Why are luxury brands more willing to open stores on WeChat?

29/10/2018

E-commerce giants are accelerating the “enclosure movement” in the luxury goods industry

 

A few months after investing in luxury e-commerce company Ordre, Alibaba once again reached out to the luxury industry. On October 26th, Alibaba announced that it has entered into a partnership with Richemont Group to form a joint venture with its luxury e-commerce company YNAP, and the YNAP brand will also be located in the Luxury Pavilion of the Tmall luxury channel.

 

Richemont Group is one of the three largest luxury goods groups in Europe. It owns internationally renowned high-end brands such as VacheronConstantin, Piaget, Cartier, VanCleef&Arpels and Montblanc. Alibaba’s cooperation with it will attract more luxury brands.

 

In the matter of investing in the luxury goods industry, Alibaba’s rival Jingdong has the same understanding. In June 2018, Jingdong entered the YNAP’s largest rival, Farfetch, at a high price of $397 million.

In August of the same year, JD.com and LVHM Group, one of the three largest luxury goods groups in Europe, spent $175 million to invest in the domestic luxury e-commerce. In addition, Jingdong also built its own luxury e-commerce platform TOPLIFE.

In the past two years, as the Internet mass consumer market traffic dividends have come to an end, e-commerce giants have begun to focus more on the market segments that have not been fully tapped to find new growth points. Successful cases include the sinking market of Pinduoduo and Netease that focuses on the lives of mid-end users.

 

Alibaba and Jingdong began to think about how to compete for the increase in the luxury e-commerce market, which coincides with the luxury goods industry in Europe and America.

 

The mainstream consumer markets such as Korea are facing a dilemma of sharp decline in performance, and the Chinese market, which has an annual growth rate of 17%, has become a lifeline. The high growth rate of Chinese luxury goods is mainly from online. In the case of Farfetch, since 2016, nearly 30% of its annual sales have come from the Asia Pacific market.

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