The global personal luxury goods market is expected to grow from 2,406 billion RMB in 2018 to 3,117 billion RMB in 2025 (a roughly 4% annual growth rate). According to McKinsey, the percentage of purchases from Chinese customers will have doubled from 19% to 40% of the personal luxury goods market.
Eventhough the Chinese luxury market is still mostly an offline market, the share of its online sales is expanding to grow from 8% to 12% by 2025.
As a result, luxury brands aiming to capture the huge potential of China have listed e-commerce as their must-have sales channel. While brands like LVMH and Prada are choosing to go solo on e-commerce, others have taken advantage of dedicated luxury platforms such as Tmall Luxury Pavilion or JD Toplife …to reach out to Chinese consumers better and faster.
Benefits of cooperating with luxury e-commerce platforms from brands’ perspective
1. Access to a wider base of customers, especially those in tier 2- 3- lower cities
Chinese customers are much more likely to buy luxury products on generalist marketplaces such as Tmall or JD (51% in China against 23% in the West).
Big e-commerce players such as Tmall and JD have spent many years and effort to build trust with Chinese consumers. Currently, they have millions of Chinese consumers browse and shop on their platforms at ease everyday.
Being on such platforms not only enhances your brand credibility with new customers but also enables you to access and convert a large amount of users without having to build your own traffic.
Furthermore, 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.
Dedicated luxury platforms have the scale to deliver goods to consumers in second-tier and third-tier cities where luxury brands lack retail presence. By betting on China’s online platforms, luxury brands can reach out to tech-savvy generations as well as customers outside of the large cities.
2. Big data enables more targeted and personalized marketing initiatives
Through big data collecting, Chinese e-commerce giants have the advantage to precisely figure out who their existing and potential customers are.
Unlike traditional bricks-and-mortar stores, e-commerce players which operate social media platforms and other entertainment outlets – gain more comprehensive insights into customers’ lifestyles.
These platforms help luxury brands gain insight into their clients and provide them with the exact products they desire. By understanding customers’ way of life, their preferred way of travelling, their favourite films and more, brand can find the best way to approach them.
3. New technologies to enhance omni-channel experience
A customer tests make-up virtually via TMall’s Luxury Pavilion
Through the help of technology, prestigious bricks-and-mortar shopping experiences can be replicated or enhanced online.
Both JD Toplife and Tmall Luxury Pavilion use augmented reality (AR) and virtual reality (VR) to promote omni-channel sales. JD, for example, launched an AR-enabled Styling Station mobile app, which allows customers to virtually try on beauty products.
Luxury Pavilion replicates luxury brands’ iconic flagship stores overseas via VR projection to offer shoppers an immersive experience for shoppers. VR technology is also used in the “see-now-buy-now” scenario where customers can shop the runway.
Moreover, dominant e-commerce platforms also invest in new selling initiatives such as the live-streaming channel, shopping holidays which they invest heavily on marketing, product reviews integrated from other platforms such as Xiaohongshu… which brands are allowed to exploit to boost their sales.
4. Available top-notch logistics system
The luxury online shopping experience is not complete without the delivery of products, and logistics has been one of the reasons some luxury brands were hesitant to embrace e-commerce.
But this challenge has been overcome through partnering with e-commerce giants that have already established delivery networks nationwide.
Toplife offers luxury shoppers a “white glove” service – a premiere delivery service where elegantly dressed couriers wearing white gloves deliver purchases to customers in electric cars.
Audemars Piguet CEO Francois-Henry Bennahmias and JD founder Richard Liu hand delivered an Audemars Piguet watch to a lucky owner
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