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Jun
2015

Fashion & Accessories May 2014

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Is luxury e-commerce now acceptable?

At present, O2O and B2C luxury e-commerce sites have developed a little in China and more international e-commerce companies have begun to increase their involvement in China. The Chinese luxury market is much more complicated than it was a few years ago, and the affordable luxury sector has diverted a significant amount of consumer spending. International brands are no longer able to exploit the market just by opening new stores. Their more considered approach resulted in cautious store opening and a greater use of e-commerce.

In October 2012, Ferragamo officially announced its formal cooperation with Zouxiu.com and became the first international luxury brand to supply its luxury products to a domestic luxury e-commerce platform, creating a new business model in China. Since then, numerous international brands, including Lana Marks, Fossil and ST.Dupont have begun to cooperate with domestic luxury e-commerce platforms. However, other big luxury brands have avoided these parnerships, fearing a devaluation of the brand.

In the end of 2012, Coach opened an official flagship store on Tmall. Unlike third-party luxury e-commerce sites, Tmall only provides a sales platform for brands, the operation and the product remain under the control of the brands. The concept of the model is that it can be integrated into the company’s management and helps maintain the brand image. Surprisingly, consumer response was lukewarm resulting in Coach closing its Tmall store two months after opening it.

After nearly two years of further preparation and development, Tmall is once again inviting luxury brands to open stores on its platform, and enhancing the status of the platform in the public eye.

On April 24 this year, the Burberry Tmall flagship store officially launched making it the first international luxury brand to open an online store on Tmall. The store sells a variety of products, including men’s and women’s clothing, fragrances, watches, bags and accessories. The products and prices offered on Tmall are identical to those on the official brand website. This strategic action means that consumers living in second or third tier cities where there is no Burberry store can purchase its products online, and the brand can also reach China’s largest online consumer group to develop the Chinese market.

According to the data, the Burberry Tmall store sold 132 items in 18 days, which is far better than Coach’s zero. After an extended education period, consumers may now more easily accept official flagship stores on Tmall. The prices range of Burberry product is much higher than that of Coach which may increase the risks of loosing business to a ‘Daigou’ on Taobao. However consumers tend to prefer to choose a reputable online shopping site such as the official brand store. When compared to the Burberry official online shopping site, consumers are more familiar with the purchasing process Tmall and find the purchase process simpler.

The products sold by Burberry so far are mainly perfumes ranging from 300-500 RMB. These are followed by products priced 2,000-3,000 RMB which includes sweaters, polo shirts, jeans and trousers. The most expensive item sold so far is a patent leather wallet, which cost 4,200 RMB. Although volumes are not high, there are still a good signs that show that consumers have begun to experience purchasing luxury goods on Tmall and have started to adapt to the concept of luxury online stores.

The consumer evaluation of the site provides some interesting insight. The scores for “quality and description”, ” seller’s attitude ” and ” delivery speed” are 4.9, 4.8, 4.9 respectively (out of 5), which is much higher than the average score for the site and indicates a good consumption experience, the figure for “return rate within 30 days” is high. 32 orders, or 26.4% have been returned so far, much higher than the site average of 7.21%.

Based on our experience, there are maybe three reasons for the high return rate.

  • Customers are more critical when buying high-priced commodities, so they may find fault more easily
  • Clothing size’s are not suitable for the customer, which results in return of goods
  • Customers may actually order two items in different colours and return the one they don’t like; which is allowed on Tmall

Time will tell whether the cooperation between Burberry and Tmall is a channel innovation, or a marketing disaster that will decrease the value of the brand.

In addition to Burberry, on April 24th an outlet in the Shanghai Mega Mills complex announced a strategic cooperation with the Alibaba Group (the parent company of Taobao and Tmall), which is the first case of O2O cooperation in a domestic luxury business zone. Currently the outlet hosts more than 170 well-known international and domestic brands, such as Versace, Pierre Balmain, Roberto Cavalli, Michael Kors, MCM, Furla, and Thomas Pink. In order to attract more people to the store and enhance the consumer experience, the two companies activated a series of programmes through a Taobao APP that offer big discounts, in some cases up to 90% off!

Store openings

May 07th, Sergio Rossi opened a new shop in Shanghai Plaza 66.

May 24th a new boutique Roger Vivier store opened in Qingdao.

May 26th Gucci opened a flagship store in the Shanghai iamp mall.

Other activities

On May 17th TOD’S held a charity sale event to help children from the disaster areas in Hangzhou which was held in the MIXC, and the VIPs of TOD’S and Hangzhou Tower Mall could also enjoy good discount.


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