Luxury Brands Meet Marketplaces

There is a new business model that is experiencing rapid transformation, called eConcessions and eConsignments – a model being introduced by more retailers and is emerging as a new industry favorite by luxury brands. 

The luxury brand industry has traditionally operated with the wholesale model, with retailers such as Saks Fifth Avenue or Net-a-Porter purchasing and holding inventory from brands. With some European brands already operating in the concessions model, they have been traditionally less common in the US. Although, this is now changing as retailers turn to eConcessions as a new way to expand their assortment. With marketplaces and a hybrid mix of wholesale and eConcessions, retailers such as Sakes.com and Hudson Bay (also owned by Saks) have already converted their website into a marketplace. 

Nordstrom has also just released that they are reducing their traditional wholesale from 85% to 50% of their overall sales. Retailers such as Net-a-Porter are transitioning to a hybrid model. 

Concessions & eConcessions

In short, concessions and their online counterpart of eConcessions are ways for brands to sell through a retailer’s platform while retaining more control over pricing, marketing, and the products than they can have with a traditional wholesale model. And, even though luxury still lags behind other industries in its embrace of eCommerce, it is quickly becoming a thing of the past. Retailers are providing space for the brand, promoting it, and taking a commission while the brand keeps most of the sales. 

Wholesale can absolutely be profitable and low risk for brands if the terms are right. But with a lack of control from the brand’s side on buyback arrangements, it’s always been an unspoken pain.

A hybrid approach has many advantages for the retailer, brand, and consumer:

A hybrid approach has many advantages for the retailer, brand, and consumer:

  1. The brand has more control over what is being sold. They are able to offer new categories, styles, and ultimately, more fashion to the consumers. 
  2. The customer journey is made easier because they don’t need to go to other websites to find products and categories that the retailer doesn’t carry. 
  3. The retailer can support more brands and offer overall better shopping experiences for the customer. Retailers don’t have to hold as much inventory themselves. 

The Bottom Line For Retailers

In today’s world, the market is incredibly competitive. There is a lot of pressure on retailers to improve their conversion. It’s already hard enough to get people to your website, but if they are already there and they still don’t convert, it might mean that the retailer just doesn’t have what they want. If retailers can increase this conversion, even just a little, it will go a long way for the bottom line. With concessions, the retailer no longer needs to bear the cost of a more extensive inventory. 

Growth For Brands 

Every brand today has a website and is trying to get consumers’ attention. Brands and retailers must ask themselves whether their goal is to increase brand equity and build relationships with customers or convert a transaction. The answer is clear – a marketplace model works hand-in-hand with the brands direct to consumer business. Selling on marketplaces brings power back to DTC channels as it works together in a true omnichannel form. You want to be where your customers are. The global teaching of marketplaces can give brand opportunities that just can’t be beaten elsewhere. Globally, more than 58% of eCommerce sales were made through online marketplaces in 2019 and are projected to grow to 66% within five years. 

Wrap Up

eConcessions can strengthen the relationship between brands and retailers, but the real prize is improving the digital touchpoint with the customer. In the end, the customer should always be the winning leader for all decisions. The customer loves eCommerce and isn’t going to relinquish this increasingly powerful freedom. What matters the most is maximizing the value and touchpoints for the customers. 

If You Are a Brand Thinking About Increasing Digital Sales Channels, We’d Love to Hear From You!

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