Under the all-powerful umbrella of the Alibaba Group, Tmall is where any brand must be if selling to Chinese customers. Ahead of the 11.11 (AKA Double Eleven and Singles Day) shopping fest, here are few numbers from Alibaba’s Alizila network: “More than 200,000 brands will participate in what is the 11th 11.11, according to Alibaba, 22,000 of which will be from 78 overseas markets. The number of new products available on offer alone is at 1 million, and more than 500 million users are expected to participate during those 24 hours – about 100 million more than last year.”
Indeed, big China numbers are always impressive. Yet for luxury brands, it’s about quality alongside quantity – which is where the Luxury Pavilion comes in. It’s Tmall’s ‘app within an app’; a luxury haven for premium brands seeking the same high-end experience that they provide in their physical stores.
With overseas brands hearing about Alibaba, Taobao, Tmall, Tmall Global and the Luxury Pavilion, The Luxury Conversation met with Mei Chen, Alibaba Group’s Head of Luxury and Fashion in the United Kingdom, Spain, Portugal and Northern Europe, in order to dive into China’s e-commerce world and learn more.
Let’s start at the beginning – what’s the story of Taobao to Tmall – and Tmall Global – to the Luxury Pavilion?
Put simply, Taobao is still focused on being a C2C platform – B2C was why we started Tmall in 2008, with a focus on all forms of fashion – women’s, men’s, accessories, watches and so on. In 2014, we saw the cross-border opportunity to align with government regulations and begin Tmall Global as an easier step for international companies to tap into the Chinese market, without having a Chinese team, entity or bank account in China.
So even without that infrastructure or capacity, it allows them to serve the Chinese market. Tmall Global, Alibaba’s B2C cross-border marketplace, was established to cater to consumers’ ever-growing demand for high quality products and deliver a premium shopping experience. It’s therefore crucial that the platform helps brands reach their target audiences, so that the consumer experience is the best it can possibly be. The platform does this through using real time analytics to help brands optimise their sales.
In 2015 it was clear that the luxury brands from the West wanted to tap even more into the most affluent segment, while Tmall wasn’t a sufficiently luxury environment. So we spoke with the luxury leaders around the world about what would be their ideal scenario, and in 2017 we launched the Luxury Pavilion based on these discussions and research.
It’s not on a separate mobile app, but an app within an app, let’s put it that way. It can be found within Tmall but the Luxury Pavilion experience is very premium and exclusive. For brands, being on the Luxury Pavilion is by invitation only.
It’s not simply a decision made by Tmall staff; the data itself will signify what brands consumers see as luxury. We don’t want to make it simply ‘another Tmall’, so that’s the reason why we keep it as invitation only.
For the consumer, we’ve also done segmentation. So on the Tmall mobile app, the consumers that our algorithm has identified as luxury consumers will have an icon on their Tmall mobile app to allow them to access the Luxury Pavilion.
Those consumers that don’t have the icon can still access it by typing the Luxury Pavilion on the Tmall app. So they still do have the access but the feel of having the icon represents your purchasing power for luxury – yet it’s open for all. It’s the same culture that anyone can walk into a luxury brand store worldwide, but maybe you don’t have full access to exclusive events and invitations.
The algorithm that identifies luxury consumers is based on what brands that they search for, but also much more than that – what celebrities they follow, what movies they watch and behaviour relating to their lifestyle.
We serve close to 700 million consumers on Tmall. On the Luxury Pavilion the numbers are much lower, while the conversion rates are much higher, as they are segmented and they come to the Luxury Pavilion to shop and purchase.
We are building it not only with the best luxury brands that consumers in China see as luxury, but based on customer service. In cross border, the luxury experience can become limited. It can take, even when optimised, 3-5 days for delivery. On the Luxury Pavilion it can be much shorter, and this is one reason why only brands on the main Tmall platform already – not only Tmall Global – can have the potential to go on the Luxury Pavilion.
Any brands on Luxury Pavilion, be it Chanel beauty or Burberry, all these brands do have a Tmall store, but on the Luxury Pavilion it’s a more controlled environment, they are all next to their luxury neighbours and the experience is more conducive to luxury shopping from both the consumer and brand perspective.
On Tmall, thanks to recent developments, other brands can still have a premium feel. Even if you go to Zara or Apple, they are not on Luxury Pavilion, yet the experience within the Tmall environment can still have a luxurious feel. It’s sometimes referred to as ‘Tmall 2.0’.
When you speak to international brands about being on Tmall Global, what are their typical questions or aspects that they had no idea about?
Tmall Global’s has retained its leading position of China’s biggest cross-border e-commerce platform by sourcing the latest and most-popular overseas products for Chinese consumers. Tmall Global currently hosts more than 20,000 brands in over 4,000 categories from 77 countries and regions.
What’s more, the number of brands on the platform has grown rapidly, from just 5,400 in 2016 to more than three times that today, and it’s continuing to grow.
One thing that some international brands may not know is that you don’t need a Chinese business license to be on the platform, which we know is something that can often dissuade brands from trading in China.
Another element of Tmall Global that some people may not be aware of is its Global Source Program, which uses a combination of blockchain technology and big data to track the entire journey of imported goods – from production, to transportation, customs clearance and third party inspection, a product’s entire journey is tracked and fully traceable. This gives consumers confidence that they know what they’re buying and exactly where it came from.
Moreover, most of Tmall Global’s consumers were born between 1990 and 1999: 2018 data showed that the 18-to-28 group – ranging from college age to new entrants into the workforce – displays the most-promising purchasing power, with the group comprising nearly 50% of Tmall Global active users.
What do you see as the main trends on e-commerce platforms in 2019-2020? What technologies are having real impact?
The convergence of offline and online remains a key trend amongst consumers, who are looking for a best of both worlds shopping experience. This, in turn, is having an impact on the way e-commerce platforms are behaving.
A recent example of this is in Tmall’s latest ‘Brand Experience Centre’ located in Shanghai’s popular K11 mall. Within this space, Tmall has partnered with brands to feature pop-up activations exclusive to the venue, including everything from a street-culture exhibition from American skate-shoe brand Vans to live-band performances and ice-cream-themed immersive plays.
The experience starts online when Tmall sends invitations to the brand’s premium customers, although anyone can sign up using the website for Tmall Club, the platform’s experiential-marketing unit. By gauging initial interest from consumers, the brands gain insight into who will participate, which allows them to better engage those consumers offline – and even after the event ends.
Another key growth area amongst Chinese consumers is health and beauty. For example, did you know that the average Chinese consumer spends double the percentage of their disposable income on beauty products, compared to western consumers?
One brand that has really been able to capitalise on this is Cyden, a UK-based intense-pulsed-light hair removal technology company. Since partnering with Alibaba in 2017, Cyden’s SmoothSkin product went on to become one of the best performing new products on Tmall during Singles Day 2018 and has continued to go from strength to strength over the last year. Chinese consumers trust not only it’s ‘Made in Britain’ credentials, a key indicator of quality, but also the rigorous clinical tests and trials the products have undergone before coming to market.
Technology such as AR is crucial to enhancing the shopping experience on Tmall, as brands want to bring shoppers even closer to the products they’re purchasing. An example of this is on seller homepages, where they can now feature content powered by AR and 3D, such as magic mirrors to virtually try on make-up or artificial intelligence-powered skin tests.
Can you share any data with us relevant to Chinese consumers habits, particularly in terms of how much research they do before they make a purchase?
McKinsey research highlights just how intertwined the online and offline worlds really are for Chinese consumers. When purchasing apparel, only 7% of consumer journeys take place solely offline and only 8% take place wholly online. Instead, 49% are truly-omni channel, 32% evaluate online and purchase offline, while only 4% touch-and-feel offline and purchase online.
What’s more, with the average Chinese consumer spending 358 minutes per day online, just short of six hours, social media has had a huge impact on the consumer journey. Whereas in 2017, just 37% of shoppers gained awareness of the new products via social, today 50% of consumers are discovering new items through social.
In the next stage of the consumer journey, evaluating a product, only 26% of consumers used social in 2017, whereas today 48% use social platforms to find out more about prospective purchases.
Finally, when it comes to purchase, 25% of Chinese shoppers are now making purchases through social platforms, compared to just 7% two years ago, a more than threefold increase. The role of the marketplace is particularly interesting in the buyer journey – with much of the search and discovery taking place within the same ecosystem as the transaction. Customers spend an average of 27 minutes each day on Tmall.
Our latest data revealed that European countries such as Germany, Spain, United Kingdom, France, Netherlands, Switzerland, and Sweden were among the top 20 markets/regions selling cross-border to China (2016 figures).
Most of the fashion and beauty brands are from France, Italy, UK and Spain, and these brands have been very successful in China through Alibaba’s Tmall Global – some of the brands we work with are Charlotte Tilbury, The Body Shop, MartiDerm and more. Overall, European brands are a stamp for high quality materials, design and luxury.
Given that Chinese consumers are becoming more sophisticated, especially the Gen Z (post 1900s and 2000s), they are looking to express their individuality through what they wear and put on their body, thus there is also a growing appetite for niche brands. For example, cosmetic products and fashion brands from the Scandinavian countries are growing followership and traction in our platforms rapidly.
Now two years old, what is the brand portfolio of the Luxury Pavilion?
The Luxury Pavilion, launched in 2017 and now hosting over 140 high end and premium brands, aims to bring the same brand exclusivity and tailored shopping experience that consumers would get in a brick-and-mortar store to the world of e-commerce. The invite-only platform offers products ranging from clothes and skincare products to watches and luxury cars. Brands on the platform include: Burberry, Maison Margiela, Chanel Beauty, Bang & Olufsen and Maserati, to name a few.
The Luxury Pavilion operates not only as another e-commerce storefront. Instead, it is a comprehensive, tailored platform within the Tmall and Taobao Marketplaces, that allows brands to deliver experiences and services typically reserved for shoppers offline. Those shoppers enjoy personalised homepages, customised brand pages, product recommendations and exclusive VIP awards.
Are there notable points on the Chinese luxury consumer in terms of how they browse and buy, particular items that are booming in popularity?
Recent data shows that China delivered more than half the global growth in luxury spending between 2012-2018, with the average consumer spending 80,000 RMB per year on luxury goods, equivalent to £9,181.77.
Much of this is being driven by those born post 1980, a group made up of approximately 10.2 million luxury consumers who together for more than half the total amount spend on luxury goods by Chinese consumers last year.
In terms of the factors influencing buying decisions, shoppers are largely dictated by brand, with 72% of consumers born post 1980 saying that was the main factor, followed by design (9%) and fabric / material (8%).
In terms of loyalty to luxury brands, 54% of shoppers born post 1980 said they shop exclusively from five preferred brands or fewer, a number that drops to 29% when you consider those born post 1990.
Interestingly, 55% said of luxury shoppers born after 1980 said they would be more likely to buy something if an AI service recommended it to them on the premise it went well with something they were already wearing. While 57% said they would be more likely to buy something if they could virtually try it on. When it comes to making a purchase, the instore experience remains incredibly important. Consumers now expect a personalised, technology-driven service from brands both in store and out.