The pandemic has undoubtedly accelerated the shift to e-commerce by half a decade, with more people than ever before opting to shop online for items like groceries that have always dominated traditional brick-and-mortar retail. Now that customers have experienced the convenience of shopping online for products they never imagined, it’s unlikely that they’ll return to in-person shopping at pre-pandemic levels.
The luxury goods market may seem likely to buck this trend, as consumers have typically shied away from making large purchases of diamond jewelry or handbags online, where they aren’t able to evaluate the products in person and assure themselves of quality and authenticity. The pandemic, however, has changed this. While the lockdowns in the first half of 2020 caused a 15 percent drop in diamond retail, the second half proved the market’s resilience. Jewelry sales in the U.S. surged higher in 2020 than 2019.
Luxury E-Commerce Replaces Experiences
The top-end of the retail market has bounced back quickly despite the pandemic, thanks to a strong stock market and extra disposable income from consumers who normally might spend it on luxury travel. Instead of marking major milestones like anniversaries with a lavish vacation, people have opted instead to spend on luxury goods like jewelry and apparel. Self-gifting has also increased, with remote workers stuck at home choosing to spoil themselves with luxury goods in place of usual discretionary spending on dining and travel.
With storefronts closed for luxury retailers around the world, e-commerce met the moment. In fact, around 20 percent of diamond sales during the pandemic occurred online, which spurred retailers to post up to 70 percent year-over-year sales growth in their online channels. The thousands of buyers who likely never considered purchasing luxury goods online before have clearly adapted, just as they have in other purchasing categories. It remains to be seen if this drastic shift online will continue post-pandemic, but it’s clear that a hybrid clicks-and-mortar approach is the best option for luxury retailers moving forward.
What the Future Holds
While the rise of luxury e-commerce has been swift, it hasn’t been without drawbacks. The question of authenticity has come to the forefront, as shoppers become increasingly concerned about the provenance and authenticity of items they can no longer try before they buy.
Particularly with items like diamonds and gemstones, customers need to be able to see clear evidence that the stone they're buying is natural, nonconflict and environmentally friendly. This is complex to prove, and customers need to have access to adequate provenance mechanisms in order to verify the item they're purchasing. Without the ability to substantiate the legitimacy of a product in person, digital provenance has moved from a nice-to-have to business critical. That’s why we've seen pioneers like Fred Meyer Jewelers in the U.S., Gubelin in Europe, and JD.com in China leading efforts in transparency, and by aligning Internet of Things technologies with blockchain.
While it’s true that some customers may not be prioritizing provenance yet, we’re certainly approaching the critical mass for digital provenance. Uncovering a proverbial "skeleton in the supply chain closet" has resulted in major commercial backlash before. Look no further than the labor and sustainability crises faced by fast-fashion and footwear brands for evidence.
This has led luxury brands to really start viewing digital provenance as mission-critical, or at the very least, as an expected ticket to play by discerning clientele. Alexander McQueen’s MCQ label is a great example of how technology has been adopted by the fashion industry. Even if the brand doesn't actively advertise the sustainability of its supply chain, many brands have created a substantiated audit trail as the need for evidence increasingly arises. And with the after-effects of the pandemic set to ripple in the luxury retail market for years to come — with e-commerce taking a much more prominent role — the need for provenance solutions that operate in both a physical and digital space has never been more important.
Louise Mercer is the chief experience officer at Everledger, an independent technology company helping businesses surface and converge asset information.