The limits of selling luxury online
This time, the news is that Ssense has filed for creditor protection. Following Farfetch, Matches Fashion, and Yoox, luxury commerce players are failing one after another. It makes me sigh and wonder what on earth all the performance I have built up over the years now amounts to.
During Covid, it seemed as though a world once rooted in offline spaces would be transplanted wholesale into the online realm, and luxury was no exception. The fact that luxury, long considered a private and traditional domain, had joined hands with online commerce, perhaps the most open and progressive of all spaces, stirred both skepticism and curiosity. This new order seemed poised to settle in as the “new normal,” yet with the end of Covid, luxury e-commerce platforms have been shutting down in rapid succession.
So was the strategy of using e-commerce to secure new customer touchpoints for luxury, while increasing spend per customer among existing clients through discounts and fast delivery, ultimately just a concept car, something that looked good in theory but could never truly run in reality?
The answer is half yes, half no.
To answer that question properly, we first need to understand the rules of the game that are unique to the luxury industry, and that remain just as valid online.
In the luxury industry, there is a version of the Pareto principle: the top 10% of customers generate 80% of total sales. Luxury goods are priced so high that this is not a market everyone can access easily in the first place. There is, from the outset, a limit to how widely the customer base can expand. Naturally, brands are compelled to focus on the small group of consumers with deep pockets, and the most rational strategy becomes maximizing spend per customer among them.
One of the central contradictions of luxury e-commerce lies in the fact that this high-involvement customer segment still insists on buying offline. By contrast, the majority of consumers purchasing luxury online belong to the low-involvement segment. Put simply, this could mean that the addressable market for luxury e-commerce is only about 20% of the total market.
So why do high-involvement customers prefer offline?
First, there is the ritual of experience. Luxury consumption is not a simple transaction but a ceremonial experience. The service, space, and staging of a physical store communicate to the customer that “you are special,” offering sensory and emotional satisfaction that is difficult to replicate online.
Second, there is social symbolism. Access to a department store VIP lounge or a private showroom visit is not merely consumption; it is proof of social status. Consuming luxury offline is not just about buying an object, but about the act of consumption itself becoming an act of status validation.
Third, there is trust and authenticity. The more expensive the product, the greater the concern over counterfeits. Offline channels provide structured guarantees for authenticity, after-sales service, exchanges, and refunds.
A case that proves this point, without departing from the luxury Pareto principle, is MyTheresa, which succeeded in targeting top-tier customers even online. The company made affluent, high-spending customers its core target and offered experiences comparable to the traditional VIP events of luxury brands, such as Dolce & Gabbana customer trips to the Italian Riviera and private access to New York City Ballet rehearsals. As a result, top customers spending over KRW 100 million annually came to account for roughly 40% of total sales. In other words, it achieved the Pareto principle of luxury even in the online space.
In the luxury industry, retailers are structurally the weaker party. Luxury brands hold the hegemony. For example, department stores often charge little to no rent to brands like Hermès, Louis Vuitton, and Chanel, or take only minimal sales commissions. That is because the traffic these brands bring in, especially wealthy VIP customers, is worth more than rent itself. In other words, the true power in the luxury industry lies with the brands.
That dynamic does not change online. If anything, it becomes even more unfavorable.
The essence of online retail, accessibility, convenience, and discounting, collides head-on with the scarcity and exclusivity that luxury values. Brands therefore have little reason to be friendly toward online retailers, and the negotiation structure is even harsher than it is offline.
In the end, the solution online retailers chose was discounting. Through perpetual sales, coupons, and “deal” tabs, they attempted to pursue a high-volume, low-margin model. But this runs directly against the rules of the game in luxury: maintain full price and restrict access. Customers gradually stopped buying online at full price, and retailers’ margin structures deteriorated sharply.
Ssense is a representative example. By targeting Gen Z and millennials, curating not only traditional luxury labels but also emerging designer brands, and producing distinctive editorial content, it made a major splash in the industry. But with the introduction of a permanent sale tab and delays in expanding its personal shopper services, both brand equity and profitability began to crack. Eventually, it reached the point where it could no longer even pay its vendors.
The collapse of luxury e-commerce is not merely the failure of a few companies. It is the price of overlooking two core truths: the Pareto principle, which says the industry must focus on top customers, and the rule of the game, which says discounting must be tightly controlled. This was never a structure in which growth could be achieved simply by pulling in masses of low-involvement consumers. In fact, competing on discounts only led these businesses to erode their own value.
And the problem does not end there. Even I, as a budget-constrained luxury consumer, find myself increasingly split in two. My head knows that “focus on high-involvement customers, limit discounting” is the right answer, yet my heart still keeps searching for the sale tab. As luxury e-commerce platforms shut down one by one, I cannot help but wonder whether my own luxury consumption might be coming to an end as well, and that thought honestly frightens me.