The fall of luxury fashion retailers and 5 ways to make a comeback

Online luxury fashion retailers are struggling in the cost of living crisis – but these 5 solutions could pave the way for a future comeback.

---

Farfetch, a luxury fashion online retailer, has made recent headlines as its founder, José Neves, is reportedly planning to take the company private after five years on the New York Stock Exchange. Since its listing in 2018, Farfetch has lost more than 90% of its £6.3bn valuation. Its struggles were evident in 2023 as well – from the redundancies made in its New York and London teams, to a £140.5m loss after tax in the first quarter, Farfetch is not alone in the looming challenges faced by online luxury retailers.

Beyond Farfetch: A shift in consumer interest

Examining year-over-year data from September 2023 reveals a surge in interest in some individual luxury brands compared to interest in multi-brand retailers. Search volumes for iconic names like Prada and Ferragamo witnessed an increase of about sixfold, while luxury fashion retailer Net-a-Porter experienced a YoY decline. Despite its aforementioned troubles, Farfetch’s search volume increased over five times YoY.

Steve Bryant, Managing Director at Thoughtmix, believes this reveals a shift in what consumers want out of their online shopping experience:

“Highly affluent audiences typically shop directly with luxury brands for a unique shopping experience and building an affinity with a brand. Now that brands’ online experiences are catching up with multi-brand retailers, the convenience of shopping with multi-brand has lost its edge. In addition, sales to multi-brand are generally middle class consumers buying a statement piece to be on trend – but this segment (BC1) has severely lost its buying power in the cost of living crisis.”

How luxury fashion retailers can make a comeback

Hop on the BNPL bandwagon

The meteoric rise of Buy Now, Pay Later (BNPL) may offer a solution to the ongoing struggles of these online shopping retailers. British BNPL payments have “more than tripled over the last four years”, with a notable increase in mobile purchases, and 35% of BNPL users view luxury goods as a wise investment. Seeing as over a third of mobile payment users fall within the 18-24 age range, integrating BNPL solutions into luxury retail marketing strategies would not only boost awareness and interest but also capture the purchasing power of the next generations.

Boost visibility with social sharing

Multi-brand retailers don’t hold equity within the products they sell, so while traditional influencer marketing plays a role in awareness, promoting a stocked brand provides more value for the brand than it does the retailer. Utilising partners offering a social sharing function post-purchase creates reach for “where to buy”. It allows their customer to talk about the retail USPs, fast delivery, seamless experience and so on to their following. This promotion method is enjoyed for free without the need to employ an influencer strategy.

Leverage referral programs to find loyal return customers

Consider using platforms like Soreto, which specialise in refer-a-friend programs to boost ROI. Platforms like these leverage the power of word-of-mouth marketing to create a personalised shopping experience that resonates with individual tastes. This approach not only increases new customer acquisition and customer loyalty, but also fosters a more intimate connection between the brand and the consumer. In addition to social sharing, using existing customers as ambassadors to the retailer increases circulation and creates an additional following to the retailer over the brand.

Use chatbots for seamless customer experience

Integrating chatbots into these online luxury fashion retailers is an efficient way to create an elevated and personalised shopping experience. These AI-powered assistants can guide shoppers through product selections, answer queries, and provide real-time assistance. The seamless interaction these chatbots can provide contributes to an enhanced customer journey, potentially boosting conversion rates.

Particularly, when considering size and fit, and choosing pieces for occasions or seasons, chatbots provide a first line personalisation for users, signposting products on site and in stock to mimic the experience of going directly to the brand.

Emphasis on personalised shopping experiences

Investing in technologies that facilitate personalised customer experiences is imperative to stay ahead of the competition in retail, but this is especially so in luxury fashion. Using tailored platforms and tech services to create product recommendations based on individual preferences, purchase history, and browsing behaviour creates a bespoke journey for each customer. This level of personalisation not only ensures a positive and memorable user experience but also fosters brand loyalty.

Online luxury fashion retailers wanting to make a comeback would be wise to utilise a holistic approach to marketing that includes BNPL, social sharing, word-of-mouth, chatbots, and an overall emphasis on creating personalised experiences. Embracing these solutions will help brands adapt to changing consumer expectations and carve a distinct niche in the competitive world of online luxury fashion.

If you’d like to learn more about levelling up your marketing program with these solutions, get in touch with us to book a virtual coffee Q&A today.