Could luxury brands on Amazon, eBay and other online marketplaces be facing an uncertain future?
German makeup brand Coty leads the fight of luxury brands against online retailers as it filed a case at the European Court of Justice (ECJ) a week ago, prohibiting online retailer Parfumerie Akzente from selling its products on online marketplaces.
Akzente is one of the distributors of Coty’s high-end products, but selling them on Amazon wasn’t part of their agreement, says Coty.
Coty said it only wants to protect the image and quality of its products which is likely to be devalued if they’re sold on mass marketplaces.
Brand Owners vs. Online Retailers
However, online retailers believe that there’s a deeper reason behind brand owners’ restrictive distributive deals, which discourage competition and hurt consumers.
According to lobby group Computer & Communications Industry Association (CCIA), whose members include Amazon, eBay, Facebook, Google, Rakuten and Yahoo, the problem is broader than luxury brands wanting to protect their image.
“This issue is far more relevant because online marketplace bans are imposed with respect to a range of day-to-day, mass market products which makes them anti-competitive and unjustifiable. That’s the real problem, not a handful of high-end luxury brands that don’t use outside distributors,” stressed CCIA Director Jakob Kucharczyk.
Battling it out in Court
Luxury brand owners work on a selective distribution system which requires distributors or resellers to comply with the rules that they’ve set.
Oftentimes, a brand owner would stipulate in the agreement where their products can be sold or distributed.
Considering the European Commission’s commitment to strengthen the competition law, one of the things that the ECJ will look into during the hearing is how a luxury brand’s need to protect its image justifies a selective distribution system.
The case has drawn the attention of many as its outcome in court will determine whether a ban on the sale of luxury brands on Amazon and eBay will be imposed or not.
Benefits Reaped from Partnership with Marketplaces
Now now, not all luxury brand owners are out to gang up on retailers who are selling their products on online marketplaces.
Many celebrated brands, in fact, partner with online marketplaces to expand their sales.
Click here to see which luxury brands are testing the eCommerce waters and seem to be liking it.
They know for a fact that many of their wealthy clientele are shopping on Amazon, eBay and other third-party sites, hence the reason astute brand owners are going with the flow.
And by the looks of it, the result wasn’t damaging to the image of their brands—if anything, they even benefitted from the regular patrons of those online marketplaces.
What’s your take on this issue? Will the result of the Coty case affect your business in any way?
Let us know in the comments below.
To your continued success,
Dave & Matt