Report: Luxury E-tailers Fail E-Biz Basics

Luxury e-tailers who spend millions trying to imitate the offline luxury shopping experience to attract upscale customers may be wasting their money, according to a report issued Wednesday by Forrester Research.

The report, "Selling to the Affluent Online," warned e-tailers not to forget that wealthy Web shoppers -- even those with investable assets of US$1 million or more -- share the online shopping expectations of their less affluent counterparts.

"Affluent shoppers are a critical consumer segment because they set the pace for e-commerce adoption. They have been buying longer, feel more comfortable buying, buy more frequently, and, of course, spend more money online than anyone else," said Ekaterina Walsh, Ph.D., senior analyst at Forrester.

"But at the same time, they buy online for the same reasons that all online shoppers do and care about price and positive experiences with Web stores as much as the less wealthy," Walsh said.

The Cambridge, Massachusetts-based research firm did find that affluent shoppers spent more online -- an average of $1,466 per household -- in 2000 than e-shoppers of more modest means, who spent only $817 on average.

Incomparable Experience

Many luxury e-tailers are mistakenly trying to replicate the look and feel of brick-and-mortar luxury shops by focusing on exclusivity, extravagance and entertainment, Forrester said. Unfortunately, downloading problems, broken links and confusing error messages make it difficult for e-tailers to offer the pampering that shoppers get in a luxury store.

E-tailers intent on recreating the real world in cyberspace often fail to realize that nothing in the virtual world can compare to visiting the elegant atmosphere at Tiffany's or Neiman Marcus and being waited on by attentive salespeople.

"Online purveyors of luxury goods should quit trying to recreate an offline shopping experience; channels aren't different funnels through which identical experiences can be poured," Walsh said.

According to the analyst, responding to the demands of affluent online shoppers is the key for e-tailers, who will then be poised to fulfill the expectations of non-affluent consumers "who are right behind" the wealthy.

What the Wealthy Want

Instead of wasting time and money trying to recreate the offline luxury shopping experience, Forrester says e-tailers should take advantage of cyberspace's own unique charms, offering customers the convenience of being able to find anything they want through keyword searches and the ability to complete purchases with just a few clicks.

Forrester also recommended that e-tailers provide customers with cost savings, quality service and a commitment to customer privacy.

Dressing for Success

The e-tailers who will survive in the new economy will be those who build brand equity and consumer trust, according to Forrester. The firm said that brick-and-click retailers with established offline brands have the advantage of building on existing consumer trust when they choose to establish a Web presence.

At the same time, luxury pure plays often have a hard time gaining Internet traffic and turning visitors into buyers because they lack brand recognition. However, Forrester said, "smart pure plays will build their names via partnerships and cost-effective marketing."

One luxury e-tailer that has found success in partnering with an established company is Ashford.com, which partnered with Internet giant Amazon.com in 1999. The companies established a promotional partnership that was renewed in January 2001 and is slated to run through the end of the year.