Luxury retailing - Yet another online store.

Luxury items aren't supposed to sell well online. But that hasn't stopped many upmarket department stores from trying to hit back at the e-tailing upstarts, says Robert Gray.

Harrods chairman Mohamed Al Fayed has had much to occupy his mind recently, not least the unsuccessful libel action brought against him by former MP Neil Hamilton. Away from the stresses of the courtroom, however, there have been more pleasant matters for him to consider, among them the launch last November of a Harrods e-commerce web site offering more than 200 branded goods to consumers in the US and Canada, with plans to extend online shopping to customers in the UK, the rest of Europe and Japan this coming spring. Never has the Harrods corporate motto - Omnia Omnibus Ubique, or "All things for all people everywhere" - been more true than it is on the internet.

"Our goal is to make Harrods the ultimate luxury e-commerce retailer and inject some of the magic of the Knightsbridge store into cyberspace," pronounced Al Fayed at the time of the launch. It is an aim which rival department store groups are challenging as, almost day by day, faith grows that the internet might just become as effective a sales channel for luxury goods as it has proved itself to be for lower-cost products.

Department stores, it is probably fair to say, are not the most dynamic of retailers - in some cases, a certain fustiness adds to their charm.

Yet the speed at which web penetration continues to grow, and the possibility of offering a large number of goods - something which has always been the department stores' strength - has meant that these retailing behemoths have had to take a serious look at the e-commerce possibilities open to them, for fear of being killed off like dinosaurs if they do nothing.

Liberty, which later this year celebrates its 125th anniversary, beat Harrods to the punch by a month last autumn when it went live with its e-commerce site (www.liberty-of-london.com) in October. During the run-up to Christmas, the site contained 500 items, the majority of which can be categorised as gifts, although about 100 were fabrics. "We're delighted because we've done it with no teething troubles," says Liberty brand sales director Andrew Thatcher. "The site has worked well, the server didn't go down and we've had the products in stock."

Orders, which have come in from as far away as Japan and the US, have been handled by the Exeter-based fulfilment house that Liberty uses to take care of its mail order operation. Thatcher recognises that Liberty will need US fulfilment and at present, the retailer is trialling distribution through a warehouse there.

Also in the US market, Liberty is in negotiations with the BBC over an affiliation deal. So far, affiliations have worked well in the UK in the shape of link-ups with lastminute.com and wedding site confetti.co.uk, both of which have been offering Liberty products to UK consumers in return for a commission on each sale.

"We think that this kind of arrangement is very positive and we are learning a lot from it," says Thatcher. "The power of existing bricks and mortar brands is being able to sign deals very easily."

However, Thatcher adds that Liberty has found the cost of marketing its e-commerce venture to be high. It has fought shy of advertising its site in the US to date because of what it describes as a "glut" of e-commerce advertising there. But it has run some offline advertising in the UK, where in the Christmas period it targeted two distinct groups: well-off men working in the City of London; and affluent, fashion-conscious female shoppers aged about 35. The first group was targeted through advertising in the Financial Times and on the sports pages of The Guardian; the second via space bought in glossy magazine Vanity Fair.

"Our sense is that the male profile worked better, but the fact that it was pre-Christmas probably skewed things," says Thatcher. Intriguingly, online order values have tended to be lower than with mail order, with a high number of single-item purchases compared to mail orders, which tend to be for multiple items. But again, this pattern might be skewed by Christmas. It is also logical to suppose that as confidence in Liberty's online shopping service grows, order sizes and values should increase.

Certainly, Liberty feels that e-commerce is a crucial commercial strand for its future. Thatcher believes that department stores have "no option" but to pursue it. "It's very important to us. We plan to invest time and effort into the web site. E-commerce enables us to leverage the Liberty brand internationally."

That is a sentiment shared by Fortnum & Mason, the famous Piccadilly department store with long-standing royal connections. Fortnum & Mason marketing manager Miranda Schofield is sure that e-commerce will be "very important" for the store in the future as a means of reaching beyond its bricks and mortar premises to a worldwide audience, with the US, Australia and Japan considered to be key markets. It has offered a Christmas site (www.fortnumandmason.com) since 1997, principally focused on gifts, and containing about 100 items, the most popular of which are its renowned hampers. However, the store has been hamstrung to some degree from truly exploiting overseas markets by customs regulations on wine and fresh foods.

Longer term, confirms Schofield, it might try to circumvent this problem by setting up a distribution operation in the US.

Harrods, on the other hand, has dealt with the question of fulfilment by forging an alliance with German company Otto Versand, the world's largest mail order firm. As the harrods.com web site becomes more international, Otto Versand will manage fulfilment through its worldwide network of distribution centres.

Al Fayed describes this set-up as a "perfect marriage" for global e-commerce.

Harrods corporate communications director Peter Willasey expands on the arrangement: "Otto Versand is ideal because it has a huge distribution network and fulfilment is one of the most important parts of e-commerce.

There's no point having a beautiful site if you can't deliver the product within an acceptable amount of time or if you send people goods that are the wrong size or wrong colour. We have a real commitment to e-commerce. Al Fayed wants harrods.com to be the luxury site."

Once the site launches in other markets, Harrods will begin offering goods from other luxury brand names online. It will not confirm any names at this stage, but it is likely to be the Guccis and Pradas of this world.

Harrods opted to begin its cross-border e-commerce activities by targeting Americans and Canadians because research has shown that they comprise the largest non-European group of customers to visit the store. The launch has been supported by newspaper advertising in major cities and the appointment of a US PR agency. Categories on the web site range from teddy bears to accessories, gift ranges, clothing, luxury pens, ceramics and mugs, luxury watches, toiletries, tea and food halls. According to Willasey, the "star performers" in the first few weeks have been teddy bears, but children's clothes have been a disappointment.

Other department stores have been slower to recognise the potential of e-commerce than Harrods, Liberty and Fortnum & Mason. That bastion of Knightsbridge chic, Harvey Nichols, says that it is unable to comment on its e-commerce strategy at present "as it has not yet been finalised".

Fenwicks is not even this far advanced, saying it has no definite plans as yet. This is also the case for the House of Fraser group, which has 51 stores spread across the country. At present, the group has a centralised web site (www.houseoffraser.co.uk) which provides a store locator and indicates which products are available. A source at House of Fraser says that if the group does go ahead with e-commerce plans, it will also be done using a centralised site, rather than separate sites for its individual brands.

Talk of a centralised site brings us neatly onto a fascinating development.

A new venture called pres.net is due to go live in the middle of February.

It has been created to "fill a gap" in the e-commerce market for an "easy-to-use international gift service", says pres.net executive director Nik Nicholas, who devised it.

Pres.net brings together department stores from around the world to co-operate in an e-commerce venture. About 20 department stores have already signed up, including Jenners of Edinburgh, Parksons of Malaysia and China, Kaufhof in Germany, Hyundai of South Korea and Printemps of France. The idea behind pres.net is to give stores access to worldwide markets without them needing to invest in worldwide marketing.

Consumers visit a single web site where they can choose their gift from the catalogue of a store local to the recipient. This means delivery costs are kept to a minimum, because goods do not have to be shipped internationally, incurring customs and transit costs, and recipients are able to exchange presents easily. Local service warranties and guarantees apply and the aim is to allow "only the highest quality stores" to become pres.net members.

"The stores are up against electronic rivals," says Nicholas. "The virtual world can damage the bricks and mortar world. But if bricks and mortar retailers join together, they can do something huge because they already have the customer base."

Pres.net will take a commission of between 2.5 and 4.75 per cent on each sale and help stores with software, web design, training and international PR support. However, promotion of the pres.net service and fulfilment of orders is done by the participating stores themselves. Leaflets promoting pres.net will be displayed in-store, sent to the participating stores' account holders and dispatched to gift recipients with their presents.

"Essentially, pres.net is a powerful marketing tool that will help retailers to maximise their sales by bringing a wider market to their stores," says Nicholas. "They also gain exclusive rights against direct competitors, so consumers will be channelled to their sites. Pres.net offers a reminder service and address book so that you can be reminded of friends' birthdays or special occasions. And no financial details are stored online, making it very secure."

All credit card numbers are encrypted when the order is placed and only decrypted after they reach the store. Pres.net offers a single web site for leading stores across the world with a standard order process, so it is as easy as possible to browse and shop. Pres.net is not a portal; all information is stored on the site. Cookies are used to recognise returning visitors and keep track of what's in their shopping carts, but pres.net stresses that personal information will not be passed on to third parties.

In its early days, pres.net will offer a limited range of about 250 gifts from each store. This will be expanded once Nicholas and his team are confident that the participating stores are able to handle fulfilment efficiently. "The worst thing that could happen would be if they got bombarded with orders, couldn't cope and thereby damaged their names," he says.

For established luxury goods retailers, safeguarding a hard-won reputation is of paramount importance. They are mindful that expansion into cyberspace must be done with great care and consideration. For a few years to come, the bulk of their revenue will continue to be derived from their bricks and mortar stores. With this in mind, most are using the internet not only as a new sales channel, but as a means of reinforcing old values and attracting consumers to their physical premises.

Liberty's web site, for example, not only enables visitors to go shopping online, but also invites them to "discover the company" and "explore the London store". The look and feel of the site is consistent with its in-store branding and traditional advertising, making it imperative that visitors are not disappointed by their visit, damaging the Liberty brand as a whole. Likewise, the Harrods site offers maps and history as well as FAQs. Given that the bricks and mortar store attracts an astonishing average of 35,000 visitors per day, it is no surprise that there is keen interest to learn about it from the public, with the colourful nature of the current owner's life adding further grist to the mill.

All the leading department stores agree that e-commerce will be an opportunity for them to reach untapped markets. And those that do not grasp the opportunity might ignore it at their peril: for them, the internet might hit like the asteroid that scientists believe wiped out the dinosaurs. After all, who now gives a thought to that once great Holborn department store Gamages?

Or to the more recently departed Simpsons of Piccadilly? Both now as dead as dodos, the victims of changing public taste.



DIAMONDS ARE THIS E-TAILER'S BEST FRIEND

End-to-end e-commerce specialist Equire is a fervent believer in the internet as a medium for selling luxury goods. "We believe the internet is as relevant to luxury goods as it is for books or CDs. We believe all kinds of luxury brands will emerge," says chairman Peter Matthews.

Equire is putting its money where its mouth is, having taken a 50 per cent stake in vanpeterson.com, a start-up selling diamond jewellery online ranging in price from #650 to #40,000. Creative director of the venture, and a fellow investor, is Eric Van Peterson, who has a reputation as a jeweller to high society, with his own shop in Chelsea and concessions in a couple of top department stores.

"We've created a new business and designed a new collection," says Matthews.

"This is fine jewellery with high-quality diamonds. We are creating a luxury brand. It would be hard to beat our prices, but what is being offered is not at the expense of style or cachet. We just don't have the infrastructure costs of the retail boutiques that occupy premises in some of the most expensive streets in the world."

The site went live last November, and Matthews claims that it has already "sold a satisfying amount to prove the business model", a figure thought to run into tens of thousands of pounds for the first four weeks' trading.

Site traffic has been about 60:40 UK to US, but sales have split about 50:50 between the two countries. Fulfilment is through an office at the Hatton Garden diamond bourse, as rings might require resizing, and so on. All diamonds over 60 points (just under two-thirds of a carat) are supplied with a certificate from leading gemology centre the Jewellery Council of South Africa. This is because the value of diamonds varies due to a quartet of factors known as the four Cs: cut, clarity, colour and carat (size).

Equire is also working on sites with two other upscale retailers: toy store Hamleys and linksoflondon.com, a retailer of silverware gifts such as cufflinks, clocks, jewellery and picture frames. Equire has no stake in the businesses, but takes a commission on sales.

Matthews expects this model to appeal to other luxury retailers and says that he hopes to offer consumers a portfolio of 10 luxury brands online by the start of 2001.



SELFRIDGES' E-COMMERCE PLANS

Selfridges, one of London's best-known department stores, is currently developing its web presence with a view to launching a site in the spring.

In the short term, its site is intended to be "informative and stylish", providing potential visitors to Selfridges with information about the store's products and services, financial information and news on special promotions.

The site will be promoted on point-of-sale material, ranging from the Selfridges Account Card magazine to in-store leaflets and banners, and possibly also on carrier bags.

"Selfridges sees the web as another media vehicle to communicate to its new and existing customers, whether based in the UK or abroad," says Selfridges special projects manager Nicola Lloyd.

"We get a lot of tourist business, especially in the London store, and hope that a web presence will make it easier for international customers to understand our proposition and how to find us. The internet is the first port of call for many when trying to find out more about a company.

"E-commerce is of immense interest to us. All the research shows it's a growing area, but customers are still cautious about buying on the web." According to Forrester Research, for example, 17 per cent of current web users buy online against 48 per cent who use it for researching product information and 70 per cent who use it as a search vehicle.

"We want to ensure that any e-commerce offer complements what we have in the store," adds Lloyd.

"The Selfridges brand is about being bold, exciting, innovative and surprising, and I can assure you that our site will match those criteria."





Become a member of Campaign from just £51 a quarter

Get the very latest news and insight from Campaign with unrestricted access to campaignlive.co.uk , plus get exclusive discounts to Campaign events

Become a member

Looking for a new job?

Get the latest creative jobs in advertising, media, marketing and digital delivered directly to your inbox each day.

Create an alert now

Partner content