What: As top luxury brands pull back from wholesale, e-tailers are adding online concessions to their business models rather than losing access to Gucci loafers and Balenciaga hoodies.

Why is it important: Big luxury brands have long embraced “shop-in-shop” concessions on department store floors, which allow them to control product assortment and pricing while benefiting from the customer traffic and upmarket adjacencies offered by department stores. In a bid to control discounting, several top brands are imposing a similar model on e-tailers as the labels pull back from online wholesale or eliminate online wholesale completely.

Gucci and Moncler for example are moving to a concession model with luxury e-commerce sites as they end their exposure to wholesale.

The shift has added another layer of complexity to the multi-brand luxury e-commerce market, with fierce competition, high customer acquisition costs, and logistical challenges making it increasingly difficult to turn a profit.

Commissions on e-concession sales are lower than e-tailers' wholesale mark-ups thus sites must sell more products to reach the same revenue. Still, concessions can reduce inventory risk and allow sites to tap deeper product availability through a brand’s stocks.

E-tailers are working to roll out concessions while maintaining a role in product curation and fulfillment. Mytheresa for example, known for its tightly curated edit of brands, rolled out what it calls a “curated platform model” for six brands, including Moncler and Gucci, during the Autumn/Winter 2022 season. As with a traditional concession, the brand retains ownership of the inventory that it sells on the Mytheresa platform. What’s different is that Mytheresa’s buyers still curate the selection of items it sells, and market the products and ship them from the Mytheresa warehouse as they would under a wholesale structure. From the customer’s point of view, the experience of shopping at the e-commerce site remains unchanged.

For wholesale businesses, making the shift to an e-concessions model can be a significant undertaking that requires ample time and investment. In the case of Kering, the end of online wholesale might prove advantageous for the handful of players who manage to forge an e-concession partnership, as fewer online competitors are likely to be selling popular items. With the brands carefully controlling prices, retailers won’t have to worry about rival websites offering the same product for less.

The pivot to e-concessions is reshaping online luxury