Retailers can use discounting to generate sales without damaging a brand’s reputation.
September 25, 2024
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Online luxury fashion retailers have been experiencing losses, and they all face the same challenges: How do you move inventory of a product with ephemeral value without destroying the perceived value of the brand? How do high-end brands differentiate their products and communicate product quality to customers effectively when the online environment removes several physical indicators? Billions have been lost in the effort to square these circles, and the conventional wisdom now is that low-margin online sales are a very different business than high-margin fashion. This article suggests that the application of the multichannel descending (or Dutch) auction method used by FloraHolland, operator of the world’s largest wholesale flower market, could give the online fashion platforms another chance.
Three of the biggest names in online luxury fashion — Farfetch, Matchesfashion, and Yoox Net-a-Porter — have been in the news recently for all the wrong reasons, including losses, layoffs, and unpaid suppliers. Secondhand high-end fashion is also on the rise, yet nobody is turning a profit.
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May Truong is a professor in Information Systems at IE University in Spain
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Alok Gupta is the Curtis L. Carlson Professor in Information Management at the University of Minnesota’s Carlson School of Management in Minneapolis, Minnesota.
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Wolfgang Ketter is professor of Information Systems at the Rotterdam School of Management, Erasmus University, Netherlands, and at the University of Cologne in Germany.
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Eric van Heck is professor of Information Management and Markets at Rotterdam School of Management, Erasmus University in the Netherlands.