Where next for luxury retail? - Issue 171 - Magazine | Monocle

thumbnail text

The debate 

Towards the end of last year, luxury retail’s long-simmering problems reached boiling point. Global marketplace Farfetch was de-­listed from the New York Stock Exchange, only avoiding bankruptcy when South Korean e-commerce giant Coupang bought its assets. London-based Matchesfashion met a similar fate. Valued at $1bn (€924m) just a decade earlier, it was acquired for £52m (€61m) by the Fraser Group, a business with little background in luxury. Meanwhile, Net-A-Porter remains without a buyer and US retailer Neiman Marcus has laid off more than 100 employees while it reportedly considers a merger with Saks Fifth Avenue.

At first glance, it might seem as though the luxury e-commerce sector, once known for its innovation and expert curation, fell apart overnight. Yet many of its current problems – overstocking and unhealthy discounting, for example – go back to the 2007 financial crisis and beyond. Breaking bad business habits will take time and many in the industry are taking a wait-and-see approach, as companies restructure under new owners. Yet this is also an opportunity to rethink the shopping experience, build better partnerships with brands and be more creative. Specialist retailers with a clear purpose are rising in popularity again, while labels are taking back control and experimenting with their flagship shops. We speak to experts from across the field to assess what went wrong and what lies ahead.

This is an opportunity to rethink the shopping experience, build better partnerships with brands and be more creative

Meet the panel


Ida Petersson
The buyer
Petersson started her career as a buyer at Harvey Nichols department store in 2002, before becoming departmental buying manager for shoes, accessories and jewellery at Net-A-Porter. She went on to become the buying director of Farfetch-owned luxury retailer Browns, leading its men’s, women’s and accessories departments.


Christopher Morency 
The brand strategist
Morency covered luxury fashion and retail as a reporter for The Business of Fashion and editorial director of Highsnobiety, before pivoting to become the chief brand officer of Budapest’s Vanguards Group in 2022. With fellow Highsnobiety alumnus Tom Garland, he launched new creative-growth company Edition1Partners and its sister agency, State of the Art, in January.


Georgia Stevenson
The investor
Stevenson is a partner at European private- equity firm Index Ventures, which she joined in 2019. She focuses on consumer and retail investments across the continent, with a particular focus on marketplaces. She previously worked at Deliveroo, launching the service in towns and cities across the UK.

Looking at recent developments in fashion retail, what do you think led the industry to this point?

ida petersson: The first time that I experienced major economic turmoil in my career was in 2008, after the collapse of Lehman Brothers. Everything in the US went on an 80 per cent discount. Our customers were global, so when they saw a product at full price at Harvey Nichols in London, they just went to the US. That’s when unhealthy discounting practices started and I don’t think we ever fully recovered. The second round of problems started at the height of the pandemic, when bricks-and-mortar shops were suffering and put everything on sale. That forced many brands to drop their wholesale partnerships. Meanwhile, e-commerce retailers became overexcited, thinking that they could continue to grow in double- or triple-digit numbers.


christopher morency: In that environment, the only thing that these companies were competing on was price. They made a stab at community-building for a while but were really betting on price and speed. That’s not good enough. Discounting will only take you so far before you end up with a loss-making business and a lot of enemies. This is why luxury brands pulled out of retailers and only use the consignment model.

Does e-commerce still have potential?

cm: The media loves a sensational headline – “Is this the end for e-commerce?” No, this is a multibillion-dollar sector. There are so many players out there and the offer is homogeneous, so we’re seeing a consolidation that needed to happen.


georgia stevenson: At Index Ventures, we have worked with a number of e-commerce businesses as seed investors – Farfetch, Net-A-Porter, Etsy – as well as brands with their own retail networks, such as Glossier or Anine Bing. We’re bullish on the future of e-commerce and excited about what Farfetch is doing, as well as what the partnership with Coupang will mean in terms of logistics and fulfilment. There will, of course, be challenges. In the short term, for example, there needs to be more focus on sustainable value propositions. Do you really need to deliver to the customers’ door in 10 minutes? But such re-evaluation is part of the process. We’re not the type of investors who would back off just because there are challenges.

“E-commerce has so many players and the offer is homogeneous, so we’re seeing a consolidation that needed to happen”

Will the changing relationship between brands and retailers continue to shape the market in 2024?

cm: lvmh and Kering brands stopped discounting and engaging with wholesalers years ago because they wanted to control their stock, pricing and distribution. Now smaller brands are becoming equally fed up and focusing on direct sales and partnerships with boutiques that build more respectful relationships with them. 


ip: The wholesale model of doing business can create a vicious circle. Many of the big players in that space are just seeking margins. Brands don’t always fully understand what they’re getting into when they sign up to it because they get too excited by a big name. But I’ve recently seen a shift: some brands are choosing to go with more specialist retailers because they are more protective and use discounting far less. And their customer base is loyal and drawn to creativity.

“The wholesale model of doing business can create a vicious circle. Many of the big players are just seeking margins”

Do direct-to-consumer brands have more power today? 

gs: As investors, we’re excited by direct-to-consumer brands. These businesses know their customers and connect with them without having to rely on third parties. Across our portfolio, there’s a theme of going back to basics, doing less and focusing on core products. That will continue as a result of the current funding environment. Wholesalers can play a part in a brand’s distribution strategy but you can’t be a hostage to them. Look at Glossier, which has an amazing direct-to-consumer audience and successful shops but, after years of building that ecosystem, recognised that working with [French retailer] Sephora was another avenue. 

cm: Traditional industry power structures are breaking down. In past decades, a group of about 20 people – retail buyers, sales agents and editors – would determine which businesses would grow. But they no longer have the same influence, so many brands are doing things differently and seeing returns. That also reflects the tools that people now have at their disposal. They can whip up a Shopify page within 20 minutes and start selling.

gs: Exactly. A retailer procures, curates and sells goods, and everyone can do that today. So questions around the future of retail remain open. The market is no longer just for big brands or large enterprises.


As dynamics shift and brands take back control, have attitudes to investment changed? What are the benefits of raising capital? 

gs: It’s an opportunity to build a community and retail experience without relying on those 20 or so traditional players to give you access to their customers. End, which is in our portfolio, is a good example: it used investment to become more scalable and move in different avenues. 

Where do multi-brand retailers fit in this new landscape?

cm: The role of retailers hasn’t changed. Wholesale has always been a great tool for brand awareness and discovery. Retailers have always done those two things better than anyone else. They just got distracted by the number of brands that they can work with: Net-A-Porter takes on and drops hundreds of brands every season. Customers don’t need that much choice.

Retailers need to return to their role as curators and facilitators for new brands. And these start-ups should see wholesale as marketing channels, rather than as a cash cow. Otherwise, the retailer becomes your boss or, in effect, an unofficial investor.

ip: A multi-brand retailer offers customers a way to explore a universe, which can be really magical. Very few people are loyal to one brand alone; most want to be part of the multi-brand experience. That’s why 2024 will be the year of the specialist. And that doesn’t necessarily have to be done on a small scale. It’s about having a distinctive identity. We were successful at Browns when we were clear about who we were. There’s a lesson in that for retailers: there needs to be more collective risk-taking. You can’t just set yourself apart with discounts.

“A multi-brand retailer offers customers a way to explore a universe. Very few people are loyal to one brand alone”

What should new owners of online retailers do to rescue the sector?

ip: The most successful will allow business units to run independently. Groups often try to tie everything together and make everything fit in one box. That’s when brands lose their identity. Look at lvmh: its brands are allowed to be very different. Walk into a Dior shop and you wouldn’t think that the label has the same owner as Loewe. People are obsessed with efficiency but if you have the same team doing everything, you erase individuality and things go wrong.


cm: What is it that makes e-commerce enjoyable? When I look at retailers’ “What’s new” pages, it’s often all the same. There needs to be another layer to the experience that’s tailored to today’s customer, whether it’s social commerce or live elements. It should be about more than just offering a product at a good price. You can’t be a big, faceless entity. You have to level with the people who are buying your stuff, beyond your top-spending customers.

How do you achieve that? 

gs: Shops need to be destinations in their own right. You have to be intentional about every touchpoint with customers – online, offline, pre-purchase and post-purchase.

cm: People are starting to consider what their business could look like outside of the fashion industry. They want to reach even higher, tapping into hospitality, media and design. We can see that people, including younger generations, still value shopping together. That’s where hospitality spaces come in. On high streets, fewer people are carrying shopping bags but restaurants are full. It’s about understanding how to embrace the social element of shopping: acting as a curator, not just a seller. Then a shop can become a marketing channel. Loewe does this so well: a theme runs through what’s in the shop windows, the products and even the design of the receipt, so a customer is buying into a story.

What are the biggest challenges that these businesses face as they attempt to change course?

gs: A key challenge will involve supply chains. There’s a lot of volatility right now. On top of that, there’s the need to meet consumer expectations in terms of where a product is made. Successful retailers have to understand how to leverage technology and build better supply chains. That encompasses everything from giving attention to payment terms, setting up new shipping infrastructures and using sustainable packaging.

What about new opportunities?
gs: One of the opportunities that we are excited about is personalisation. We’re only at the start of this. Brands have been concentrating on the infrastructure of operating online but now it’s about understanding what it actually means to be in this space and to provide a good experience, beyond that “What’s new” page. Artificial intelligence will offer better personalisation in the long term but, in the meantime, there’s a lot of low-hanging fruit. The general theme of being a kind of concierge has a lot of potential.

ip: People are shopping very differently and it’s an exciting time to be experimenting. The way in which brands interact with male audiences has changed completely, regardless of their age. Even more traditional men – the kind who would historically come in once a season to do a big shop – have started to become more interested in fashion and be influenced by the news, TV series and social media. This has led to more impulsive shopping. There’s a big opportunity in menswear.

“Traditional power structures are breaking down. They no longer have the same influence so many brands are doing things differently”

Many of these issues are centered in the West, particularly the UK and US. What can we learn from other markets?

ip: In Japan, for example, retailers’ commitment to the shop experience is on another level and I still don’t understand why this hasn’t come to Europe or the US. Whether it’s a boutique or a department store, the Japanese focus on the physical product but also employ things such as art, music and food to create something fully immersive. Mexico City is exciting right now, with so much new retail opening there, and India offers another huge opportunity. If you open your mind and you’re willing to listen and learn, this could be an amazing time. But you have to lose the fear.

“There will, of course, be challenges but we’re bullish on the future of e-commerce”

Not so long ago, online and wholesale models of fashion retail seemed to be the future, offering scale and reach unimaginable in decades past. Yet their focus on speed and efficiency at all costs has proved to be their undoing, as major players struggle to survive and new owners sweep in, promising change. For businesses that are daring enough to reimagine the sector to meet the fast-evolving expectations of consumers, however, new opportunities abound.

Share on:






Go back: Contents

Property Special, 2024


sign in to monocle

new to monocle?

Subscriptions start from £120.

Subscribe now





Monocle Radio


  • The Continental Shift