The new findings from Taylor Wessing’s Luxury Barometer Report present a snapshot of business outlook in the luxury sector for the year ahead. The study polled more than 250 business managers and decision makers in businesses that operated in the luxury sector and explored perceptions on growth drivers, investment areas and latent business risks.

Majority agree online business is key

More than three in five respondents (61 per cent) said online channels were key for growing sales of their products and services, compared to 37 per cent which rated the importance of their own retail stores as the key driver for sales.

Underestimating the risks  

In a world of cyber-crime and counterfeiting, the potential threats posed to online transactions, IP, ideas and talent were largely overlooked. For example, when asked what the top challenges to the growth of their business might be in the next 12 months, only two per cent of the businesses surveyed mentioned IP or trade mark protection. Further, less than one in 10 mentioned data security or cyber-crime (eight per cent) or the impact of social media activism (eight per cent).

With luxury businesses expecting to grow through online markets, these findings are somewhat alarming – signaling that some businesses may be underestimating their exposure to risk by under-investing in online protection. Counterfeiters and cyber-hackers are hungry to exploit this weakness. Luxury brands are also potential targets for social media attacks.

UK government ups the ante in fight against cybercrime  

This comes at a time when the government is poised to double UK funding to £1.9bn to fight cybercrime, following a period when hackers have wreaked havoc on businesses with an online presence, with high profile cases in the last year including investment bank JP Morgan Chase, car maker Fiat Chrysler, and luxury hotel chain Mandarin Oriental, who last year confirmed that credit card details had been stolen in a hack attack on the company’s network.

A luxury online experience

As well as digital risks, replicating the in-store experience online remains a challenge for luxury businesses. From the online environment and experience generally, to after sales service, packaging and delivery, if part of the chain breaks down or is not fully reflective of the luxury nature of the product, the business could suffer reputational damage as a result.

Luxury brands 'behind the digital curve'  

Jason Rawkins, international head of the Fashion and Luxury Brands group at Taylor Wessing, commented: ‘Traditionally, luxury brands have been slightly behind the digital curve compared to other sectors, possibly due to the difficulty of replicating the luxury experience online. However, the research shows that this is set to change as businesses realise the importance of online channels as a key determinant for sales growth. 

‘The concern, given this confidence, is that only around one in five luxury businesses prioritised investing heavily in digital capabilities over the next year and only a small proportion of them appreciate the brand reputation and security risks that come hand in hand with the digital marketplace. The sector may well be at a digital crossroads. Businesses will need to adjust to the pace of change in the digital world, take steps to protect the integrity of their brands and also, on a practical level, they must fully replicate the luxury in-store experience in order to be successful online.’