Sotheby’s reports a 5x increase in digital sales to $150.5m in 2020 vs 2019, Christie’s reports a 3x increase in the number of online sales events (and 4x increase in revenue for those events) in November and December vs the corresponding period in 2019. Christie’s is also seeing a new willingness by customers to purchase very high priced goods online. Prior to 2020, the highest price it had sold an item for online was $80,000, but it has already sold 25 items for over $100,000 each this year. Other luxury goods retailers are seeing similar dynamics. David Rosenblatt, the CEO of online luxury goods marketplace 1stDibs, reports that “buyer behavior has changed dramatically overnight” during the pandemic, resulting in “10 years of digital adoption over the last 10 months”.
The increasing exposure to digital sales at these luxury goods companies brings with it an even bigger increase in the critical business task of ensuring sufficient resources are devoted to protecting the underlying technology that makes it all work. Indeed, luxury goods companies such as Christie’s and Sotheby’s have an even greater need to maintain reputations for trust, security and reliability than a ‘typical’ consumer facing company due to the exclusive nature of their products and customer base.
Shareholders in these companies should ensure that management is giving this matter the attention commensurate with the business risk it represents. Many companies such as these that are not traditionally based on digital products or digital sales struggle to grasp how crucial this is, and digital transformations that are both successful and sustainable often require a culture change at the top, as well as guidance from the C-Suite that cyber security must be a priority for all employees and is not something that is just dealt with by IT departments.
Those companies that are able to handle this transition well and instill these values across their workforce—such as Home Depot—are rewarded with increased sales and share price. Those that handle it poorly are more susceptible to damaging attacks such as ransomware, and experience persistent share price underperformance as they struggle to keep pace with their more digitally secure peers.