The Luxury Metamorphosis: Shift to Digitalization and Its Impact on Sustainability Strategy

Abstract

The luxury sector is at a crossroads, with e-commerce, sustainability and new market segments seeking to disrupt and even upend it. Though e-commerce is not looked upon favorably by the luxury brands, it is the way of the future and luxury brands will have to find ways to incorporate it into the company DNA. New consumer segments have given rise to the concepts of digital and sustainability strategies in luxury that need to be researched and analyzed in order to have a comprehensive view of the future for the luxury sector. The digital and sustainability integration of “Shared Value” goals may provide a well-defined method by which to pursue both corporate success and the creation of social and environmental value. In order to have such foresight, it is key to have the right leadership is in place, and this will define the next decade for the luxury sector.

My research hypothesis was that the shift to digitalization and e-commerce in the luxury sector would coerce companies to also adopt sustainability as a core business strategy, in order to be innovative. The research methodology utilized a multiple-case study approach, comparing companies in the luxury sector that were either digital or sustainability leaders using the Yin Case Study method. The case study method was used to conduct a comparative analysis of varying types of luxury companies in the personal goods sector, chosen based on whether they fulfilled each case classification. There were four case classifications and one company was chosen per case. They are respectively:

Case 1: Companies that are neither leaders in e-commerce or sustainability

Case 2: Companies that are leaders in e-commerce but not sustainability

Case 3: Companies that are leaders in sustainability but not e-commerce

Case 4: Companies that are leaders in both e-commerce and sustainability

I created a Sustainable Index with multiple metrics addressing different sustainability and social responsibility criteria under which the four case companies were scored from 1 through 3. The sum of these scores was then used to rank the four companies. Subsequently, there was a cross-case analysis of the four multiple case companies, where Case 1 was compared to Case 4, and Case 2 was compared to Case 3. These results refuted my hypothesis, as the digital capacity of a firm does not give it the vision to pursue sustainability as another core innovative strategy and vice versa. With digitalization, companies in the luxury sector are compelled to have a unique relationship where they co-create value with their consumers. Some potential benefits of this research would be helping companies in the luxury sector move closer to the triple bottom line by focusing on economic, social and environmental factors, recognizing the impending business value in sustainable luxury.