In the general context of the Chinese market, the focus is on major digital players such as Alibaba, Tencent and JD. On the other hand, we often hear that luxury fashion brands have long been reluctant to sell their products online. At the same time, China has become the world’s leading fashion-consuming country since 2019. So what is the weight and influence of these E-commerce platform on the luxury fashion market in China? Let’s take a look at this.
Luxury E-commerce platform in China gets a big piece of the pie
Since 2012, the penetration of online channels in the luxury market has gradually increased and has proven to be a major opportunity for fashion brands. Today, online shopping accounts for 26% of mainland Chinese customers’ luxury spending. This means that despite the belief that online luxury selling would remove the exclusivity and high status of luxury companies, Chinese consumers are popularizing luxury e-commerce and probably paving the way for a global change in the luxury selling experience.
In today’s luxury e-commerce landscape, according to a study by Tencent and the Boston Consulting Group, Chinese customers in mainland China are much more likely to purchase luxury goods from marketplaces such as Tmall or JD and less likely to go through a branded website. This figure is much lower on multi-brand luxury e-commerce sites such as Yoox, Net-a-Porter or Farfetch. Social media, such as WeChat stores, are also the 3rd sales channel for Chinese consumers (70% of luxury brands included in Gartner L2’s China Luxury Index operate a Wechat mini program.)
The local digital experience and costumer service is their bigger strength
While traditional luxury Western strategy promotes personalized and tactile shopping experience of brand brick-and-mortar stores, digital players in China seized the opportunity of the digital transformation of the market and laughed millennials targeted Fashion E-commerce platform in China really suited to their need.
« This burgeoning wave of consumer spending is largely driven by tens of millions of tech-savvy millennials who make up the country’s expanding middle class, given that the average age of Chinese luxury shoppers has dropped from 35 to 25, and 48% of them are under 30 » Claire Chu, Walk the Chart.
The Chinese Idiom « “臥虎藏龍” – Crouching Tiger, Hidden Dragon », that refers to people with extraordinary talents or abilities that are hidden from view, represents well the role taken by the digital players in the Chinese luxury market. For example, by collecting and analyzing data about Chinese millennial consumer, Tmall developed a high qualitative customer service while a consumer in the West can usually wait for an entire evening. Because The younger generation expects more from a personalized service approach, they also developed a personal styling and fitting online recommandation. In the present Luxury Chinese E-Commerce environnement, three platforms are dominant : JD.com, Tmall.com and Secoo.com
JD.com is a Chinese E-commerce company headquartered in Beijing, which is also known as Jingdong. As far as it is a dedication to the luxury and fashion sectors, in June 2017, JD.com invested US$397 million into Farfetch. The partnership helped Farfetch win Chinese consumers and fight against counterfeit products. In October 2017, JD.com launched TOPLIFE, a portal which is independent from the main JD application in the areas of interaction design and platform service.
Tmall.com was launched in 2008 by the giant Alibaba Group, is the most popular Chinese website for business-to-consumer (B2C) online retail. To strengthen its position in the luxury sector, in August 2017 the company opened an e-shop, Luxury Pavilion, specifically conceived for luxury fashion. Alibaba enables luxury brands to launch their official flagship stores on the site and sometimes provides them with necessary marketing support, data analytics, and logistical assistance. As a result, shoppers can benefit from personalized homepages, customized product recommendations, and virtual content.
Secoo.com is China’s biggest luxury e-commerce platform. It also offers offline experience centers for shoppers. Secoo started out as an online consignment marketplace for luxury items, and has since expanded its offering to a range of lifestyle services.
While western luxury brands sometimes get lost in translation, local players are taking a larger share and transforming the online market. That said, in the case of a new luxury brand, not every marketplace can be an entry point. For example, most brands are rejected from Tmall because they select brands with significant sales and reputation. The alternative is to move to more niche but highly appreciated platforms such as Little Red Book, Hupu, T Global E-Luxury.