Demand Learning Through Social Media Exposure in the Luxury Fashion Industry: See Now Buy Now Versus See Now Buy Later

Abstract

Recently, luxury fashion brands can webcast fashion shows and analyze market feedback from social media exposure (SME). See now buy now (SNBN), a new product introduction system that allows consumers to purchase products after fashion shows, has been deemed a revolutionary movement in the fashion industry. Whether SNBN can replace see now buy later (SNBL), the traditional system in which consumers purchase products several months after fashion shows, is unclear. In this article we evaluate the value of demand learning through SME for SNBL and SNBN. We develop a stylish two-period model to characterize SNBL and SNBN with SME. We find that when the feedback accuracy and holding cost are sufficiently low, SNBN performs better than SNBL with SME. Furthermore, for SNBL, when the consumer valuation is relatively low, learning market responses from SME is effective and profit improvement with SME decreases. For SNBN, SME is not always effective. Our results imply that brands, such as Gucci, should sell trendy and fashionable items via SNBL without SME and classic products (products with high consumer preference) via SME. Brands, such as Burberry, should sell low holding cost products (e.g., shirts) through SNBN and high holding cost products (e.g., leather bags) through SNBL.