This weekend, a new law was passed in Europe that may sound the death knell for on-line discount shopping of designer labels. But is this law necessary and what implications will it have for both the e-retailer and the consumer?
Due to the new rules formed in the European capital Brussels, the hub of European policy and Government, buyers will face higher prices on luxury clothing, perfumes, accessories and bags as luxury brands can block the sale of their goods on websites. This means brands such as Louis Vuitton, Burberry and Gucci can block the sale of good for e-retailers that don’t have ‘bricks-and-mortar’ stores on the high street. This means, any e-retailer that is not on the face of the high street, such as SecretSales.com and BrandAlley.co.uk based in the UK and even Gilt.com, based in the USA are under threat.
But why has this come about, and why now? This decision is not timed to coincide with a particular event or change in related policy, but it has been lobbied by manufacturers for some time who see discount sites as freeloaders on their profits from “carefully crafted” campaigns and endorsements from celebrities. But with the world economic recession still in the grips of many, it may be better to keep their brand in the minds, and aspirations, of the consumer who may buy full price at a later date. More over, the sale of overstocked apparel and accessories from retailers ensures that, whilst they may be making a loss on the original purchase, discount sites are giving them more than they would have received if it had lay in a stock room ‘out back’ for months on end.
The new rules, that come into effect this summer, give labels with large market shares the power to prevent the sale of goods from e-retailers. However, whilst the likes of eBay.com and Amazon.com are in the favor of manufacturers, smaller outlets are not. This means a small site exclusive to one country, will almost certainly be faced with higher prices on their luxury bargains.
The rules apply to all manufactures but the luxury goods industry have been the biggest supporter of the change. Speaking to The Times Online, based in London, one anonymous source said, “We don’t invest huge amounts of time building these brands only to have someone come along and basically free-ride off the investment we make.” They went on to say, “We have no problem with online — it’s a crucial tool for us — but we don’t want the customer to feel like they’re buying stuff off the back of a lorry.”
This decision may sound the death knell for bargain hunting online but the rules will ensure quality and authenticity, without worrying about if the product is of good quality. However, in times such as these, fashion followers are looking harder for cheaper ways of keeping up with the trends and breaking away this invaluable avenue may deter buyers from choosing a particular brand. And once the global crisis is restored to its former self, will consumers go back to those brands?
It’s a risk the luxury manufacturers are willing to take, but are they so sure that their profits are so strong they are ready to exclude their future, full-priced buyers?