Background: Luxury e-commerce has increased rapidly during the past years, especially among younger generations. While some luxury firms were fast to endorse the idea of selling luxury online, others were more doubtful arguing that the characteristics of the internet are contradictory to the core dynamics of luxury brands. The experience in the physical shopping environment and online shopping experience are two different things and there is a risk that luxury brands follow the e-commerce trend without considering the potential risks and the potential damage that could be incurred on the brand image. Few studies have previously assessed the challenges that luxury brands are facing when they attempt to apply conventional luxury brand concepts in a digital environment as well as how firms can overcome these challenges.

Purpose: The purpose of this thesis is therefore to discover whether and how luxury firms can be engaged in online sales without hurting the brand image and the differentiation strategy.

Method: This is a qualitative research based on inductive reasoning. The study employs both semi-structured interviews with researchers and company managers, and a questionnaire that was designed to capture the opinions of luxury consumers.

Conclusion: The results suggest, inter alia, that the democratization that can arise with e-commerce may dilute the brand and its perceived exclusivity. Most consumers prefer to purchase luxury offline, partly because of the service and in-store experience. Brand authenticity turned out to be an essential factor in the digital environment and storytelling is an effective method to strengthen it. Another discovery of the study is that differentiation attempts online can affect the seamless shopping experience negatively.