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ForwardPMX's annual report unpacks the current and future state of the online luxury market.

ForwardPMX’s latest report analyzes the current and future state of the global online luxury sector, which is poised to see a decline in sales that could reach 45 percent and is forecast to not fully recover until 2023.

But the 39-page report also describes the luxury market as a resilient industry, with brands forging ahead despite headwinds. And then there are the opportunities in China, where consumers there are expected to generate half of all luxury goods purchases in the world in the next five years.

ForwardPMX’s 2020 luxury report also put a spotlight on luxury brands that are capturing industry-leading site traffic and wooing shoppers on social media with engaging content. The bulk of the report, though, focuses on global online data for the top luxury brands — a candy bowl for data and marketing experts.

In a letter to clients in the report, James Townsend, global chief executive officer of ForwardPMX, noted that the luxury market, like many sectors in 2020, “has felt the effects of a health crisis, the consequent economic impact, as well as social unrest occurring throughout 2020. Consumers have developed new behaviors and priorities, and the luxe sector has had to adapt. Despite the challenges this presents, many luxury brands are pressing forward with a courage and boldness that defines them at their very core — reaching beyond product to deliver heart and new relevance to inspire tomorrow’s generations of luxury consumers.”

Townsend also praised efforts by many luxury brands to help during this time of crisis. Whether recalibrating product lines to make PPE for essential workers or shifting formulas from fragrances to hand sanitizer, luxury brands have stepped up to the plate. Townsend praised the companies’ brand partners and promised to lock arms during a challenging time.

“We remain truly humbled by our clients’ resilience and unwavering devotion to their cities, their people and to their craft in this difficult year,” the ceo said. “As partners, we look ahead with optimism, working to drive the advancement of brands’ digital agendas across their businesses and acting as strategic guides to ensure brands are agile and fit for the changing world.”

Digging into the report’s data, ForwardPMX said that in the U.S., overall search volume for luxury brands increased 9 percent year-over-year, but the growth came “at a time when site traffic to those same brands dipped 2 percent year-over-year.”

“This growth suggests that brand demand has been resilient in the face of uncertain health, social and economic times — but also that luxury consumers are choosing to engage with brands elsewhere — whether multibrand retailers, social platforms, resale sites or fashion content sites,” the authors of the report said. “The challenge going forward is the same online as in the real world: welcoming back consumers, whether into reopened boutiques or reinvigorated brand sites.”

The growth in search volume also backs up what retail analysts have said for the past few months: consumers, many stuck at home, are spending time searching for and researching brands online.

The top brands in share of search volume in the U.S. are Louis Vuitton and Gucci with 17.7 percent and 9.8 percent, respectively. Michael Kors took the number three spot with 6.4 percent search share and was followed by Balenciaga with 4.6 percent and Coach with 4.1 percent. In sixth was Chanel with 3.9 percent, followed by Burberry with 3.7 percent and Ralph Lauren with 3.6 percent. Off-White came in with 3.5 percent, and was followed by Versace with 3.2 percent at number 10.

In China, Louis Vuitton was number one, followed by Gucci, Dior, Chanel, Hermès, Burberry, Jimmy Choo, Coach, Armani and Saint Laurent.

In regard to U.S. online market share, measured by traffic to sites, Michael Kors was tops, followed by Louis Vuitton, Ralph Lauren, Coach, Gucci, Chanel, Dior, Burberry, Hermès and Versace.

Other notable findings in the report include insights about social media. “Instagram maintains its lead in the number of luxury followers, and its total grew the most at 12 percent, year-over-year,” the report stated. “In China, WeChat and Weibo still dominate the conversation, with emerging channels like RED and Douyin becoming increasingly important.”

Other findings include a shift to younger demographics, who embrace luxury. “In the U.S. as well as nearly all countries studied, Millennials and Gen Z are the largest cohorts among luxury brand site visitors, represented at considerably higher rates versus the general population,” authors of the report said.

London-based Sellier is seeing its business skyrocket, as a result of an online shift and its premium offer of luxury bags, from the likes of Chanel and Hermès. Its growth is shaking up the rules of the guarded primary market.

LONDON — When luxury reseller Sellier opened the doors to its brick-and-mortar boutique in London’s Knightsbridge in early 2019, the aim was to tap into the local community and the robust foot traffic from nearby Harrods.

“Everything was ticking along nicely,” said Hanushka Toni, who founded the business with her mother Dina Ibrahimova — until the COVID-19 outbreak in March forced all nonessential retailers in London to shut their doors indefinitely.

A few months later, thanks to the web site and plenty of Instagram content, the business has become a player in the secondary market with a dedicated following and a wider international reach. Its online network of sellers and buyers has grown to include some serious luxury collectors with knowledge of the market and an affinity for super brands.

“Since our web site launched in May, we turned over 1.5 million pounds. We’re growing month-over-month, so our revenues are now on average 300,000 pounds and 500,000 pounds per month, just on the web site,” added Toni, pointing to the company’s 43,000 Instagram followers, most of whom were acquired during lockdown.

“It may not seem like a huge amount for Instagram, but that’s 43,000 real people and customers. Each story that we post gets at least 15,000 views, which is very high engagement.”

That engagement has ultimately translated into high — and quick — sell-throughs: There is an 80 percent sell-through rate for new items, most of which go within an hour. A slow pickup means an item will sell within a week.

The retailer tends to receive up to 50 Instagram messages the second it posts a new item on its social feed, with most inventory selling out before it even has a chance to be uploaded on the Sellier web site.

The bag category is by far the business’ biggest growth driver, with Chanel and Hermès leading the way. The company tends to sell an Hermès bag a day, while a classic Chanel flap bag can sell out within 30 seconds.

“It’s funny because Hermès bags are very expensive, they are at a premium to the shop price, but we ship them all over the world. People are prepared to pay 14,000 pounds or 15,000 pounds for an Hermès bag that they haven’t seen before,” said Toni.

Part of the popularity of bags by the megabrands lies in the increasing savvy of modern-day consumers, who are sensitive both to the investment value of the bags, and to the big brands’ ever-evolving pricing structures.

“In the past year alone, Chanel has had two price rises. Now the Chanel Maxi bag costs the same as an Hermès Birkin, so people have become attuned to the fact that there’s a locked-in profit. If they had bought the same bag two years ago, it would probably have been 2,000 pounds cheaper,” said Toni.

“If you buy Chanel, if you buy Hermès, not on an immediate horizon, but in a five-to-10-year horizon, there’s going to be added value.”

The access to coveted Hermès Birkin and Kelly bags via online platforms like Sellier is also shaking up the primary market. Customers no longer have to go on yearlong hunts for Birkin or Kelly bags — or play the Hermès game.

“If you ask for a bag like a Kelly in-store, they’ll probably laugh at you and tell you that it’s unavailable,” said Toni, recalling a time when she was asked to spend $20,000 in an Hermès boutique in Dubai for the chance to be offered a plain leather Birkin.

Hermès bags in the secondary market are sold at a premium — a size 25 Birkin bag that sells for 6,500 pounds in-store would be sold for 13,500 pounds by Sellier. But not having to spend on other in-store items and getting the size, color and hardware of your choice makes it worthwhile, claimed Toni.

“Given that the store price is more than half, it’s just insane. But obviously the profit isn’t just for us, we buy these pieces from resellers at a premium,” she added.

Hermès declined to comment on the brand’s sales protocols.

Outside of Hermès bags, and perhaps a handful of rare Chanel models — flap bags in a Tiffany blue color are particularly popular — the store makes a point to not sell any other brands or items at a premium.

In fact there’s a mutual understanding among Sellier’s most loyal customers that most of their trendy pieces, be it a Bottega Veneta pouch or a Prada nylon cross-body bag, are bound to depreciate — and they’re fine with that.

“The sort of people who buy those pieces are people with enough disposable income, so it doesn’t matter if they buy into a trend. They are pretty comfortable knowing that if they pay 1,900 pounds for a Bottega pouch, they’re going to sell it for 1,300 pounds. They turn them around quite quickly and go on to the next thing,” added Toni, pointing to Sellier’s policy of carefully selecting its sellers and building a community of affluent women “with incredible collections, who update their wardrobes with pieces from super brands on an almost weekly basis.”

Investment values aside, Toni argues that, in most cases, it makes sense to buy pre-loved: “Clients realize that the price tag in the primary market, with the exception of Hermès, is so inflated compared to what you can get pre-loved.”

Some of the most popular pre-loved styles on the market, and at a discount, include Dior Saddle bags, Louis Vuitton monogram styles and Bottega pouches.

According to Toni, Gucci Dinoysus bags from Alessandro Michele and Miu Miu styles are losing their market value, as are seasonal styles by contemporary brands like Rejina Pyo — hence the markdown can be as much as 80 or 90 percent off the original retail price, even if the bag looks brand new.

As Sellier continues to establish its online presence, the aim is to double in size by next year and look at expanding in the U.S., which has been driving the biggest portion of the site’s international sales.

The original Knightbridge boutique is also staying intact: “Having a physical space offers people comfort, they know we’re not just an Instagram person who will take their bag and run off. People ship their Birkin bags and their Kelly bags to us from across the world without any payment. I don’t think they would be as comfortable shipping that to someone’s home address.”

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Henry O’Sullivan, an outside adviser, was paid on 10 Wirecard deals, some of which are the focus of investigators trying to unravel the company’s collapse

German prosecutors allege that Wirecard AG WDI -7.09% executives overpaid for a string of companies, causing massive losses to shareholders of the now disgraced financial-technology company.

Playing a key role in some of the Wirecard deals was Henry O’Sullivan, a behind-the-scenes payments consultant who was paid as an adviser on at least 10 separate Wirecard acquisitions, according to former senior company officials. The acquisitions he advised on were among a larger group of deals done at inflated values, the officials said. His paid role on the deals, not previously reported, builds out a picture of what investigators say was a key aspect of the company’s collapse.

Mr. O’Sullivan helped identify acquisition targets in Asia and Africa that are at the center of investigators’ questions about whether funds were misappropriated. More than $1 billion was lost from the company through overpayment for deals, and other alleged malfeasance such as bogus software contracts and sham loans, according to a calculation by one of the former officials who has access to company records.

Wirecard went from being a listed company worth more than $14 billion to bankruptcy in a little more than a week in June, after admitting that more than $2 billion of cash it had reported on its balance sheet didn’t exist.

The German company processed electronic payments, a fast-growing business driven by the expansion of internet shopping and entertainment as well as declining cash use world-wide. Wirecard boosted its growth by making around 1.2 billion euros, equivalent to $1.4 billion, in acquisitions in the past decade, according to a report by Wirecard’s bankruptcy administrator.

Prosecutors in Germany say a major fraud took place and allege inflated acquisitions, among other factors, played a role. Some acquisitions were never properly integrated into the group and some were done at high valuations even though the businesses were loss making, the former company officials said.

The Munich prosecutors office is investigating Wirecard for potential cases of embezzlement, including linked to acquisitions, but it hasn’t drawn any conclusions, according to a spokesperson.

Several former Wirecard executives and board members were called to appear this week for questioning in a German parliamentary investigation into the government’s oversight of the company before its collapse.

Mr. O’Sullivan didn’t respond to requests for comment. His whereabouts couldn’t be determined. Lawyers for Wirecard’s senior executives who Munich prosecutors allege to be conspirators in the alleged fraud didn’t respond to requests for comment on the details of this article.

Mr. O’Sullivan, a U.K. native, was well known to some Wirecard executives as a payments-industry entrepreneur, according to people who knew them. He entertained them regularly from his home base in Singapore, including at events such as the Singapore Grand Prix motor racing.

He lived a luxury lifestyle, often dining at a high-end restaurant on top of the Marina Bay Sands hotel, which dominates Singapore’s harbor. He had a brand new convertible Rolls-Royce in Singapore, where import taxes can double the sticker price of cars. He built an aquarium in his house for three hammerhead sharks, according to former business associates.

Mr. O’Sullivan was a confidant of Wirecard’s former Chief Operating Officer Jan Marsalek, whom authorities in Germany suspect of having committed “commercial gang fraud” in the downfall of the once mighty payments technology company. Mr. Marsalek is on the lam and couldn’t be reached for comment. A lawyer for Mr. Marsalek has previously declined to comment.

Wirecard presented Mr. O’Sullivan as a special consultant and adviser to Mr. Marsalek in several acquisitions for which he was paid, according to one of the company officials.

But Mr. O’Sullivan kept a low profile in his business dealings. He isn’t listed as an owner or director of Singapore-based Senjo Group, but people familiar with its operations say he made management decisions for the company, The Wall Street Journal previously reported. Senjo was one of three key partner businesses of Wirecard identified in a special audit performed by KPMG AG as the source of more than $2 billion in cash that turned out not to exist, precipitating the company’s collapse.

Senjo Group is being investigated by Singapore police and financial regulators in connection with the Wirecard scandal, the authorities said in July. Senjo didn’t respond to requests for comment.

A Singapore-based entrepreneur who met Mr. O’Sullivan several times when Senjo was considering making an investment in his business said that he asked Mr. O’Sullivan multiple times for his surname but that he refused to give it. Eventually another person told him who he was.

Mr. O’Sullivan was a key player in one of Wirecard’s biggest deals, the €340 million takeover of several Indian payments businesses in 2015, the Journal has reported, citing people familiar with the deal. Wirecard bought the businesses from a private Mauritius-based investment fund and agreed to pay more than eight times what the fund had paid for businesses just six weeks before.

Mr. O’Sullivan was described as “the architect of the whole transaction” by an Indian accountant in an email discussing the deal that has been reviewed by the Journal. Mr. O’Sullivan also arranged for the owners of the Indian businesses to meet Mr. Marsalek and later outlined potential terms of a deal in emails filed in an Indian court case, according to filings reviewed by the Journal.

In July, the central bank and financial regulator of Mauritius opened an investigation into whether Wirecard used the deal for round-tripping, a practice by a company to recycle the proceeds of a transaction back into its own books.

KPMG AG, which Wirecard hired to conduct a special audit of its operations before its collapse, examined accusations that the Indian payments deal was fraudulent, and was unable to identify the ultimate owners of the fund.

KPMG spoke to Mr. O’Sullivan about the India deal, but he told the auditors he would only cooperate if his name was kept out of the auditor’s report, according to a person who has read an annex to KPMG’s final report. The auditor wouldn’t agree to anonymity for Mr. O’Sullivan, so he refused to say anything.

Mr. O’Sullivan acted as an adviser to Wirecard’s former COO Mr. Marsalek on the group’s acquisition of a South African payments company, MyGate, according to the former Wirecard company officials. Wirecard paid €23.1 million for the company, according to its announcement at the time, which included €18.2 million in cash up front and the remainder to be paid depending on future earnings growth.

Former MyGate executives didn’t respond to requests for comment.

Some of the proceeds for MyGate were paid to a counterparty in Russia who wasn’t the owner of the business, the former company officials said. The payment appeared suspicious to people examining the wreckage inside Wirecard in recent months, they said.

Wirecard supervisory board members at the time knew about Mr. O’Sullivan’s involvement in this deal and others, according to one of the former company officials. It couldn’t be determined what they were told about the payment to the Russian counterparty. Board members at the time either declined to comment or didn’t respond to requests for comment.