How do Chinese luxury e-commerce survive in the future? Final Fashion Project Marketing ARTD 3038

Word count: 7425 MENG WANG Excutive Summary Executive

This report is aim to research and analyze the current landscape of Chinese luxury e-commerce industry Summary by many specific aspects. The research method of this report is all based on secondary research.Due to Covid-19 pandemic, many industries are affected negatively and many businesses are about to end their 2 lives unfortunately. Therefore, the recommendation 3 plan for Chinese e-commerce platforms, a industry that still not mature yet ,will be necessary to check what they can improve in the future and how to effectively reduce the cost of Covid-19 outbreak. 06 Introduction

Existing Problems 4 Content 15 5 56 Recommendation Introduction

In the past few years, China has stepped into a stage of rapid development in every aspect and one of those developing areas with a good momentum is its great luxury market. China’s sustained, fast- pacing economic development and its powerful consumer group attract the attention of the whole world, and also opened the door of opportunity for all the luxury brands to establish their businesses in China’s market. In addition, Chinese luxury consumers is also becoming increasingly influential in the worldwide as the group with the biggest growth opportunity. According to research based on UnionPay transaction data, China contributed more than half 6 7 of the growth in luxury spending between 2012 and 2018. During the year of 2018, Chinese consumers at home and oversea spent 115 billion dollars on luxury products, which is equivalent to one third of the world’s spending.(Mckinsey, 2019) If this consumer behavior pattern continues, their spending on luxury items could double to 1.2 trillion RMB by 2025, which means Chinese customers will support about half of global spending in luxury sector.(Bain & Company, 2020)

However, those Chinese luxury consumers with incredible spending power still has not driven the existence of successful luxury e-commerce giants that domestically based in China, and also survive resiliently as longer as those foreign leading luxury online platforms like Farfetch, Net-a-porter, etc. This phenomenon Introduction exposes many problems behind it, including deadly shortages those Chinese luxury e-commerce brands have. More importantly, many terrible social events happened one by another and even seriously affected almost everywhere across the world since last year. Hong Kong riots, COVID-19, “Black Lives Matter” anti-racism protests caused by George Floyd’s death, all these incidents severely hit and challenge the global economy and society of countries. Luxury industry is one of the sectors that has been seriously impacted in all aspects. It’s time for them to re-evaluate the whole thing and win those customers back to the luxury market in China. This will be the main focus of this report. Current Landscape MENG WANG Market Overview

As mentioned in the introduction, Chinese luxury customers are still significantly leading the global market in luxury sector with plenty space for further growth. In 2019, their total consumption on luxury products reached 152.7 billion dollars, increased by 5% over the previous year. (Jing Daily,2019) Also based on a report about China digital luxury published by Mckinsey, the percentage of Chinese luxury consumers’ purchases will have increased from 19% to 40% of the market of personal luxury goods.(Thomas.J, 2019)

8 During this decade, Chinese luxury market has 9 experienced a lot of ups and downs due to its fast- changing development on general landscape and customers. For the first five years, many new luxury e-commerce platforms was born domestically and did successfully attracted a lot of attention from those potential customers by their effective marketing strategy,

Final Fashion Marketing Project Fashion Final such as Shangpin, Xiu.com and etc. Since finally Chinese customers at home can purchase authentic luxury products at a reasonable price from these e-commerce platforms conveniently without the necessity to travel aboard.(Sohu, 2014) But unfortunately, most of them didn’t last long because the products and services failed customer expectations and their own company promises. Shangpin have already claimed their bankruptcy in 2019.(Ding.Y,2019) During this period of uncertainty, plenty of Chinese customers flowed into global market like oversea platforms or official online and offline retail. The failure of those first generation of Chinese e-commerce platforms cause the vacancy for a IARTD 3038 luxury e-commerce giant in China. Current Landscape

According to the estimation from McKinsey, the global luxury industry will contract by 35% to 39% in 2020. Since last year, Chinese customers drew the attention from many luxury brands since their purchasing power surged in the global luxury market, then lots of luxury brands established their businesses in China.Therefore,

10 some Chinese luxury customers start coming back to 11 spend domestically. Moreover, Covid-19 and Hong Kong riots are also the drivers of domestic spending trend since both of two events severely hit many industries, including luxury market. In addition, according to the prediction mentioned in the report published by Yaok, many global e-commerce giants like amazon and Alibaba, they will be no longer only satisfied with their existing businesses and will move forward to expend luxury sectors as their new opportunities for the future. The partnerships or collaborations between those e-commerce platforms and luxury brands will be future trends in the next few years shortly.(CBN Data, 2019)

“ To capture this opportunity, companies across the globe need to learn about the underlying digital. and 12 13 economic trends driving the behaviors of Chinese consumers—because it’s a complex environment.

BCG,2018 Existing Problems Authenticity & Transparency

Based on the data from US Chamber of Commerce, it estimates that “Greater China is the source of 86% of the world’s counterfeit goods, a portion valued at a staggering $397 billion.”(Business 14 of fashion,2018) Authenticity is always a pain point of luxury market, especially in China due 15 to the rapid development of massive counterfeit market behind it. Lack of authenticity is also the main reason that caused the failure of some Chinese luxury e-commerce platforms, even some of them were quite popular at that moment like Shangpin, Xiu.com and Secoo.(CBN Data,2017) They are very early domestic platforms to sell luxury products through online. All of them promised the authenticity and high quality of products for lower prices as brand mission, but none of them accomplished it properly to show how they maintain this kind of long-term trust with customers. Soon after, they were eliminated gradually over time.(Sohu,2018)

According to the statistics on Mintel about Chinese internet consumers’ attitudes towards spending, 48% of internet users aged 20-49 strongly agreed that quality is more important that price.(Mintel,2019) Like the statement released by Alibaba said, knock-offs is an serious issue that not only violating the rights of consumers and brands, but also damaging the further innovation, the long-term economic development and growth.(Business of fashion,2018) As the technologies keep advancing, “Transparency could be a key way of creating trust because it helps eliminate any suspicions or anxieties customers might have about the value of what you’re offering.”(Forbes,2018) Therefore, to provide more transparent details of each products, such as supply chains, country of origin, factories, workers and even following logistics by using technologies, will be a key trend later that could effectively help customers to get rid of concerns about buying knock-offs.(Mintel,2020)

16 17 Existing Problems

Definition of Luxury Existing Problems 18 According to the research on those early luxury platforms which failed at the end in 19 China, their definition of luxury were poorly performed in many aspects, especially their brand positioning and strategies that presented on details of their platforms. First of all, contents design of websites or mobile apps can be seemed as an important part of online shopping experiences for customers.For an example, overall contents design of Shangpin have been mistaken to design as almost exactly the same as Taobao or Pricing Amazon’s website, which is not suitable direction for luxury market.(Jing Daily, 2018) The discount signs were everywhere on their site as their strategy to tell customers that high-quality luxury goods for lower prices. As a luxury e-commerce platform, the According to Gartner’s Report in 2019 about the traveling Chinese contents should present their understanding about luxury. At least to match with the consumer insight, a finding shows that luxury items sell in China are averagely 33% more expensive than in France so that only 27% definition of luxury and most luxury consumers’ demands for luxury is a requirement. of Chinese consumers purchase luxury goods domestically, this pricing gap led Chinese luxury consumers’ high demand to purchase Since the main purchasing group of luxury products starts shifting to younger internationally through various distribution channels. (Gartner,2019) generation, like the millennials and generation Z that were born in digital age with Based on another research, Chinese customers had more than 150 million trips aboard in 2018, and the total spending overseas plenty of new technologies, their demand on luxury shopping experiences is in high accounted for more than half of total Chinese luxury spending that standard.(Euromonitor, 2019) Although the younger generations may not very loyal year.(Mckinsey, 2019) to one specific brand according to their behavior pattern, they still could be loyal to one reliable luxury e-commerce platform with items from hundred of brand on it. It’s time for those Chinese luxury e-commerce platforms to rethink about the key of their service and supply what customers really wants. Pricing

As the pain point of Chinese luxury market, a career named “Daigou” was born since then. “Daigou”, which translates in English as “buy on behalf of”, describes Chinese personal buyers who purchase luxury products overseas, especially popular bargain locales such as Hong Kong or European countries. (Bain & Company, 2020) Then those “Daigous” resell them to Chinese Covid-19 customers at home. Their profit comes from the pricing gap and also dodged taxes and duties by bringing undeclared souvenirs back to China which is illegal. In 2014, which was the peak time of “Daigous”, about 40% of luxury products are bought by them.(Vice,2019)

20 21 Later, this low-key smuggling empire was hit hard by the government’s new VAT reduction policy in 2019 that forces “Daigous” to pay tax and duties and register as companies. Furthermore, import tariffs on many European products reduced since the trade war between U.S and China happened. It not only effectively controls “Daigou” but also boost the consumption of domestic market at the same time.(Bloomberg, 2019) Covid-19 Macro impacts

The outbreak of the Covid-19 not only just causes death of people At the beginning of 2020, the Covid-19 pandemic suddenly spread out in the in the worldwide, but also severely hit the economy, social system worldwide, about 8.14 million people were infected in total and the number of and every industries in China. Since China has evolved into the death cases reached 442,808 for now and it’s still increasing. (The Guardian, 2020) global economy as an essential part of the global supply chain, this As the first country being locked down, people in China have experienced two- outbreak will also threats those international companies which month quarantine time at home. All the brands have to re-evaluate themselves rely on Chinese consumers and production industry. According toward value creation to lower the loss during this difficult time. “What many 22 to the prediction by Oxford Economics, the economic growth of 23 brands underestimate is the speed of change and the profound magnitude of China would reduced about 5.6%, the global economic growth disruption.”(Jing Daily, 2020) would also decrease by 0.2%, which will be the slowest pace since the last global financial crisis in 2008 and the cost of this public health crisis could be three or four times of SARS.(Business of fashion, 2020) “After the end of the outbreak, China’s macro environment will trigger five major changes: the modernization of the government, the decentralization of urban clusters and central cities, the acceleration of digital health system, the accelerated rise of contactless business and services, and the acceleration of the global supply chain strategy of China.” says Kitty Fok, managing director, IDC China.(IDC, 2020)

Moreover, many different industries also got affected negatively due to Covid-19 outbreak, including tourism, hospitality, retail, transportations and many others. However, since many products like groceries still needed by customers during lockdown, many industries switched their offline businesses to online platforms almost overnight.(Harvard Business Review, 2020) 24

Macro impacts Micro Impacts Micro market.(Jingdaily, 2020) especially when it comes to the China to rethink theiroverall strategies, industry, forcingluxury many companies pandemic hasbeenawakeup callfor the and shutdowns, the ongoing COVID-19 collapse driven by worldwide lockdowns Faced ofaglobal withtheprospect Online & Offline channel mix Online &Offline 80% inChina.(Businessoffashion,2020) thelocaltraffic intheir reported stores decreased by of customers in stores and sales. also sadly Moncler groupKering already saw drop asharp innumbers has already brands. beenfelt by mostofthe luxury threats the lives of brands. The huge loss behind this brands have to shutdown for awhileanddirectly channels ofthose which means offline distribution areproducts obviously dropped due to lockdown, aswell. health crisis Chineseconsumption ofluxury isseverely hitby industry thisglobalpublic Luxury 25 Covid-19

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“The lockdown crisis has also created opportunities for some e-commerce firms to catch up with the competition in areas that they looked to have lost out in.”(Harvard Business Re- Online & Offline channel mix view,2020)

However, there is a turning point and also the last chance for luxury brands to lower the cost, which is to shift to online and adopt their e-commerce sector somehow. During this digital age with various online platforms and technologies, developed e-commerce industry in China is growing extremely fast in recent years while playing a leading role in the world. According to the research, some sales assistants that work in luxury boutiques start hosting livestreaming sessions via WeChat, Weibo, TikTok, Kuaishou, Xiaohongshu to turn their offline businesses into 26 27 e-commerce stores.(Business of fashion, 2020) Year-on-year increase in livestreaming increased by more than 700% in China. So do WeChat mini programs, are also another popular and useful tool for brands to promote themselves online. They are both effective ways to reach customers under this difficult situation. Sales assistants are still able to contact with customers and keep them updated with the latest collections. In fact, livestreaming and WeChat mini programs are both commonly being used as principal methods of promoting by many domestic brands that belong to other categories on different platforms in China. As a late adopter of digital technologies, the situation accelerates the further development of luxury e-commerce market and helps luxury brands build a more completed digital ecosystem.(WWD,2020) Brunello Cuccinelli is one of them and said they already saw improvement on sales in China in early March.(WWD,2020) Italy’s OTB group, which owned many luxury fashion brands like Marni and Maison Margiela, is also impressed by the result after they joined livestreaming as their main strategy in China.(Business of fashion,2020)

23 Covid-19 Micro Impacts

28 29

New Opportunities The impact of Covid-19 might be a long-term issue. Demand for luxury goods in Asia was higher than many Western countries, so their contribution is more crucial than ever now. After two- month long of lockdown, China is the first lifted country and slowly get everything recover back to normal under continuing surveillance of public health policy. It’s time for all the brands to put all their efforts to discover new opportunities, create

desirability as soon as possible and encourage the sales in China Covid-19 Micro Impacts for getting revenues flowing again.(WWD, 2020) According to the research on Global Web Index, about 60% of Generation Z and Millennials agreed that they have delayed purchases and they plan to make those purchases after lockdown relaxed. And 40% of them agreed that they will return to stores once the stores reopened.(Global web index,2020) THE BRIGHTONE

Corporate Social Responsibility

During this difficult period of time, many luxury market players made generous contributions. LVMH luxury group donated about $2.3 million to the Chinese Red Cross foundation and also sent many needed medical supplies from France to China. This news was spread and gathered positive attitudes and reactions in China.(Jing Daily,2020) L’Oreal and Estee Lauder also donated $720,000 and $300,000 to support China during the outbreak. In the other side, Chinese domestic brands also proactively support the national health system in different ways. Alibaba blocked vendors from raising prices of medical supplies like facial masks and cleaning products. Taobao urgently contacted the factories that are able to produce medical supplies and all those factories volunteered to work for supporting the high demands during that time.(Tencent news,2020) This kind of positive messages and actions show their respect and care for Chinese market instead of rushing on promoting products. It will effectively 30 connect the brands and customers more emotionally. 31 CHASING SUNRISE FOR INSPIRATION HongKong Riots Hong Kong Hong Kong is a free marketer’s dream. The tiny island has a GDP bigger than many industri- alised countries, low tax and abundant cheap Riots labour, and is a world-class financial center boasting a stock market with a total value of more than 2.5tn pounds.

32 33

Macro Impacts

Since the U.S-China trade war happened, Hong Kong’s economic growth reduced due to bounding with mainland as a special administrative region of China.The protests shut down the airport for two day and it caused severe consequences that flight cancellations worth about $76 million dollars.(The conversation, 2019) Overall retail sector in Hong Kong sldo dropped 23.6% from a year earlier. (Forbes,2020) Moreover, 4% of Hong Kong’s GDP is from tourism and mainland tourism that accounted for 75% of Hong Kong’s total tourism has fallen due to this targeted protest.(The Guardian, 2019) A plan of new security laws was unveiled in the annual meeting of China’s legislature, Beijing will push harder and strictly punish those anti government protests, even though it may cause more criticism and fiercer protests in Hong Kong.(New York Times, 2020) The most worried thing is that Hong Kong’s image may not be as the same as before the protect. It could not be still considered as a stable business environment from the perspective of economic, which could cause that international businesses may re-evaluate if it’s still right to headquarter there during this chaotic time.(The Guardian, 2019) Micro Impacts

As the top luxury market in Asia, the sales of luxury goods fell 43.5% because of Hong Kong riots.(Forbe, 2020) It attracted many international businesses as a tax haven and a shopping paradise to mainland.However, Customers 34 since more and more luxury brands established their 35 businesses in top-tier cities in mainland in recent years, Hong Kong has already lost part of its strategic strengths.Nowadays, Chinese free trade zones also benefits luxury players in the similar way.(Business of fashion, 2020)

On the other side, offline retail stores of luxury brands had to shut down during this pro-democracy protest since most of them are located in the area that protest happens. The offline sales also would severly affected by it. Moreover, closures of some luxury boutiques are inevitable in Hong Kong. This store-opening sprees were led by the booming of Hong Kong’s tourism.Now Chinese luxury customers are including people of different too many offline stores only may cause more concerned ages, from different countries with different backgrounds, a losses.(Business of fashion,2020) As a result, for those crowd of diversity. This group of people will only get larger and brands that want to reach the customers in China, they more heterogeneous both geographically and demographically. may have to more sharply focus on mainland. (N.Clark,2014) HEADSHOT

36 33 37 35 Customer Customer Target Market

As the engine of global spending on luxury goods, Chinese customers are the main target market group that need to be deeply analyzed by luxury e-commerce platforms. Chinese customers basically can be divided into three groups by ages. First of all, luxury customers was mainly composed of the oldest generation in many years ago, Generation X. Most of them are from wealthy upper-class, and quite loyal to some specific brands. In today’s digital age, the majority of 38 39 Generation X still prefer shopping offline in physical stores. So this group of people only accounted for 9% of luxury e-commerce consumers in China but their average luxury spendings per person is the highest.(Forbes,2019) As time changes, Generation X became older and their children Generation Y grew up as the second group. They are contributing the most of luxury e-commerce consumption which is 48% of total luxury sales.The last group is also the youngest consumers, Generation Z. Although some of them are still not graduate from school yet, their luxury e-commerce sales contribution is unbelievably 42% of the total sales, almost as much as the Generation Y.(BCG,2019) In general, consumers of luxury e-commerce in China continue to be younger generations, accounted for 48% of all the luxury consumers. Behavior Pattern

Generation Y and Generation Z were both born as digital natives. Mobile phones and laptops are two representative digital devices owned by those two generations in this decade. They are good at using new technologies and digital platforms which make them quite different from the older generation in many aspects. E-commerce is the most suitable method of shopping for them because it’s easier and faster. Only 41% of Generation X may do some research before purchasing, compared with 52% of Generation Y and 45% of Generation Z. (Mintel,2019) Moreover, Generation Y and Generation Z both value the transparency of the products they purchased. They don’t want to buy products that actually have ethical or sustainable issue. Transparency of information are required.

Young Chinese customers prefer discovering new products or brands on many integrated digital platforms like social media. They are also heavily influenced by opinions from celebrities and influencers on social media platforms. So many brands pay those opinion leaders to publish interesting contents about products as their principle online marketing strategies. (Mckinsey,2019) In additional, WeChat, Weibo, Tik Tok and many other popular platforms directly embedded the purchase link of the products 40 in their contents, which effectively shorten the gap between discovery 41 to purchasing point for the customers. More importantly, convenient payment methods like Alipay and WeChat pay make the purchase faster. (Jing Daily,2019) This kind of seamless shopping experience for customers are brought to the next level and many Chinese customers feel satisfied with it. Behavior Shifts after Covid-19

Spengding habits and Preference

Due to this outbreak, many customers rethink about their current spending habits. They are shifting to buy products that last long and reliable, something worthy. (Business of fashion,2020) According to the Mckinsey’s report, high-end and low-end luxury goods seem more resilient than those items that in the middle of the range. That’s because there are two main group of customers that have different opinions on their luxury spending after Covid-19. One group of customers prefer “revenge shopping‘’,which accounted for 15% of Chinese customers, they are still want to buy the items at full price. And the other group of customers that they are 23%, they want 42 43 to spend money on cheaper or functional items that worth the value. (McKinsey,2020)

On the other hand, the demand of transparency keeps growing since last year. It is one of the main trends that customers care about during coronavirus outbreak. Transparency plays an significant role as the 42 key to create trust between brands and customers(Forbes,2018) Brands require to provide enough detailed information about their products, the process of production, supply chain and etc.to enhance the relationships with customers.(Mckinsey,2020) Moreover, corporate responsibility is another sentiment that Chiense customers care about. They expect those companies to positively support the national system, economy, environmental issue and etc.(Jing Daily,2020)

Since all cities has been lockdowned in China, all the physical retail stores also temporarily closed. Customers have to shop on the online platfroms instead. During this period of time, e-commerce channels would boom and customers will get used to it gradually. This digital transformation could be permanent for some customers, like Gen X. Some of them have successfully picked up that how to use those convenient technologies, like mobile apps..(Deloitte, 2020) 44 of national economy andbusinessesinChina. can’t travel to othercountries lockdown.but during also asupport led Chineseplanto spendmore at home. Notonlybecausepeople salesrevenue.(Jingmarket Daily, 2019) Covid-19 pandemic also of 44.4%year onyear. alsocomposes 16%ofthedomesticluxury It reachedsurprisingly a new record 7.5 billion dollars, an increased Moreover, inChina market thetotal e-commerce revenue ofluxury and more inChina.(Yaok, brands market entered 2019) theluxury home rapidly went upto 47.5billiondollars, rose by 24%since more time to increase negatively by 2%. On the contrary, their outlay at 105.2 billiondollarsoutsidethecountry, first whichwas thevery consumersBased ontheresearch spent in2019, Chinese luxury From globaltraveller to localshopper people will be educated further aboutsustainability.people willbeeducated further customers’ andmore oneco-consciousness, andmore actions sustainable anddesire oftransparency. Covid-19 would accelerate practice, Chinese customers are awakened about theidea of being ofseparatingsearching.Since trash isputinto policy compulsory happened in2020” are three themostpopularkeywords of social mediaplatforms. “Revere nature”, animals”“wild and”what andanimalprotection suddenlyfloodedmanysustainability rights ofanimalsfrom younger generations. Contents about trading in market Wuhan. This triggered thevoice ofprotecting Covid-19outbreak. was proved that originated from wild animal customers nowadays,be eco-conscious Covid-19 especiallyafter Chinesecustomers are alsopayingearth. alotofattentions to concerns graaduallySustainability become aurgent issueonthe Growing Eco-consciousness

Competitors 45 Competitors

Competitors “Daigou, “overseas online personal buyer

“Daigou” are very competitive because most of their customers are quite loyal to them. Customers only need to contact them via social media and then make the purchase on the same platform, which is quite convenient and even faster than buying from official distribution channels. Lower prices for luxury products are one of their selling point because luxury goods that selling in China are much higher than other countries 46 as mentioned in the section of pricing. However, the gap of pricing is no longer a 47 annoying problem since government reduced the VAT tax. (Jing Daily, 2019) Moreover, travel restrictions blocked their business during this outbreak of coronavirus. Many luxury brands are also reaching Chinese customers by starting businesses right there in China. So Chinese customers now are able to purchase at home with no difference. The fate of those “Daigous” are still unknown for now.

43 Competitors

Offical Channels

Online and offline distribution channels are the most competitive to luxury e-commerce platform whatever before Covid-19 or after. First of all, customers do not need to worry about the authenticity of products. More importantly, luxury shopping experiences in the boutiques are exactly what luxury customers want to feel about nowadays. During this process of shopping, sales assistants play an significant role both online and offline. For Chinese customers,it is very convenient to contact the sales assistants online with using social media or meet them in the boutiques and it is a common way of shopping in China. Customers prefer the service that make them feel very private and personalised.

48 49 Domestic Platforms

Many domestic e-commerce giants are being used in high popularity as favourite platforms by Chinese customers due its convenience and developed mobile payment technology, such as Taobao, JD.com and T-mall. Although those e-commerce platforms may not sell luxury items specifically, they are still formidable competitors. Alibaba and JD.com are two leading players that accounted for about 74.5% of the market in China. Alibaba generated $30 billion on Singles day, a major yearly shopping event held by Alibaba. Moreover, the total revenue of JD.com’s anniversary promotion reached $25 billion in 2018.(Deloitte,2020) Their mobile applications are very familiar to Chinese customers, their developed logistics systems, mobile payment technologies make their customers long-term loyal customers. More and more brands are operating their businesses on these domestic e-commerce platforms which make them more competitive in the market. The only issue that they may have is the authenticity of products, which prevent them from dominating the whole market completely.(Jing Daily,2017) International luxury e-commerce platforms

During the time without having a successful and reliable luxury e-commerce platform in China, many 50 51 Chinese customers travelled abroad and became the loyal customers of luxury e-commerce platforms in other countries, such as Farfetch, Ssense and etc. Since Chinese luxury market develops better and bigger, those international luxury e-commerce platforms also start to reach the domestic luxury market in China. Farfetch, Selfridges, Ssense and New-a-porter, all of these platforms are now able to deliver products to China. Moreover, many of them invest their sites to have a Chinese version and Chinese follow-up services. Farfetch signed a partnership with Secoo, which is a Chinese luxury e-commerce site. It is a good strategic choice to localize in the Chinese market. Case Study

52 53 Case Study

Secoo

Secoo, a Chinese luxury e-commerce site was established in Hong Kong in 2018, went public on the Nasdaq Global Market in the U.S in 2017. Although it tried really hard and invest a lot 54 on marketing promotions, the beginning of Secoo seemed 55 not as good as expected. The opening price dropped from its opening price 13$ on the first day of trade to $7 a month later which is disappointing. In 2018, the share price of Secoo reduced 46%.

Until in 2019, Secoo changed its strategy to collaborate with Luisa Via Roma, the Italian retailer.(Jing Daily, 2019) This 50 partnership enables Secoo to access and sell more than 600 luxury and fashion brands on their site and offline centers. Collaborating with Luisa Via Roma is the best choice for Secoo because Luisa Via Roma‘s good reputation and brand authenticity in the industry and Chinese customer’s mind as one of leading e-commerce platforms in the world.(Tencent new, 2019) The benefits gradually showed on their growth. In 2019, the total revenue grew by 66.8% year-on-year.(Business of fashion, 2020)

Moreover, Secoo also invested a lot on launching 24-hour livestreaming on the short-video platform Kuaishou during the Covid-19 crisis. The result of sales are surprisingly got over $14.8 million, which is a big win for Secoo. For further development, Secoo is also transforming itself to online- to-offline commerce. It will create seamless shopping experience between online and offline physical stores for Chinese customers which totally match the current trends of customer shifts.(CBN Data,2019) Case Study

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JD X Farfetch

JD.com is a successful Chinese e-commerce giant for years with no doubts. There are about 300 million users on its platforms. JD.com is famous for its efficient logistics system and authenticity of their products. In 2017, JD.com launched its own luxury platform“Toplife” as extension of its business, which only focus on selling luxury items from clothes to home furnishing. But the result at the beginning didn’t meet the expectations for the first few years until Farfetch joined the game. JD.com sold Toplife to Farfetch due to the increasingly tough economy in China for $50 million dollars. Since then, Farfetch got chance to localise in China and also can benefit from their advantageous logistics system. In exchange, users of JD,com also are able to access the luxury brands on Farfetch’s network. This strategic partnership definitely helps JD.com with providing much more wide variety of shopping options on luxury products. Normally it will take a new player years to grow like this in the market.(Jing Daily,2019) This strategy makes JD.com extremely competitive to their strong competitor Alibaba, they also just launched the platform for luxury goods. Based on all the research mentioned before, Chinese luxury e-commerce market still has plenty of space to fill in. It’s perfect time for luxury e-commerce brands to proactively communicate with customers online during Covid-19 pandemic. But what kind of strategy will be accurate and appropriate to use for those Chinese luxury e-commerce platforms is still a concerned question. It may determines if they can survive in this highly competitive market in China in future.

As a luxury e-commerce platform, the collaborations with luxury brands are extremely significant. In 2016, a notorious Strategic fit scandal exploded and shocked everybody is that counterfeit 58 Herme handbags were found in the biggest boutique of 59 Hermes in Shanghai,China.(Tencent new, 2016) This news was quickly spread out everywhere among the customers. It even made the official distribution channels of luxury brands in China were not reliable. Therefore, customers prefered to disscusion purchase authentic luxury products in the countries of origin in the past few years. Since then, Chinese customers shifted to travel more and buy luxury items outside the countries or pay a trusted overseas “Daigou” to buy what they want then post them back to customers.

Since authenticity is a pain point of Chinese luxury market for years, customer trust is the most important than ever and extremely hard to get. Today’s Chinese luxury consumers mainly are from younger generations that may not loyal to one or two specific brands. But to a reliable platform, the customer loyalty is still available to particular one platform. It’s much more convenient to shop on one platform with efficient mobile payment technology instead of opening each brand’s official site one by one. Everything from discovery to purchase just require few clicks that exactly match with the customers’ demand on “New or Never”.(Business of fashion, 2019) “ So the following questions might be what kind of collaborating strategy and who to collaborate with are suitable for those Chinese luxury e-commerce platforms. Although the economic growth of China dropped due to U.S-China trade war and Covid-19 pandemic,the high demand on luxury products in China actually are still there but just blocked by the lockdown for now. So it is the perfect timing for Using consumer data in international luxury brands to establish their businesses and settle in China, also potential opportunities for those Chinese luxury e-commerce platforms. JD.com estimated their revenue rose by 10% for the first quarter during coronavirus smarter ways can help outbreak and number of luxury brands that want to collaborate with JD.com is increasing.(Business of fashion,2020) save money and get your However, those partnerships that tech giants gained could strategically marginalising the leading international luxury e-tailers like MatchesFashion and MyTheresa who are smaller businesses than JD or Alibaba, and they are product or service to the not specifically targeting Chinese customers.Then those domestic luxury e-commerce platforms will be squeezed easily by this duopoly like Shangpin and Xiu.com.(Business of fashion, 2019) right people, at the right 60 61 In addition, even though those luxury brands agree to collaborate with domestic luxury e-commerce platforms, it will also take time for users of platform to pick time. It’s increasingly up the changes, especially to new e-commerce players in the market. According to AIDA framework, it will need longer time than expected for Chinese customers to process awareness and interest on luxury products that sell on a unfamiliar important to understand e-commerce platform before desires are successfully triggered.(Elmo.L, 1898)

Another kind of collaborating is similar with Secoo’s case in the case study part of the demographics and this report. Secoo chose to collaborate with an international luxury e-commerce platform that believed by customers.This looks like a smarter choice for Secoo. Both Luisa Via Roma and Secoo are beneficial from each other. Luisa Via Roma are behaviours of your able to localise and reach the audience who can’t travel in China and access to all the Secoo’s distribution channel, logistics, and also Chinese prefered marketing promotions with the help of Secoo. In exchange, Secoo also gain the brand audience. (Deloitte,2019) authenticity and brand trust by collaborating with Luisa Via Roma strategically.

56 Recommendation62 always beaware andcareful with. platforms themselves infronte-commerce oftheaudiences. should theboundaries So The behindthiscould risks bemisunderstandingasjustanattempt ofpromoting luxury some events that realistically helpthesociety. items brands or ads collaborationsonline, or hold special eco-conscious with eco-conscious have ambassadorwithpositive ancelebrity attitude to sustainability, somenoncommercial brands andcustomers empathy. player withsharing could e-commerce Chineseluxury So could beusedasaway to effectively attentionsattract from the fancustomers then connect sustainability, theorganizations orevents andsupport aboutit. Positive also effects celebrity platforms from canlearn thisto e-commerce educate more customersChinese luxury about justannouncedKering that Emma Watson joinedthemastheboard’s committee. sustainability They have many the society. choices to help and support For example, French group luxury maycrisis result irreversible losslikelosingcustomer engagement andlong-term trust. promotions.various marketing notsensitive Being to what customer care this aboutduring proactively contribute instead to ofonlypushingcustomer thesociety to purchase with positive platforms reputation willgetavery iftheyconstantly e-commerce and China luxury care andthesustainability. abouttheethicsofproducts withhighvalue, As amassive industry Chinesecustomers are inthisreport, earlier consumers transforming who to eco-conscious emotional attachment withcustomers. to Due ofcustomers thebehavior mentioned shifts shoulddevelop muchmore theirCSRsectors thanbefore industry to buildthe e-commerce China showed how theyusedtheirown ways peopleandnation Luxury inactions. to support have concerns aboutsustainability, animalprotections andsocialissues. Many companies in goods, haveluxury brands been putting pressure to be more ethical.on those luxury They customers. Since last year, those younger generations who are the mainstream purchaser of After Covid-19 ragingly are spread andpositivity inneedby out, Chinese sensibility CSR could causebackfired results. theysell.”(Deloitte,2019)products it’s So alllive whichmeansthat inappropriate behaviors who are more authentic andthat talkopenlyabouttheirvalues andtheprovenance ofthe and untruthful contents.They are “shifting towards brands that are seento have integrity, generation Zare tired ofpaidinfluencers that whogotpaid to exaggeratedly likeashow act thisprocess. during products not break Moreover, theimageofluxury millennialsand needtoproducts becareful andhighstandard. and inhighquality It’s to important very could possibly expand to a wider range. The contents of livestreaming for promoting luxury promotion of online marketing arethis kind open to online. everyone The target market The mainstream usersofthesesocialmediaplatforms are Z.Butstill millennialsandGen in China.(Deloitte,2019) Weibo andetc. These popularplatforms become thenewrepresentative of “word ofmouth” online. There are ofsocialmediaplatforms plenty suchasXiaoHongShu, Kuaishou, TikTok, to andpotential explore customers more ofluxury newopportunities can helptheindustry brands andcustomers instead ofjustfor before entertainment everything’s backto normal. It online platforms inChina.For now, isthemostpopularplatform live-streaming the to connect difficult time. Almostallthebusinessesandmarketing promotions have to continue by using mediaplatforms greatSocial are certainly onlinepromoting tools, this especiallyduring Livestreaming

57 Recommendation 63 58 Recommendation64 each other for further growth.each otherfor further platform to takeadvantageplatforms e-commerce of andthat international luxury their businesses in China. e-commerce enables that Chinese luxury The partnership for now. There are that stillmany alsowant to optionsofpotential establish partners platforms by collaboratinge-commerce withthemare themostbeneficialmovement withgloballuxury to become ofthisreport, partners Based ontheresearch part sells it. strategy ofmarketing This benefitsbothdesigners kind andtheplatforms. edition. To customers, they might think it’s hard to give it up andthat is the only platform days. kind of exclusiveThe effect of this is similar with the effect of limited collection platform Ssense, the exclusive sellsonSsensewere collection soldoutinaboutthree brand JustineClenquetare e-commerce jewelry collaborating withCanadian luxury be more interesting possibilitieslikehaving exclusive collections. For example, French players. e-commerce for Chineseluxury could be anotherbigopportunity There will trendyChinese designers are andtheirproducts aswell. very Collaborating withthem the size of their businesses and gather more potential customers. recent In years, many to collaborateshould try withasmany astheycanto expand brands withhighpopularity After testing thewater platforms by Secoo andJD.com, e-commerce Chineseluxury International luxury e-commerce platforms e-commerce International luxury Brand partners New Partnerships Transparency/Blockchain Technology understand andaccept. this latest technology isstillnotpopularizedmay yet. stillneedmore It timefor peopleto on purchasing expensive items online. The of using blockchain technology only risk is that a definitely reliable and safe system for customers to rely on and they will be more confident items of origin, the materials they bought, and etc. is like the country details of the luxury It products. Blockchaintechnology enablescustomers to ofluxury trackauthenticity allthe e-commerce platforms, that are can beusedinanotheraspect quite significant to luxury scanning a QRcode with Alipay mobileapplication. Moreover, blockchain technology also ofbusinesses.transparency Customers information by caneasilytrack thoseimportant platforms inChinaprovideconsideration e-commerce asanusefultool radical for luxury and etc. For example, Alibaba’s Ant Financial blockchaintechnology canbetakeninto technology to providing clearinformation aboutdetailsof supply chain,production last year.(Business offashion,2019)Many companies responded withusingblockchain (Global webis the main trends transparency since index,2017) of customer Radical shifts andthisvoice fulltransparency distrusting customers whoexpects islouderandlouder. Fashion brands pay mustseriously attention whichisthere to are thefact of plenty

59 Recommendation 65 60 Recommendation66 new way ofseamlessretail inthefuture. efficient. Theadvantages anddisadvantages ofonlineandoffline couldbebalanced inthe businessmodel.to Manufacturer The newversion ofseamlessexperience willbemuchmore oftechnologies,increasingly whichissimilarwithC2M-Customer joinupwiththesupport and offlineshopping experiences formed. onlineandofflinewill Basedonthe prediction, thistrendoutbreak, willcontinue to beshapeduntil aimproved online modelofconnecting products. The newdisruptive modeloffuture seamlessretail isaboutto After the beborn. sales assistants work inphysical stores have to mixonlineandoffline to continue sellingtheir coronavirus to currently beheldononlineplatforms. shift everything outbreak, many So inperson.However,feeling the service since the businesses have to be operated online during more favored shoppingexperiences withactually by thecustomers becauseoftheluxury other other is being used in physical stores. Usually the experiences in physical stores are are usuallyaskedto register and themembershipofabrand twice, oneisfor onlinee-shop shopping experiences between onlineandoffline are mostlyseparate. For example, people Digitalization is happening in the worldwide Covid-19 during pandemic.Before the crisis, the Seamless experience Seamless

Conclusion 67 68 In summary, the market of Chinese luxury e-commerce platforms are still got many 69 space to fill in and will increasingly grow bigger in the future. It’s time for those Chinese luxury e-commerce platforms to re-evaluate themselves and create new strategies to succeed.Due to the Covid-19 pandemic, the luxury industry has been significantly impacted, but it also pushed the emerging trends to quickly evolve and caused new customer behaviors for brands to learn about.(Global web index,2020) Bibliography Accessed on: 20/05/2020

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