Disrupt or die? No chance: Experts say e-commerce will not collapse luxury industry

Panelists sat down to discuss the effects of digitalization on the premium goods industry at Arab Luxury World in Dubai.
Updated 23 May 2017
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Disrupt or die? No chance: Experts say e-commerce will not collapse luxury industry

DUBAI: Would you buy a luxury product worth thousands online? It is a question that panelists at the Arab Luxury World forum in Dubai sat down to discuss on Monday as the fourth iteration of the annual event kicked off.
The forum is set to run from Monday and Tuesday and features an agenda of speeches and panel discussions by more than 70 speakers under the theme “Digital Disruption and Emotional Engagement.”
In the world of luxury goods, the panelists agreed that digital shopping will not soon replace brick-and-mortar retail as many consumers still wish to get a real feel of the high-end product they are buying, however, all panelists emphasized the need for luxury brands to communicate effectively with consumers online.
In a session moderated by Anand Vengurlekar, chief communications officer at INSEAD Business School, experts from the luxury industry discussed the effect that digitization was having on the market.
However, panelist Samer Bohsali, a partner at the Strategy& consulting firm, was quick to assure the audience that digital avenues would not disrupt the luxury industry in same way Uber had for the transport industry, for example.
“The old model of digital was disrupt or die. With what Netflix has done to Blockbuster, what Uber has done to the taxi industry, you would think that the next victim is the fashion business,” he told the audience, before adding: “Digital will not disrupt luxury the same way.”
Why? Because, according to Bohsali, “the luxury industry has relied, for centuries, on the aura of exclusivity and sensory experiences that are very difficult to replicate on a mobile device.”
However, Bohsali did note that the digital sphere has made customers more aware about the products they wish to buy.
“Digital has transformed the habits of your users and your consumers, you’ve got a new generation online that can compare the price of a bag in Beijing and Paris and know they are not getting a fair deal in Beijing,” he said.
Category Director for Fashion at noon.com, a Middle East-focused online shopping portal, Jose Antonio Grajales, agreed that the digital world was transforming the luxury industry, rather than disrupting it.
“For me, the disruption is not a complete metamorphosis of the industry, it is more of an evolution of the way we consume,” he said.
According to Grajales, much of the world’s luxury sales happen in just 10 cities, something he says digital platforms can help to change.
“As sellers of luxury products, we have failed at getting that product to customers in other places… Because of e-commerce and digitalization, we are able to get those products into the hands of consumers more easily.
“Luxury is unique because you like to touch it, you like to feel it and you like to experience it but you aren’t always in a place which makes those nice things easily accessible,” he said, explaining the power of e-commerce in widening the reach of luxury brands.
“Technology should enable us to serve a customer better, wherever you are you should be able to access that luxury experience and that luxury product.”
But what advice did the panelists have for luxury brands seeking to leverage the digital world?
“Be prepared to fail,” Bohsali said.
“The fashion industry hasn’t cracked it. The classic model that has worked is a store — the in-store experience works — but the future could be a combination of using a mobile device and coming to a store.
“It’s an experiment, the industry is still experimenting.”
The panel also included Graziela Martins, vice president of the merchant business at American Express Middle East and North Africa and Emre Karaer, general manager at Volvo Cars MENA.


As worries about populism in Europe rise, investors bet on stock market volatility

Updated 47 min 38 sec ago
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As worries about populism in Europe rise, investors bet on stock market volatility

  • More than 350 million EU citizens will head to the polls between May 23 and 26 to elect a new Parliament
  • The vote will shape the future of the bloc amid a backlash against immigration and years of austerity

LONDON: Investors are betting on heightened political uncertainty and greater volatility in European stock markets ahead of European Parliament elections in May amid growing concerns about rising populism.
In one of the first concrete signs in financial markets that investors are bracing for political instability, VSTOXX futures , which reflect investor sentiment and economic uncertainty, have jumped in recent weeks.
While the classic gauge of fear — known as implied volatility, which tracks demand for options in European stocks — is currently at 15.68, futures that bet on the same thing over the coming months show a pronounced jump.
That’s because investors have piled on trades that bet on big swings in stocks as election day nears.
Implied volatility for futures contracts expiring in May show a pronounced jump to 16.8, compared with 15.35 in April. The contracts measure the 30-day implied volatility of the euro zone STOXX 50 index.
“We are seeing a bit of a kink around May when we have European elections and we have this wave of populism,” said Edmund Shing, head of equities and derivatives strategy at BNP Paribas.

Looming elections
More than 350 million EU citizens will head to the polls between May 23 and 26 to elect a new Parliament, a vote that will shape the future of the bloc amid a backlash against immigration and years of austerity.
Mainstream center-left and center-right lawmakers may lose control of the legislature for the first time, as euroskeptic and far-right candidates build support.
Herve Guyon, Societe Generale’s head of European equity derivatives flow strategy and solutions, said the rise of populism had triggered a recent flurry of speculative trades.
“Political uncertainty might be coming from the EU rather than the United States. We’ve seen investors doing very large trades to benefit from an increase in volatility around these events,” he said.
“We as a bank don’t expect the elections to be a massive game-changer. The populists won’t get enough to disrupt the political system, but we do note some investors did take some positions on this event.”
The implied volatility is still well below levels seen in late 2018 when global stock markets were routed amid worries about rising interest rates, slowing economic growth and the trade war between Beijing and Washington.
In late December, it shot to above 26, its highest since February.
But the flurry of activity suggests investors are seeking out new opportunities after a slide in implied volatility across major asset classes.
Edward Park, deputy chief investment officer at asset manager Brooks MacDonald, said some of the activity may also be due to persistent uncertainty about Britain’s exit from the European Union as the Brexit date of March 29 nears.
This year, volatility across currency, fixed income and stocks markets has plunged as the US Federal Reserve and European Central Bank have taken dovish policy stances.
The Deutsche Bank currency volatility indicator hit multi-year lows this week, while the proxy for fixed income volatility is languishing at all-time lows.
In stocks, the Cboe volatility index, Wall Street’s so-called “fear gauge,” fell to its weakest in six months this week.
“There’s been a cross-asset volatility crash — in euro-dollar, US rates and equities — in the aftermath of (ECB President Mario) Draghi’s and (Fed Chairman Jerome) Powell’s comments and the expectation of lower rates for longer,” said Guyon.