The future of Luxury in China is online and PRC cross-border e-commerce platforms are busting this trend
E-commerce in China? Almost US$7 trillion business China retail trend 2019; to hit US$6.77 trillion, fueled by e-commerce and new retail.
PRC leads the world in e-commerce. Today, more than 40% of whole online transactions take place in China. One decade ago, PRC’ s e-commerce transactions count only 1%. China e-commerce is much more than simply a means for consumers to secure bargains on everyday purchases. It is an important driver of economic and social development that is powering transformational change across the country.
That’s why is easy to understand why dedicated online luxury platforms are battling to become the entry point to China for luxury brands.
Luxury platform Farfetch just announced its decision to merge its business in China with JD.com’s luxury e-commerce platform TOPLIFE. As Amazon in the US, Chinese e-commerce giants are aggressively courting luxury brands. Both Alibaba and JD.com have recently launched dedicated all-in-one luxury platforms with ultra-secure warehouses, invite-only loyalty programs, mobile e-commerce, and other services. And it’s working — Alibaba’s Tmall Luxury Pavilion now offers more than 80 brands, including Maserati, Valentino, and Burberry.
©123.rf. In 2016 Maserati sold 100 Levante on its platform in 18 seconds on Alibaba
While luxury-giant brands like Gucci, Louis Vuitton or Prada are choosing to go solo on e-commerce, others bet that these dedicated luxury platforms can help them reach out to Chinese consumers better and faster.
And it makes sense. The vast majority of luxury stores are located in the top 15 cities in China, but 75% of the wealthy Chinese consumers live outside of these cities, according to McKinsey.
Plus the country has been setting up new cross-border e-commerce pilot zones in 13 cities since 2015 – included first and second tier – which has led to tremendous growth, plus State Council has just approved 22 more locations across China. How it works this new procedure?
These pilot zones provide a system with simplified regulations for faster examination and approval, custom clearance, and easier information sharing for cross-border e-commerce imports and exports.
Thus, Alibaba and JD.com have the scale to deliver goods to consumers in second-tier and third-tier cities where luxury brands lack retail presence. They also offer premium delivery services such as JD.com’s white glove delivery service.
©123.rf. Shaanxi, Xian. Second-tier such as Xian, Jinan or Nanjing will drive PRC consumptions in the future.
As JD.com recently stated, by betting on China’s online platforms, luxury brands are acknowledging the importance of the online channel to reach out to tech-savvy generations as well as customers outside of the large cities. Luxury is shifting from exclusive distribution — limited retail footprint in major cities — to favoring convenience: being able to purchase goods wherever you are, whenever you want.
Going forward, luxury brands will need to find new ways to create a sense of exclusivity. This could include more personalized services and products based on the data captured by these luxury e-commerce platforms, as well as delivery and packaging innovation, among others.