Luxury online?

Luxury retailers started reopening in London last week. Stores are combining following government guidelines to keep staff and customers safe with maintaining a desirable in-store customer experience. For Harrods, this means footfall monitoring technology and rainbow windows.

Beyond bricks and mortar, there is a potential sea change on the horizon for luxury online. The luxury sector has typically been intentionally slow to e-commerce, citing fears of trivialising products and brand deterioration. The pandemic, with customers staying at home, provides an impetus for luxury online. LVMH, for example, has seen rapid growth of online sales of fashion and leather goods during lockdown (this is amid a decline in fashion and leather revenue generally due to store closures). The industry is thinking hard about its next steps in this area.

Luxury brands moving to a more online-focused model targeting UK-based customers will need to consider, among other things:

1. Being better than consumer law

If a brand sells direct to consumers from its website it needs clear terms and conditions of sale written in plain English and, to help maintain a strong brand, in keeping with house-style. In most cases consumer laws provide online consumers with a right to change their minds within 14 days of receiving the goods. To maintain a heightened customer experience, luxury brands could offer customers a more generous returns timetable than what is prescribed by law. If the customer returns an item, unless the item is faulty, the brand can generally oblige the customer to pay the cost of return. For luxury, the brand might choose to take on that cost or even arrange collection.

2. Care and compliance with personal information

Transitioning to an online direct to consumer model will leave brands in control of more personal information belonging to online customers. Luxury consumers will expect, and have the right, to have their personal information handled in a careful and discreet way, reflective of the care and discretion provided in-store. When dealing with a consumer's personal data, brands must be transparent about how they are using it and comply with data protection and privacy laws. Brands should be even more alert to the special rules around electronic marketing to customers provided for in the Privacy and Electronic Communications Regulations.

3. Watch out for pirates!

More luxury brands moving online is likely to provoke lookalike sites selling fake goods or trying to defraud the public. Customers, aware that luxury is moving online, may be less wary of engaging with these sites, assuming them to be legitimate. To protect against this, brands could pursue a domain name policy which acquires and controls all of the common domain names that might be used to associate with the brand. Brands can keep a watch on fake sites, taking action should they pop up.

4. Brand control

Luxury brands moving to an online reseller model will need to take measures to control the use of their brand by the reseller, both on the reseller’s website and in any agreed online marketing materials. A registered UK trade mark is not infringed when it is used for the purpose of identifying or referring to goods as those of the owner of the mark so, to avoid grey areas and uncertainty, brands should consider tight contractual provisions with the online reseller as to how and when it can use the luxury brand’s registered and unregistered trade marks.

5. Quality control and competition law

Competition laws stop brands from requiring online resellers to sell their goods at a fixed price or to always sell at a price above an agreed minimum. This often causes brand deterioration concerns. Luxury retailers will need to think carefully about the reputation of the online resellers that it uses before contracting and use contractual means to ensure that the online reseller maintains appropriate standards of marketing and promotion of the brand, while remaining compliant with competition laws.
Selective distribution arrangements might also be used. Again, competition laws will need to be considered and complied with.

If you require further information about anything covered in this briefing, please contact Natalie Rimmer, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, June 2020