Luring Luxury to China’s E-commerce World; Who Comes Out On Top?

By Tamsin Smith

It seems not a day goes by without another of China’s e-commerce platforms announcing a luxury initiative, attempting to lure the top brands to their sites with exclusivity, the fight against fakes and seamless logistics services. Many foreign luxury brands, however, are still unclear over the reality of the various apps and platforms in regards to luxury retail; and it’s easy to see why.

Last year saw JD.com’s Toplife launch JD Luxury Express, promising the delivery of luxury items by the likes of Saint Laurent and Alexander McQueen to wealthy customers in under 24 hours — complete with handsome delivery drivers in suits and white gloves. Elsewhere, JD’s biggest rival Tmall’s Luxury Pavilion continues to grow, offering private access to a carefully curated personal page of luxury brands to Alibaba’s most powerful consumers. Tmall last week announced the launch of the Luxury Pavilion Loyalty Club, promising yet more unique delivery perks to an even narrower list of invite-only members.

Additionally, this month saw Chanel team up with Farfetch to develop new digital initiatives, including the creation of a branded app to help complement a personalised in store experience; but the French fashion giant is yet to bow to the pressures of online e-commerce.

Despite the steady rise of Toplife and Luxury Pavilion, in recent weeks Secoo has managed to gain the trust of the Chinese consumer, emerging as a new leader among luxury e-commerce in China. In a recent report by Deloitte, Secoo is said to hold a 25.3% share of the luxury e-commerce market.

Intimidating and confusing, many brands are unsure which route to take when seeking to sell amongst domestic leaders on China’s luxury e-commerce networks. To gain some clarity, The Luxury Conversation spoke to industry insiders who gave us their top tips on the best luxury e-tail platforms- and what brands can do to succeed on them.

Spot the difference

Luxury Pavilion and Toplife have long since battled it out to demonstrate a strong anti-counterfeiting strategy, with JD’s Toplife often coming out on top due to its distribution of goods directly from its own warehouses.

As many have pointed out, as long as the demand is there, fakes will remain — however Secoo has garnered quick support for its impressive quality control. Bai Zhang, Fashion Writer and Trend Analyst at YOOX-Net-A-Porter group, explains, “The authenticity of “buying the real thing” is the first and biggest concern for Chinese consumers. Secoo set a good example by reassuring the credibility of the products, you can easily see that on their homepage, highlighted with certifications from different organizations, which I believe earned Chinese consumers’ trust.”

Brands can look at the different development strategies of the key players in order to find the best synergy with their own ideals. JD and Tmall have a solid foundation based on e-commerce, so you know that the numbers are there. Since its launch in August, Tmall’s Luxury Pavilion has welcomed the arrival of over 50 brands from various industries, including the likes of Stella McCartney, Hugo Boss, Burberry, Givenchy, Maserati, La Mer and Zenith.

Net-A-Porter and Secoo stemmed from a fashion media aspect, offering more opinions and editorial content on products and fashion.

MEI.com, and VIP.com are more discount-oriented. While ‘discounts’ may seem incompatible with ‘luxury’, the fact that these two sites shine in selling high volumes of stock at one go can still be attractive to an overseas business which needs to deal with sending stock to China in the first place, not wishing to have masses of it sitting unsold.

One size does not fit all

Despite the emerging flexibility of e-commerce platforms, proven online discount methods by the likes of MEI.com and VIP.com are understandably hard to sell to the biggest of luxury brands. All luxury e-commerce platforms are aware of the need to tread the careful line between exclusivity and an open customer experience. Zhang from Net-a-porter believes that the most important aspect for brands choosing an e-commerce platform is to look at the demographic of their own consumers.

“It’s a common misunderstanding for international brands entering the Chinese e-commerce market that they can roll out a one-page profile to attract all Chinese luxury consumers. In fact, there are different types divided by province, age, education, profession, life style, family values- and each of these factors could individually lead to a key motivation for consuming luxury. Therefore I think, each different e-retailer is targeting, partially or entirely, the different types of Chinese consumers.”

This niche targeting is particularly evident when examining Tmall’s Luxury Pavilion, who seeks to attract the most affluent consumer and top name brands, by remaining an exclusive invite-only platform.

This however, isn’t necessarily enough to lure luxury brands to a platform. As Chanel has demonstrated, many high-end labels are still hesitant to throw their lavish hat in China’s quickening e-commerce race. Zhang understands, but suggests the protective nature of big brands may be causing them to lose out,

“I always think, to create a brand’s image could take one hundred years, but to destroy a brand’s image might take just one second. For top luxury brands, it is always a risk to let others “speak” for you, let alone in an entirely foreign language. In my opinion, for China market, the online platforms are able to provide high-standard services for the brand’s existing loyal consumers that local physical stores cannot, they’re able to 100% understand the consumers.”

Isn’t WeChat enough?

According to Bain’s latest study, WeChat alone represents 30-60% of luxury brands’ digital marketing spend, causing brands to question whether investment in WeChat is indeed all it takes to grab a sizeable slice of China’s e-commerce market. Joseph Leveque, Managing Partner at 31Ten, believes this could be the case,

“WeChat is an excellent fit for luxury e-commerce: most brands started with campaign sales targeting impulse buying, and are now moving to offering permanent stores for their most popular items, especially via mini program stores. Every issue of L2’s Luxury report shows more brands adopting permanent WeChat e-commerce. WeChat allows for numerous options of servicing the customer along the purchase, especially concierge customer service via the chat interface. We feel it’s yet to be fully implemented by most brands.”

Where e-commerce platforms are able to thrive however is through the development of luxury experience strategies. Luxury delivery adds to this experience, with Zhang explaining that luxury brands’ products require high quality packaging and delivery, and its important for e-commerce sites to meet this standard.

Toplife’s white-glove delivery service has hoped to differentiate the platform from competitors, guaranteeing a fast, safe and lavish delivery. Secoo however, provides customers with a 7-day return guarantee, as well as aftercare services for luxury products. High-end shoppers are offered an aftercare service of their purchase up to eight times annually.

Find the perfect fit

With so many e-commerce platforms offering varying benefits, brands no longer need to panic for a partnership. It’s vital to consider the narrative of your own brand, and how it can align with others in China’s online market. Are you using e-commerce to sell in bulk as quickly as possible, or to build a private affluent consumer base? Do you want your products supported by informative media-driven content, or are you willing to offer the most competitive level of discounts and deals?

Above all, the experts’ best advice is to be patient, weigh up what your brand stands for, and what you want to gain from evolving e-tailers.

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