What is luxury? How do companies that offer luxury goods differ in their operating model vs companies that don’t? These are questions for which it is difficult to pinpoint a correct answer. Definitions of luxury goods may vary from gold plated objects for some people, to a daily scoop of ice cream for other people.1 I will dare to say that a key characteristic of luxury goods is that they offer a perceived premium – in comparison to the ‘average’ product – to the consumer.
In the world of retail, customer service is an important factor that defines an offering as luxury. It regularly impacts the price customers are willing to pay for a particular product. In fact, according to Microsoft, ‘66% of US customers are willing to spend more money with a company that provides them with excellent customer service’.2 For the luxury retail industry, great customer service during a customer’s purchasing period traditionally occurs in store. Shopping assistants help customers navigate the selection process by providing experience based advice. But in the era of e-commerce, how can we reconcile fast, online based shopping with a personalized and aided shopping experience which has traditionally defined luxury? One company seems to have cracked the code. Mr Porter has been a pioneer in the realm of e-commerce for men’s luxury goods since its launch in 2011.
The company was faced with the challenge of offering luxury goods without the brick and mortar stores traditional luxury retailers such as Neiman Marcus and Bergdorf Goodman used to provide the customer service that differentiated them from other department stores.
Mr. Porter used its purely online presence to its advantage. Its operating model allowed the company to offer more brands to its customers because they were not limited by physical space, which in turn attracted niche customers.3 This was key to its worldwide success because it connected people from different corners of the world with brands to which they had no precious connection with, a benefit to both avid shoppers and small local brands in distant parts of the world.3
Additionally, Mr Porter was able to personalize its service to its audience: men. Essentially, Mr. Porter understood that the approach to getting men to purchase luxury (and expensive) products was through clear communication with potential customers about the practicality and usability of their products and not just their ‘trendiness’ as was usually effective with women.3 An example of how it did this is through editor’s notes on each products description on the website. These notes focus on the products’ value proposition as well as some of its technical details. Additionally, the website is filled with sales advice and style guides that try to cater to men of different styles and age groups.
The global luxury goods market is approximately $250 billion4, so taking a piece of the pie could be attractive albeit hard. The market grew 13% in current exchange rates from 2014 to 2015 but only 1% at constant exchange rates, which essentially signal a slowdown in the market according to Bain and Co.5
Mr Porter has unlocked a successful business model that attracts men to purchase luxury personal goods without ever touching or seeing them in person by understanding their customers’ mindset and adjusting its operating model to offer a wide array of products which otherwise they would not have access to. In the era of the internet, in order for businesses to succeed, they need to find avenues to offer innovative products and services to their clients in a way similar to which Mr. Porter has done in the last five years.
- Beckett, K. (2015, August 26). V&A Asks, What is luxury? New York Times.
- Halpin, N. (2016, June 11). THE CUSTOMER SERVICE REPORT: Why great customer service matters even more in the age of e-commerce and the channels that perform best. Business Insider.
- Sebra, M. (2016, February 18). GQ. How Mr Porter Changed Menswear E-Commerce In Just Five Years.
- Bain & Co. (2015). Luxury Goods Worldwide Markey Study.
- Jacobs, A. (2013, December 20). The World at Her Fingertips. Net-a-Porter Founder Natalie Massenet Looks to Expand on Success. New York Times.