E-commerce: Innovation brings a touch of class to online shopping

E-commerce is not generally seen as the sexiest corner of the internet these days. Amazon has become the world’s general store, eBay the world’s flea market. Walmart and Target offer predictably low prices. Brands sell direct through their websites, but hardly make that their focus.

Many luxury groups have opted out of e-commerce altogether, believing the risks of selling online – such as brand degradation and counterfeiting – outweigh any benefits.

“This whole notion of the web being a channel of discounting went against the very aesthetic of these brands,” says Sucharita Mulpuru, an analyst at Forrester Research. “There was a belief that there was no way you could communicate your brand essence online.”

But in recent years, a flurry of innovation has reshaped e-commerce. Fuelled by a resurgent interest in the consumer web, a raft of technological advances, and evolving opinions of the web itself, companies such as Ike Behar, Burberry and Thomas Pink are discovering ways to reach consumers without sacrificing brand integrity.

Applications on smartphones and the iPad have delivered a powerful interface for users to search, browse and buy goods. Ralph Lauren’s Rugby brand and Gap, among others, have developed their own sophisticated apps.

Indeed, shopping is proving one of the most popular activities on touch devices. Sales through eBay’s iPhone app last year topped $500m. Purchases included a Lamborghini, a $150,000 boat, and a Bentley.

“People are used to the convenience of getting what they want when they want it,” says Fred Felman, chief marketing officer of Mark Monitor, a brand protection specialist. “Buyers online are used to finding speciality, and sometimes very expensive, goods online. They don’t want to talk to a sales representative.”

At the same time, so-called “private sale” sites are drawing large followings by offering big discounts on luxury goods. Gilt Groupe, Rue La La and Haute Look take excess inventory off brands’ hands. But instead of throwing it on the racks at a dingy outlet store, the private sale sites take new photographs of models wearing the available merchandise and promote it on well-designed web pages.

“It’s a way to get rid of products without a brand tarnishing its reputation in the way liquidation stores might,” says Josh Goldman of Norwest Venture Partners, a venture capital firm with investments in several e-commerce startups.

But luxury brands will have to work hard to preserve their margins on private sale sites, too.

“As these sites gain more and more power, the economics may start to change,” says Mr Goldman.

“Now that this is a maturing market, the margins may start to benefit those who own the customer. Gilt is establishing itself as that brand.”

Though some high-end brands are only just starting to innovate online, the internet demand has always existed.

“Luxury goods are among the most popular things consumers search for online, and a lot of it is their desire to know what’s going on with them and their desire to own them,” says Mr Felman.

Yet, meeting the demand and maintaining the luxury brand’s image was a perennial challenge. Many brands simply outsourced the problem, allowing department stores to resell their goods through their shops and their websites.

Some more adventurous brands turned to e-tail sites such as Zappos.com and BlueFly.com.

“Luxury sees itself as cooler than everyone else,” says Ms Mulpuru. “They’re the prom queen, the cool kids. God forbid they’d be seen at the table with the computer nerds or the misfits, which is how they perceived the web for a long time.

“It was only when they started to see that the computer nerds are also looking at their products that things like Facebook became more accepted.”

Even with today’s myriad options, the move to selling online is not without its perils. “As we see internet sales rising for us, we also see an increased level of counterfeiting across the web,” says Deborah Greaves, general counsel for True Religion, the premium denim company.

LVMH in particular has waged a fierce war against counterfeiting, filing suits against websites and internet service providers, among others. But aside from assiduous monitoring, there is little that brands can do to stem the tide of fakes flooding the online markets.

Even True Religion, which tracks hundreds of sites selling counterfeit versions of its products, cannot turn its back on the web.

“We just look at it as another retail store,” says Ms Greaves.

With most high-end brands establishing online sales through traditional channels such as resellers and their own sites, they are gaining confidence to venture out.

“It’s a huge period of innovation for consumer-facing e-commerce, unlike anything we’ve seen in the past 10 years,” says Mr Goldman. In addition to new applications and private sale sites, Mr Goldman points to local deal sites such as Groupon and LivingSocial, and a new wave of companies that are bringing together location awareness, real-time inventory and deals, and social media.

“You’ll always have direct sales,” says Mr Goldman. “But customers look for curation, and social and mobile [media] are enabling real innovation and entrepreneurship today.”