EBUS Luxury ecommerce in China - 13FRN310

Luxury ecommerce in China

By Joanne Rabenarisoa, 13FRN-310

 

Regarding the crave of the Chinese people for luxury brands (second luxury market with 27% of the global consume –first is Japan), I decided to make an article about the ecommerce of luxury products in China. China, even with its 1.4 billion inhabitants, is still not the first nation to buy online but it would not take very long before it happens. It is said that in 2015, China would have overtaken the United States who is currently the leader in ecommerce.

According to a study published by the giant Chinese website Alibaba, 52% of the Chinese online consumers declare that the main reason to buy online is that the price is lower than in physical shops. This fact is particularly true for luxury brand which are much more expensive in continental China than in Hong-Kong or anywhere else.

As a consequence, only one third of luxury products are bought in the country. At the same time, Chinese consumers fear that if they buy luxury items on Chinese website, at a very low price, they will get a poor quality product or a counterfeit. So online retailers have to highlight the fact that the quality and value are the same but only the price is different.

Many brands have tried to get into the Chinese online market through online luxury retailers. Nevertheless, many of them have failed. For example, LVMH who decided to sell its products through Tmall.com had to quit after only 6 months, with a thousand of pages seen but no purchase made.

Why it did not work out? In one part, it is due to license problems, price controls and instability of the offer. In another part, Chinese consumers have to feel the "touch" of the product which must justify its high price, something that online retailers cannot provide. In addition, ecommerce in China has been related for a long time to cheap products and counterfeit resellers. Logistics has also a big role to play: customers who can afford these products prefer to travel to the main cities rather than receive a damage parcel at home.

Facing this challenge, luxury brands have to innovate to make people buy online. 5lux.com, which is a multi brand luxury online store, has decided to open an "experience store" in Beijing. It consists of a place where clients can experience several products through activities and marketing animations. This tendency of "online to offline" (O2O) aims to make the customer confident before he or she makes a purchase.

Nowadays, the Chinese market represents a huge opportunity for luxury brands, the latter have to adapt even if they fail because it can be used to collect information. For example, Armani succeeded to reach its goals through its website generated by Yoox, an international luxury multi brand retailer.