CHINA LUXURY E-COMMERCE.
AN OVERVIEW OF THE WORLD’S LARGEST E-COMMERCE LANDSCAPE
1 November 2018 CHINA LUXURY E-COMMERCE FOREWORD.
In this digital day and age where consumers expect everything related to a brand to be found online, the pressure for labels to establish an e- commerce presence mounts. However, questions and doubts remain in the minds of many, especially when it comes to the e-commerce landscape of luxury’s biggest consumer base: China.
Technological advancements within the Middle Kingdom have bred a complex and competitive e-commerce landscape that foreign brands may find difficult to navigate. Besides the option of setting up their own e- commerce channels, brands can also choose to work with a myriad of online retailers and marketplaces that complement the luxury industry.
How does the e-commerce experience offered by brands compare with Pablo Mauron. that of these pure players? How do they shape consumers’ habits and Partner & Managing Director China expectations? What are some of the e-commerce best practices in China? [email protected] This study attempts to address all these questions and offer insights into the ever-changing and fast paced Chinese e-commerce playing field.
2 CHINA LUXURY E-COMMERCE GLOBAL E-COMMERCE LANDSCAPE.
• 1 Global E-commerce Spend Global retail market stands at $28 trillion , roughly one- (in trillions) tenth of which ($2.304 trillion)2 is accounted for by e- China commerce in 2017. USA 30% • Of this number, $1.149 trillion (7.18 trillion yuan) comes Rest of the World from China3, which is nearly 50% of the total global e- commerce spend.
50% • This marks an increase of 32% from the $869 billion (5.43 billion yuan) clocked in 2016, according to China’s Ministry of Commerce. • China far outpaces the United States, the second-largest e-retail market in the world, in both sales and growth. 20% • In comparison, the US spent $453.46 billion web retail purchases in 2017, a 16% increase from 2016.
1. A Look at The Evolving E-commerce Landscape, The Nielsen Company http://www.nielsen.com/us/en/insights/news/2017/a-look-at-the-evolving-e-commerce-landscape.html 2. Mobile is Driving E-commerce Sales Worldwise, eMarketer Retail https://retail.emarketer.com/article/global-ecommerce-topped-23-trillion-2017-emarketer-estimates/5a6f89f5ebd40008bc791221 3. Online Retail Sales in China Soar Past $1 Trillion in 2017, Digital Commerce 360 3 https://www.digitalcommerce360.com/2018/02/08/online-retail-sales-china-soar-past-1-trillion-2017/ CHINA LUXURY E-COMMERCE METHODOLOGY.
A scope of 10 of the most popular and highly regarded luxury and premium Chinese e-commerce platforms, operating solely in China, has been used for analysis in this study.
BUSINESS MODEL USER EXPERIENCE PLATFORM MARKETING Product Offering Before Digital Presence Pricing During Campaigns Membership After Strategic Partnerships
4 CHINA LUXURY E-COMMERCE CHINA LUXURY E-COMMERCE. LANDSCAPE
China’s luxury e-commerce landscape is nascent, with a limited few pure players that manage to bring together both extensive product ranges and consumer appeal. While many mass market brands are generally on e-commerce platforms, the number of luxury brands available through these sites continue to be modest.
Total Number of SKUs
Fashion/ Lifestyle Luxury Offering Offering
5 CHINA LUXURY E-COMMERCE CHINA LUXURY E-COMMERCE. IN FOCUS
Unlike the other platforms mentioned in the study, 5LUX works as an aggregator. Sometimes described as China’s online “Fifth Avenue”, the site offers shoppers a selection of luxury items sourced from both authorised dealers and brands, guaranteeing product authenticity. While it does not hold any physical inventory, the platform is in charge of logistics and delivery of all items.
6 CHINA LUXURY E-COMMERCE Secoo integrates offline stores into its e-commerce CHINA LUXURY E-COMMERCE. omnichannel ecosystem ECOSYSTEM
With the exception of Luxury Pavilion, which is accessible only via the Tmall App, most e-commerce platforms transact on three touchpoints – website, APP, and within WeChat. Only 5 have delved into transactional WeChat Mini Programs.
TYPES OF TRANSACTIONAL PRESENCE, AGGREGATED BY PLATFORM
Standalone App 80% % Desktop & 90 Mobile Site 10% % Brick-And-Mortar 90WeChat 60% WeChat Store Official Account Mini Program
7 CHINA LUXURY E-COMMERCE CHINA LUXURY E-COMMERCE. IN FOCUS
Unlike the other platforms, Secoo has offline “Experience Centers”, which are essentially physical stores that allow consumers to directly interact with products. There are currently 8 offline stores throughout the world.
Beijing Changsha
Shanghai Qingdao
Chengdu Hong Kong
Xiamen Milan
*The Malaysia outpost is more of a warehouse and therefore not included in the list even though it is mentioned in the Secoo website.
8 CHINA LUXURY E-COMMERCE CHINA LUXURY E-COMMERCE. CONSUMER AWARENESS & PERCEPTION
Despite the burgeoning e-commerce landscape in China, current consumer sentiments on the topic reflect that consumers are still in the discovery phase when it comes to understanding what luxury e-commerce platforms offer.
Type of Questions Asked 60% 53% 50%
40%
30%
20% 16% 11% 9% 10% 9% 4%
0% Platform Product Competitor Authenticity Discounts Service
9 *Word cloud extracted from discussions on Baidu Zhidao About Luxury E-Commerce Platforms CHINA LUXURY E-COMMERCE CHINA LUXURY E-COMMERCE. CONSUMER AWARENESS & PERCEPTION
Q: How is Meici.com? Q: How is 5lux.com? Are their products genuine? Those who know, please help out by answering, Has anyone ever bought a handbag on it? How is it? Is it genuine? Thank you! thank you!
A: They are one of the better quality ones. Previously, I purchased a new season Prada wallet on A: I’m not sure, but it appears that the platform has its own supply source, which might not be the platform for a friend. That friend liked it very much – and he is the kind who travels often genuine. Purchase with caution! My friend said that the attrition rate on the platform is quite and has seen quite a lot. In addition, the price point is comparable to that in Europe, making it high. Apparently the owner is not a trustworthy person. Not too sure about other matters. Just considerably affordable in the China context. for your reference!
10 *Discussions extracted from Baidu Zhidao About Luxury E-Commerce Platforms CHINA LUXURY E-COMMERCE CHINA LUXURY E-COMMERCE. CONSUMER AWARENESS & PERCEPTION
Q: Are the products from Secoo are genuine? Q: What kind of womenswear brands are there on VIP, and why they are so cheap? A: Personally, I think it’s authentic, as items are pretty much the same as those in A: There are many brands on the platform, and the online store is a bit of a mess. The cheap the boutiques. They have a lot of limited edition items as well. If you are brands, naturally, won’t be as good. VIP was set up as a website dedicated to flash sales. purchasing things online, you can make use of Tiao Fan Wang** as well. This can Authenticity is guaranteed, with 100 brands being sold at special prices and in limited help you save some money. quantities on the shop daily. Unlike other online platforms, VIP positioned itself as “a website specialising in special sales”, offering a one-stop shopping experience with a discounts of up to 90% off and a limited-time buying mode. When VIP was first created, it advocated the notion of exquisite and elegant living, and was committed to enhancing the fashion taste of consumers in China and around the world.
*Discussions extracted from Baidu Zhidao About Luxury E-Commerce Platforms 11 **A now defunct cash-back shopping platform CHINA LUXURY E-COMMERCE BUSINESS MODEL.
12 CHINA LUXURY E-COMMERCE BUSINESS MODEL. PRODUCT TYPES A wide selection of premium and luxury products is offered across the platforms, ranging from luxury watches and fashion to lifestyle and household goods.
PRODUCTS SOLD BY CONSUMER TYPES, AGGREGATED BY PLATFORMS
100% 100% 100% 100% 90% 100% 100% 60% KEY CATEGORIES MEN WOMEN KIDS
80% 70% 60% 40% SECONDARY CATEGORIES
20% 10%
OTHERS
13 CHINA LUXURY E-COMMERCE 10% of consumers look for discounts on luxury BUSINESS MODEL. e-commerce platforms PRICING
Platforms appeal to a wider range of consumers by offering more than one pricing model for products, with most offering discounted prices, as well as one other purchase method.
SELLING MODEL, AGGREGATED BY PLATFORM
Unlike other platforms, Secoo offers the full range of pricing Luxury Pavilion only and buying options, including offers full price items group purchases and auctions*
DISCOUNT FULL PRICE FLASH SALES 80% 40% 60%
* This feature has since been disabled, but the brand notes that it might be brought back online in the future. 14 The Auctions tab in the website/app is still accessible. CHINA LUXURY E-COMMERCE BUSINESS MODEL. IN FOCUS
Of all the platforms studied, Secoo offers the most number of pricing and buying options, including auction, second-hand selling and group purchase functions.
Auction Second-hand Group Purchase
While it is currently unavailable*, users are Users are also able to sell their second-hand able to put up their own luxury items on luxury goods on the platform through its second- Secoo and sell them to highest bidder. hand selling model. Items can be placed with the There are two types of Group Purchase items. While the first (see brand on a consignment basis, with funds paid left image) offers shoppers the item at a special (discounted) out to the user once the item is sold. A service fee price if it is bought above certain quantities, the other option will be charged by the platform. (see right image) only allows the item to be purchased when a minimum order quantity is met.
* This feature has since been disabled, but the brand notes that it might be brought back online in the future. 15 The Auctions tab in the website/app is still accessible. CHINA LUXURY E-COMMERCE 86% of Chinese consumers would purchase from retailers BUSINESS MODEL. with a loyalty programme over those without4 LOYALTY
Most platforms have established comprehensive loyalty programs, including status and privilege details outlined on their sites. Privileges come in the forms of premium service, shopping credits, and exclusive access.
LOYALTY PROGRAM FEATURES, AGGREGATED BY PLATFORM Mei.com encourages users to invite friends to join the community and offers credits and coupons as incentives
SERVICES CREDITS ACCESS
• Butler/Concierge • New Member Bonus • Offline Brand Event Invites • Personal Shopping Consult • Birthday Gift • Discount & Shopping • After Sales • Upgrades Events • Product Maintenance • Shipping Discounts • Global Product Search • Complimentary Gift Packaging • Spending Bonus/Cash Back • Limited Edition Products • VIP Hotline • Points Accumulation System • Exclusive Members’ Prices • Free Shipping for Gift Redemption • Customer Service Centre
4. Retail Loyalty Program: An Effective Way to Bring More Market Competitiveness in China, The Nielsen Company http://www.nielsen.com/cn/en/insights/news/2017/retail-loyalty-program--an-effective-way-to-bring-market- 16 competi.html CHINA LUXURY E-COMMERCE BUSINESS MODEL. IN FOCUS
In addition to the other loyalty bonuses provided by most platforms, Mei.com also encourages its users to invite their friends to join the community by offering gift coupons as incentives.
17 CHINA LUXURY E-COMMERCE BUSINESS MODEL. STRATEGIC PARTNERSHIPS
As the battle for e-commerce supremacy between JD and Alibaba continues in China, both tech giants have gotten more aggressive in their efforts to expand their influence. Between the forming of strategic alliances with existing platforms and creation of new ones, the country’s digital landscape continues to grow in complexity.
JD ALIBABA
Invested in Owns Retails brands from
18 CHINA LUXURY E-COMMERCE USER EXPERIENCE.
19 CHINA LUXURY E-COMMERCE USER EXPERIENCE. BEFORE PURCHASE
As platforms offer a wide range of product options, making search and selection easy is even more important. Support on demand online is a standard practice, as is a very detailed product page including delivery and after sales service details.
SEARCH FILTERS PRODUCT PAGE ONLINE SUPPORT
• Product Information & Pictures Website • Quick-linked, alphabetised • Brand Information Online Chat App brand list • Editorial Recommendations WeChat • Price range setting • Customer Reviews QQ • Result filters (eg. Gender, size, • Size Reference Service hotline product feature, etc.) • Maintenance Instructions • Sorting filters (eg. Season, • Delivery Details • popularity, price) After-Sales Service Message or email • 100% Authentic Guarantee
Secoo and Toplife offer a Reserve Call Back service for VIP Members 20 CHINA LUXURY E-COMMERCE USER EXPERIENCE. IN FOCUS
Both platforms offer VIP shoppers the option of scheduling a call-back from a customer service officer.
VIP members who click to make an appointment for offline purchase will automatically get a callback from customer service.
21 CHINA LUXURY E-COMMERCE USER EXPERIENCE. DURING PURCHASE
Following similar practices to mass product e-tailers, luxury platforms ease consumers through the purchase experience by providing options such as saving product selections, payment upon delivery, and free shipping.
CHECKOUT PROCESS Wish List Time Limit Buy Now Coupon • All but two of the platforms (Shangpin and 90% 40% 80% 100% Toplife) offer a “Buy Now” feature. • Meici, Secoo, Shangpin and Toplife enforce time limits on items placed in shopping bags, creating a sense of urgency.
• Some platforms send trigger reminders to consumers, prompting them to make purchases within the remaining time.
22 CHINA LUXURY E-COMMERCE USER EXPERIENCE. DURING PURCHASE
PAYMENT OPTIONS
60% offer both Alipay & WeChat Pay Alipay ( 90%), WeChat Pay (70%), JD Pay (20%)
60% 90% Cash on Delivery by Card
23 CHINA LUXURY E-COMMERCE USER EXPERIENCE. DURING PURCHASE
SHIPPING OPTIONS
Toplife and Shefenqi offer free shipping with no minimum spend
70% 50% Platform in charge Brand in charge
• For most of the platforms, shipping is free with a minimum spend. • Otherwise, standard shipping & handling rates apply.
24 CHINA LUXURY E-COMMERCE USER EXPERIENCE. AFTER PURCHASE
DELIVERY METHOD
• Half of the platforms studied come with specialised packaging by default. • 5lux offers specialised packaging upon request. 60% • Specialised 5lux, Meici and Secoo offer offline pick-up options, Packaging* leveraging their retail locations. • 5lux allows consumers to directly pick items up from 20% selected brand stores. Specific Delivery Appointment • Toplife offers its White Gloves service exclusively in 8 cities.
25 *Refers to packaging branded by the platforms CHINA LUXURY E-COMMERCE USER EXPERIENCE. AFTER PURCHASE
RETURNS & EXCHANGES • All platforms have a returns policy within 7 days of purchase.
• Almost all platforms also have an exchange policy, save for Secoo that ONLY accepts returns. ü Secoo’s returns policy does not cover watches or Hermes bags in particular.
• All platforms offer to cover the shipping cost of returns or 90% exchanges if the item is considered defective. For all other Exchanges reasons, consumers will have to bear market shipping and handling costs. ü Shangpin offers customers a 20 RMB coupon for defective item returns. 100% Returns
26 CHINA LUXURY E-COMMERCE USER EXPERIENCE. AFTER PURCHASE
AFTER SALES SUPPORT • All platforms offer an authenticity guarantee post-purchase. Product Maintenance* Product • Half the platforms offer some form of post Insurance** 50% purchase product maintenance. Product 20% Warranty • Product warranties mostly cover watches and 60% Butler bags only. Authenticity Service Guarantee 10% 100% Price Protection*** 10%
*Refers to routine product maintenance services such as polishing, cleaning, etc. **Product insurance allows customers to claim compensation if products are found to be counterfeit. 27 ***In the event the price of an item drops within 7 days of purchase, users can request for the difference to be refunded. CHINA LUXURY E-COMMERCE PLATFORM MARKETING.
28 CHINA LUXURY E-COMMERCE PLATFORM MARKETING. DIGITAL PRESENCE
Overall, platforms remain in early stages of their marketing activities. Search ranking and real estate via Baidu Brand Zone is seen as a higher priority, with basic activity and content on social media.
PLATFORM *
5LUX ✓ ✓ ✗ ✗ ✓
IHAVEU ✓ ✓ ✗ ✗ ✓
MEICI ✓ ✓ ✗ ✓ ✓
MEI.COM ✓ ✓ ✓ ✓ ✓
SECOO ✓ ✓ ✓ ✓ ✓
SHANGPIN ✓ ✓ ✗ ✓ ✓
TOPLIFE ✓ ✓ ✗ ✓ ✗
LUXURY PAVILION ✗ ✗ ✗ ✗ ✗
VIP.COM ✓ ✓ ✓ ✓ ✗
SHEFENQI ✓ ✓ ✓ ✓ ✗
*Refers to Baidu Brand Zone
29 CHINA LUXURY E-COMMERCE PLATFORM MARKETING. CAMPAIGN: TOPLIFE
During Paris Fashion Week this year, Toplife cooperated with luxury brands like Missoni, Perrin, Moynat, and John Galliano to carry out live postings on Weibo to promote their new collections, helping Toplife to establish a premium luxury positioning among their online audience. The content included interviews with chief designers, footage from the runway shows, and visits to brand showrooms.
Campaign Duration: 27 Feb 2018 — 9 Mar 2018
30 CHINA LUXURY E-COMMERCE PLATFORM MARKETING. CAMPAIGN OVERVIEW: SECOO
In November 2017, Secoo launched their Black Friday campaign on both its Weibo and WeChat official accounts to promote its e-commerce event and invite online audiences to visit their offline stores. On Black Friday, customers could either shop online or visit 4 offline stores for even more discounts. The activation included live Weibo posting from offline stores and integration of WeChat content with their Secoo branded APP.
Campaign Duration: 18 Nov 2017 — 24 Nov 2017
Secoo has 8 offline retail points
31 CHINA LUXURY E-COMMERCE KEY TAKEAWAYS.
l The Chinese luxury online market is big and complex. Take the time to analyse it and build a consistent approach. Your strategy could be more sophisticated than one exclusive partnership.
l While being digitally savvy and the world’s top consumers of luxury products, Chinese shoppers remain weary of product authenticity when it comes to the online experience. Establishing credibility is important.
l Site features and best practices like hassle free returns, payment upon delivery, and service support from pre- through to post-purchase help to reinforce ease of purchase and trust in the experience.
l In this market, a brand’s e-commerce strategy will come with nuances and requires brands to remain agile as the landscape develops and evolves – not one size will fit all, nor will that size always fit.
32 CHINA LUXURY E-COMMERCE INTERESTED IN LEARNING MORE? Connect with us to get platform factsheets and insights and details on specific platforms relevant to your business needs. DLG (Digital Luxury Group) is an international agency with offices in Geneva and Shanghai offering social media, e-commerce and CRM services for luxury brands. It has developed a unique expertise in defining and PABLO MAURON implementing impactful digital strategies that target Partner & Managing Director China sophisticated consumers through a combination of [email protected] technological know-how, creativity and luxury savoir-faire.
*Data gathered from Q3 2017 to Q3 2018
33 CHINA LUXURY E-COMMERCE THANK YOU.
34 CHINA LUXURY E-COMMERCE