] Nowadays, luxury ventures are forced to conduct business online because luxury consumers tend to purchase online more than ever. According to a study, 60% of consumers search online for luxury products and 51% share online information about luxury brands or products in Europe.[107] The rise of internet affinity and the evolvement of technology have led to the increased importance of e-commerce, as explained in detail in the subsequent chapter.[108]
3 Theoretical Framework of E-Commerce
3.1 Definition of E-Commerce
E-commerce can be narrowly defined as a distribution channel where consumers can buy and companies can sell products via online websites such as Amazon.[109] Strictly speaking, e-commerce is understood as a value exchange transaction, whereby economic goods are sold in return for money via electronic networks such as the web, the internet and/or mobile apps.[110] However, experts determine that e-commerce involves many more features than financial transactions carried out electronically.[111] TURBAN et al. go further and defined e-commerce as:
“the process of buying, selling, transferring, or exchanging products, services, and/or information via computer networks, including the Internet.”[112]
TURBAN et al. also argue that e-commerce stands for several perspectives, which are indirectly related to commercial value exchanges. For instance, researchers have highlighted that besides the business approach, e-commerce is used by management to cut service costs, enhance the quality of consumer service and introduce a collaborating framework for business partners. In addition, from a community perspective, e-commerce provides a platform where community members can learn, collaborate and transact.[113] In accordance with this view, CHAFFREY defines e-commerce as a bundle of all electronically-submitted transactions without distinguishing between financial transactions, service features and information exchange. Thus, e-commerce is not solely limited to buying and selling processes, but also involves pre- and after-sale activities across the whole supply chain. Moreover, in accordance with his definition, e-commerce transactions are differentiated between buy- and sell-side commerce: the former reflects transactions between the organisation and respective suppliers, while the latter refers to transactions between the organisation and customers.[114] The literature delivers different opinions regarding the notion for this bundle of mentioned characteristics and does not agree whether e-commerce is only a sub-field of e-business, vice versa, or if the meaning of both notions is the same.[115] In order to develop an e-commerce model for the luxury industry, this essay will follow up with the broader meaning of e-commerce, which encompasses buying and selling as well as pre- and after-sale activities in accordance with CHAFFREY’ s definition. The focus is placed on establishing an appropriated model under consideration of sell-side e-commerce conducted through the web.
3.2 Online shopper profile
Through the increasing use of the world wide web as an information medium and place of social interactivity, online sales continue to rise: worldwide, 3.4 billion people are using the internet for an average of 4.4 hours per day.[116] The internet as well as the web have evolved to a platform where people can interact with each other online through social communities and social networks worldwide. It improves a new form of communicating while users participate in dialogues, share information and engage interests with a sizeable audience. The virtual world creates new behavioural patterns that have influenced consumer mindsets and allowed individuals to be in charge of their own online experiences. Consumers no longer trust two-way communication with companies and rather prefer to evaluate the brand message by looking around for information 360° degrees under consideration of other consumers’ experiences.[117] As a result, consumers participate voluntarily and actively in sales processes in the form of providing feedback to sellers, recommendations to other interested parties and publishing product reviews.[118] This kind of empowered consumer is also designated as a prosumer (producer + consumer).[119] The sender-receiver model has changed as users are in the focus and have also become senders. Through the aroused ability to have an impact on sale processes - e.g. by writing a recession - e-commerce is also affected by the community characteristic.[120] New web applications and technologies have been introduced by the evolution of the Web 2.0, which has improved the data exchange through social networks, blogging services, interactive applications, podcasts, etc., forming a new basis for business models.[121]
Moreover, consumers prefer to purchase products with a cross-channel approach. Thus, consumers intend to research online for products and services while buying in a retail store and vice versa.[122] From an emotional buying perspective, internet users are frequently informed by social networks about the acceptance and popularity of products. By purchasing that respective product, users gain the feeling of belonging to a social group.[123] In the sum of all aforementioned behavioural shifts, several steps of purchase decisions have converted from point of sale to point of decision. Accordingly, a user searches first for product information, compares it and finally selects it, whereby the vendor is only seen as the point of sale. From the perspective of stationary trading, the product choice is made after the vendor has been chosen and the point of sale is automatically the point of decision (Figure 3).[124]
Figure 3: New purchasing process based on the internet
illustration not visible in this excerpt
Source: Gehrckens, M. et al., Zukunftsvision, 2013, p. 54.
In the case of sociodemographic features, a recent survey has identified the consumer profile and development of e-shoppers in Europe over the past ten years (Figure 4). The results of this study demonstrate different age groups and their shopping activity. Overall, online purchases have accounted for an increase of 16 percentage points in the 2007-2016 period. The age group 25-54 records the highest share of online shoppers (69%), closely followed by those aged 16-24 (68%). The age group 55-74 represents the lowest purchasing share (55%) while buying travel accommodation, magazines, books, newspapers and medicine.[125]
[...]
[1] Cp. Merten, H.-L., Luxus, 2009, p. 6.
[2] Cp. Hoffmann, J., Luxury strategy, 2012, p. 108.
[3] Cp. McCrea, B., Global reach, 2016, p. 37.
[4] Cp. Meurer, J. et al., Luxusmarkenführung, 2012, p. 23; Kapferer, J.-N. et al., Luxury, 2012, p. 247.
[5] Cp. Okonkwo, U., Luxury, 2009, p. 304.
[6] Cp. Som, A. et al., The road, 2015, p. 331.
[7] Cp. Hoffmann, J., Luxury strategy, 2012, p. 108.
[8] Cp. Kapferer, J.-N. et al., Luxury, 2012, p. 45 ff.; Wiedmann, K.-P.et al., Marketing, 2013, p.80 ff.
[9] Cp. Lasslop I., Luxusmarken, 2005, p. 472; Valtin, A., Luxusmarken, 2005, p. 20; Kapferer, J.-N. et al., Luxury, 2012, p. 46.
[10] Cp. Kapferer, J.-N. et al., Die Marke, 1992, p. 348.
[11] Cp. Kapferer, J.-N., Luxury brands, 2006, p. 69; Okonkwo, U., Luxury online, 2010, p. 13.
[12] Cp. Valtin, A., Luxusmarken, 2005, p. 22 f.; Kapferer, J.-N. et al., Luxury management, 2009, p. 313.
[13] Cp. Okonkwo, U., Luxury online, 2010, p.13; Barnier, V. et al., Luxury, 2012, p. 626.
[14] Cp. Büttner, M., Luxusmarke, 2008, p. 10.
[15] Cp. Lasslop, I., Luxusmarken, 2005, p. 473.
[16] Cp. Kapferer, J.-N. et al., Die Marke, 1992, p 351 f.
[17] Cp. Lasslop, I., Luxusmarken, 2005, p. 473.
[18] Cp. Dubois, B.et al., Luxury, 2001, p. 8 ff.
[19] Cp. Kapferer, J.-N. et al,, Luxury, 2012, p. 47 f.
[20] Cp. Lasslop, I., Luxusmarken, 2005, p. 474.
[21] Cp. Müller, F. et al.., Luxusmarketing, 2012, p.12.
[22] Cp. Kapferer, J.-N.et al., Luxury, 2016, p. 338.
[23] Cp. Valtin, A., Luxusmarken, 2005, p. 30; Lasslop, I., Luxusmarken, 2005, p. 475.
[24] Cp. Kapferer, J.-N. et al., Luxury, 2012, p. 23; Scholz, L. M., Brand management, 2014, p. 24.
[25] Cp. Barnier, V. et al., Luxury, 2012, p. 649 f.
[26] Cp. Dubois, B.et al., Luxury, 1995, p. 69 ff; Kapferer, J.-N., Luxury, 2016, p. 479.
[27] Cp. Vigneron, F.et al., Cosumer behavior, 1999, p. 4 ff.
[28] Cp. Kapferer, J.-N.et al., Luxury, 2012, p. 121.
[29] Cp. ebd., p. 121 f.
[30] Cp. Veblen, T., Feinen Leute, 2007, p. 79 ff.
[31] Cp. Mason, R. S., Consumption, 1981, p. 130.
[32] Cp. Bagwell, L. S. et al., Veblen effects, 1996, p. 349.
[33] Cp. Vigneron, F. et al., Consumer Behavior, 1999, p.4.
[34] Cp. Snyder, C. R.et al., Uniqueness, 1982, p. 3 ff; Lynn, M.et al., The desire, 1997, p. 601 ff.
[35] Cp. Kapferer, J.-N.et al., Luxury, 2012, p. 117 ff; Kapferer, J.-N., Luxury branding, 2016, p. 484 f.
[36] Cp. Dubois, B.et al., Luxury goods, 1993, p. 37; Mason, R. S., Consumption, 1998, p. 92 f.
[37] Cp. Leibenstein, H., Consumers' Demand, 1950, p. 189.
[38] Cp. Maxwell, A., Bandwagon effect, 2014, p.527; Kapferer, J.-N., Luxury branding, 2016, p. 485.
[39] Cp. Kapferer, J.-N.et al., Luxury, 2012, p. 485.
[40] Cp. Lasslop, I., Luxusmarken, 2005, p.379 f.
[41] Cp. Mei-Pochtler, A., Premiummarken, 2003, p. 92 f.; König, V.et al., Luxusmarken, 2012, p. 8.
[42] Cp. Vigneron, F.et.al., Consumer Behavior, 1999, p. 3; Reich, C., Luxusmarken, 2005, p. 42.
[43] Cp. Burmann, C. et al., Luxusmarkenführung, 2012, p. 7 ff.
[44] Cp. Sirgy, M. J., Self-congruity, 1986, p. 7 ff.
[45] Cp. Aaker, J. L., Malleable self, 1999, p. 45 ff.
[46] Cp. Meffert, H. et. al., Luxusmarkenstrategie, 2004, p. 7; Büttner, M., Luxusmarke, 2008, p. 14 ff.
[47] Cp. Solomon, M. R., Social Stimuli, 1983, p. 323.
[48] Cp. Valtin, A., Luxusmarken, 2005, p. 23 ff; . Burmann, C. et al., Luxusmarkenführung, 2012, p. 7.
[49] Cp. Mayer, H. et al., Werbepsychologie, 2000, p. 14 f.
[50] Keller, K. L., Brand Equity, 1993, p. 3.
[51] Cp. Kapferer, J.-N. et al., Die Marke, 1992, p. 44.
[52] Cp. Ballantyne, R. et al., Brand choice, 2006, p. 339 ff.
[53] Cp. Büttner, M., Luxusmarke, 2008, p. 19.
[54] Cp. Van Gorp, T., Luxury industry, 2012, p. 129 f.
[55] Cp. Lasslop, I., Luxusmarken, 2005, p. 475 f.
[56] Cp. Meffert, H. et al., Marken management, 2005, p. 333 f.
[57] Cp. Meffert, H., Marketing, 2000, p. 879.
[58] Cp. Burmann, C. et al., Authentizität, 2010, p. 54.
[59] Cp. Shanahan, S., Dialogmarketing, 2010, p. 6; Van Gorp, T., Luxury industry, 2012, p. 135 ff.
[60] Cp. Kapferer, J.-N., Luxusmarken, 2001, p. 355 f.
[61] Cp. Ward, D. et al., Luxury, 2008, p. 16.
[62] Cp. Sihler, H., Luxusmarken, 2007, p. 177.
[63] Cp. Dubois, B. et al., Luxury, 1995, p. 69 f.
[64] Cp. Chevalier, M. et al., Luxury brand, 2008, p. 154 ff.
[65] Cp. Kisabaka, L., Luxusprodukte, 2001, p. 267.
[66] Cp. Kapferer, J.-N. et al., Luxury, 2012, p. 99 ff.
[67] Cp. Hennings, N. et al., Luxury brands, 2012, p. 31.
[68] Cp. Hoffmann, J., Luxury strategy, 2012, p. 97.
[69] Cp. Reinecke, S. et al., Massenexklusivität, 2011, p. 11 ff.
[70] Cp. Chevalier, M. et al., Luxury brand, 2008, p. 349.
[71] Cp. Hoffmann, J., Luxury strategy, 2012, p. 88 ff.
[72] Cp. Kapferer, J.-N. et al., Luxury, 2012, p. 234 f.
[73] Cp. Hoffmann, J., Luxury strategy, 2012, p. 88 ff.
[74] Cp. Kapferer, J.-N. et al., Luxury management, 2009, p. 6.
[75] Cp. Valtin, A., Luxusmarken, 2005, p. 118; Urde, M. et al., Corporate brands, 2007, p. 10.
[76] Cp. Lasslop, I., Luxusmarken, 2005, p. 334 ff.
[77] Cp. Kapferer, J.-N. et al., Luxury, 2012, p. 211 f.
[78] Cp. Bhat, B. et al., Innovation, 2001, p. 26.
[79] Cp. Merten, H.-L., Luxus, 2009, p. 39.
[80] Cp. Morley, J. et al., Innovation, 2011, p. 5.
[81] Cp. Reinecke, S. et al., Massenexklusivität, 2011, p. 14.
[82] Cp. Urde, M. et al., Corporate brands, 2007, p. 10 ff.
[83] Cp. Esch, F.-R., Markenführung, 2001, p. 757 ff; Lasslop, I., Luxusmarken, 2005, p. 341
[84] Cp. Kapferer, J.-N. et al., Luxury, 2012, p. 172.
[85] Cp. ebd., p. 305 f.
[86] Cp. Hoffmann, J., Luxury strategy, 2012, p. 159.
[87] Cp. Kapferer, J.-N. et al., Luxury, 2012, p. 278.
[88] Cp. Som, A. et al., The road, 2015, p. 95 f.
[89] Cp. Reingruber, M., Luxusmarke, 2014, p. 112.
[90] Cp. Kapferer, J.-N., Luxusmarken, 2001, p. 355.
[91] Cp. Faßnacht, M. et al., Luxury brands, 2013, p. 104.
[92] Cp. Dubois, B. et al., Luxury, 2001, p. 9 ff; Lasslop, I., Luxusmarken, 2005, p. 486.
[93] Cp. Vigneron, F.et al., Luxury, 2004, p. 486; Kapferer, J.-N. et al., Luxury, 2012, p. 75.
[94] Cp. Kisabaka, L., Luxusprodukte, 2001, p.259 f; Lasslop, I., Luxusmarken, 2005, p. 486; Sihler,
H., Luxusmarken, 2007, p. 181.
[95] Cp. Maloney, P., Luxusmarken, 2012, p. 145.
[96] Cp. Scholz, L. M., Brand management, 2014, p. 33 f.
[97] Cp. Kapferer, J.-N. et al., Luxury, 2012, p. 279.
[98] Cp. Kapferer, J.-N. et al., Luxury, 2016, p. 332.
[99] Cp. Hoffmann, J., Luxury strategy, 2012, p. 75.
[100] Cp. Okonkwo, U., Luxury challenge, 2008, p. 287; Truong, Y. et al., Luxury, 2008, p. 375.
[101] Cp. Bain & Company, Luxury goods, 2016, p. 11.
[102] Cp. Kapferer, J.-N., Luxuries’ future, 2014, p. 720.
[103] Cp. Som, A.et al., The road , 2015, p. 287; Deloitte, Luxury goods, 2016, p. 8.
[104] Cp. Dubois, B. et al., Luxury, 1995, p. 69; Wiedmann, K.-P.et al., Marketing, 2013, p. 193; Truong, Y.et al., Luxury, 2008, p. 376.
[105] Cp. Bain & Company, Luxury report, 2016, p. 5.
[106] Cp. The Buston Consulting Group., The new world, 2010, p. 4.
[107] Cp. Mirosoft Advertising, Lovers of luxury, 2009, p. 4
[108] Cp. Laudon, K. C. et al., E-commerce, 2016, p. 49.
[109] Cp. Chaffey, D., E-business, 2011, p. 10; Wirtz, B. W., E-business, 2016, p. 30 f.
[110] Cp. Laudon, K. C. et al., E-commerce, 2016, p. 50.
[111] Cp. Chaffey, D., E-business, 2011, p. 10.
[112] Turban, E. et al., E-commerce, 2009, p. 48.
[113] Cp. ebd., p. 48 f.
[114] Cp. Chaffey, D., E-business, 2011, p. 12.
[115] Cp. Charlesworth, A., Key concepts, 2007, p.88; Bächle, M. et al., E-business, 2010, p. 4; Turban, E. et al., E-commerce, 2015, p.7; Wirtz, B. W., E-business, 2016, p. 30.
[116] Cp. Heinemann, G., Online-Handel, 2017, p. 1.
[117] Cp. Okonkwo, U., Luxury online, 2010, p. 42 ff.
[118] Cp. Heinemann, G., Online-Handel, 2017, p. 37.
[119] Cp. Bächle, M. et al., E-business, 2010, p. 184.
[120] Cp. Walsch, G.et al., Web 2.0, 2011, p. 8 ff.
[121] Cp. Chaffey, D., E-business, 2006, p. 97; Laudon, K. C.et al., E-commerce, 2013, p. 159 ff.
[122] Cp. Höschl, P. et al., E-commerce, 2012, p. 15.
[123] Cp. Heinemann, G., Online-Handel, 2017, p. 48.
[124] Cp. Gehrckens, M. et al., Zukunftsvision, 2013, p. 53ff.
[125] Cp. Eurostat, Internet users, 2017, p. 6.
- Quote paper
- Anastasia Sobolev (Author), 2017, The Development of an E-Commerce Model in the Luxury Industry, Munich, GRIN Verlag, https://www.grin.com/document/379494
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