THE LIST’s Post

💣  Reasons why luxury e-commerce imploded, according to the media: ⤵ - Sector-wide slowdown - High costs - Overspending + poor planning - Off-brand discounts - Brexit ——————————— ⚡ Reasons why *I* think it imploded: 1. Unreasonable integration costs and time for retailers. Retailers should not have to hire a team of data engineers and work 8-12 months to join a marketplace. This forces retailers to only invest in a handful of marketplaces. Big bets can be bad bets. 2. All marketplaces run at extremely high operations overhead because of manual processes. These costs translate into either: ▶ Outrageously high commission structures that force even luxury retailers’ brand margins to their knees, in addition to the constant discounts they are forced into. ▶ Frighteningly low commission structures for the marketplaces in order to stay competitive. Actual costs cause subsidence craters of losses on their balance sheets, so financial market corrections cause ships to sink. 3. Inflexible data architecture and manual processes. The first marketplaces finally put luxury online, but they were too slow to integrate machine learning. ▶ For example: Let’s say each SKU has 15 attributes associated with it: color, season, etc. A retailer wants to add “Seen on TikTok” as an attribute. Simply adding one attribute to the data architecture is a nightmare and often ends up in the “not possible” bin. 4. It costs up to $80 to add each product to a marketplace catalogue. Just too high. ——————————— 🐂  Why I’m still bullish: 1. Online sales are still expected to grow from 20% to 32% of all luxury sales by 2030 (2023 Bain & Company Altagamma Study) 2. If companies can make AI commercially viable and actually work on a large scale, it can solve many of the core issues. ▶ Catalog production, pricing, inventory management, content creation, shipping. There’s no aspect AI can’t support or solve. 3. Luxury is perfect for training AI models. ▶ High seasonality → more variations fed into models → faster learning. We can scan millions of data points to train models to the most commercial viability. 4. After the implosion, there’s now space for new players to innovate and meet retailers where they are. Retailers can try different marketplaces with little to no downside. ——————————— 🌊 TLDR, I see 3 waves of luxury ecomm. 1️⃣ Luxury ecomm 1.0: The tech was not robust enough to withstand a slowdown. 2️⃣ Luxury ecomm 2.0: The next marketplaces stepped away from the inventory risk, but the tech and operating models were still inefficiently designed. 3️⃣ Luxury ecomm 3.0: Belongs to those who can leverage AI across the value chain to stay lean, while developing a winning customer experience across the entire lifecycle. ——————————— 3.0 is our core focus at THE LIST. Watch this space 🤘