Luxury brands rethink e-commerce strategies as pandemic affects in-store retail

Trade wars and Brexit also create challenges for the luxury sector, according to Hogan Lovells webinar

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The Covid-19 pandemic has forced luxury brands to embrace e-commerce faster and rethink how they can deliver an exclusive and personalized experience online, according to Pamela Weinstock, an expert in entertainment and fashion law.

Weinstock – speaking at a webinar hosted by the Luxury Law Alliance and Hogan Lovells – said brands should take note of developments in China, where e-commerce retailers have focused on consumer engagement via applications, gamification elements, rewards and innovations such as augmented reality, digital mirrors and virtual fittings.

“The shopping experience in Asia has always tended to focus on interactivity and their technology often has live chat as a very central element before making a buying decision,” Weinstock said. “It lends itself very well to the luxury experience, as you provide the personalized, tailored service that luxury seeks.”

The panel, moderated by Sahira Khwaja, Head of Brand Practice in London and Co-Head of the Fashion and Luxury Brands Group, agreed that luxury brands are already using technology to change the way they sell products in line.

LVMH, for example, has co-developed a system using blockchain technology that helps fight counterfeiting by allowing customers to verify whether their products are genuine, with brands such as Prada and Cartier also joining the project.

Uncertain future

As the pandemic accelerated the switch to the internet, traditional brick-and-mortar stores already faced an uncertain future before the virus struck with the closure of many shopping malls and department stores in recent years.

“Brands are moving towards an omnichannel approach, with more activity online,” Weinstock said. “Stores can have a smaller footprint, they can be more of a showroom, more of a brand experience where there is ‘retailtainment’. Often times there may be cafes or partnerships that are not necessarily traditionally associated with luxury clothing retail channels.

The move to the web is also changing the way luxury brands should approach advertising, with many starting to use influencers to promote their products through social media.

“It’s been a bit of a challenge because you can let go of some creative control when you have influencers creating content, so what we’re seeing in this space is a greater use of micro-influencers who can have an audience in it. the arts, whose aesthetics are consistent with brand positioning and there is more of a sense of authenticity, ”Weinstock said. “There are a lot of interesting developments in China where we see virtual influencers as well as KOLs [key opinion leaders], who are starting to have their own product lines or share the profits instead of just receiving a lump sum. “

In this new world, there are a number of things GC luxury brands should do to protect their businesses, Weinstock said. For those who may have started producing masks or other protective clothing during the pandemic, brands need to be aware of the IP protections they have in place. Brands also need to review their emergency policies, such as examining supply chains and suppliers for potential disruptions, as well as strengthening IT security to manage the growth of e-commerce and protect against cyber hackers.

Trade wars

It’s not just the pandemic that is causing headaches for GC luxury brands. Persistent trade tensions between the United States and China and to a lesser extent the United States and the European Union, as well as the uncertainty surrounding Brexit, weigh on the global luxury sector, said Aline Doussin, manager. of the UK sales team at Hogan Lovells.

“Trade wars and increasing rhetoric and retaliatory tariffs restrict imports and exports and have had a significant impact on all sellers and buyers, as well as e-commerce,” Doussin said. “The United States has imposed tariffs on more than $ 360 billion of Chinese products and China has responded by imposing tariffs on more than $ 110 billion of American products. Luxury brands have also been strongly impacted, particularly on the European side for EU exports to the United States. “

To alleviate the additional costs of these business feuds, ecommerce retailers need to identify the parties that bear the financial burden – whether it’s the seller, the buyer, or the ecommerce platform itself, Doussin said.

For Brexit, it’s not just the tariffs, but also the additional paperwork that retailers need to consider when determining who foots the bill. One way for some brands to respond is to move manufacturing locally to eliminate cross-border business and avoid tariffs, she said.

Brexit is also forcing luxury brands to consider storage issues, for example if they have to open their own warehouses in the EU or use warehouses owned and operated by third parties.

Tax implications

Changes in the supply chain and, more importantly, new ways of doing business could potentially have tax implications, said Karen Hughes, co-head of global tax practice at Hogan Lovells.

“Since in tax terms profits follow value, new data-driven and technology-driven business models may mean that where profits need to be accounted for – transfer prices – needs to change,” a- she declared.

“The good news is that a lot of the thinking has already been done. This is because of some striking – perhaps surprisingly – similarities between the luxury goods industry and the tech giants.

“Both have extremely valuable intellectual property, high margins and, with e-commerce, are very centralized. Of course, there are differences. But the key point is to learn the lessons: to recognize the role in the creation of value played by the intellectual property owned and developed in a centralized way, but also the significant contribution made locally. “

Accelerating Digitization and E-Commerce: What Luxury GCs Need to Know was held on April 21 in association with Hogan Lovells. Click here for more information on the capabilities of Hogan Lovells fashion and luxury brands.

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The Global Legal Post’s Anti-Counterfeiting World Law Summit takes place on June 22. Click here to read the program of this virtual event. For sponsorship requests email [email protected] and to inquire about delegate passes contact [email protected]


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