China’s Lap of Luxury
China’s affluent upper-middle class is an enticing prospect for the world’s designer brands. The global luxury industry has become increasingly reliant on China’s wealthy consumers to drive growth. According to a recent McKinsey Report, in 2018 Chinese consumers at home and abroad spent 770 billion RMB ($115 billion) on luxury items—equivalent to a third of the global spend—with each luxury-consuming household spending an average of 80,000 RMB per year. Bain & Company predicts that Chinese shoppers will account for half of all luxury spending by 2025.
It is not surprising that more luxury brands are looking for ways to expand their online presence in China through collaborations with leading e-commerce platforms. There is more pressure for luxury brands to integrate their online and offline sales, and leverage digital engagement campaigns to build their market share. If you are interested in capturing your own share of the luxury goods market in China, below are a few platforms that you can explore to establish your cross-border e-commerce presence.
In 2017, Chinese retail giant Alibaba launched “Luxury Pavilion” to engage with affluent Chinese shoppers. The Pavilion offers a range of product categories, including apparel, watches, accessories, beauty and cosmetics, even luxury automobiles. Brands like Gucci, Valentino, and Louis Vuitton have launched their own e-commerce stores within Luxury Pavilion to sell a wide assortment of goods directly to Chinese consumers.
With dedicated stores and Mini Programs, WeChat is a great space for luxury brands. WeChat boasts 900 million users and offers unique marketing programs to lure consumers. Luxury brands such as Cartier, Céline, and Dior have used WeChat to sell directly to their target audience.They have also been able to effectively showcase their brand identity to potential Chinese customers in smaller cities like Chengdu and Hangzhou, which have been identified as future luxury hubs in China. WeChat’s social capability is one of its biggest strengths. For luxury customers, the ability to connect with brands at a more intimate level is important.
Earlier this year, Farfetch acquired Toplife from JD.com for $50 million. The deal folded JD.com’s existing luxury platform, Toplife, into Farfetch’s Chinese operations. JD.com’s 300 million users now have direct access to Farfetch’s marketplace, which encompasses over 1,000 luxury brands and boutiques. JD.com will also use Farfetch’s technology and logistics platforms to connect foreign brands to Chinese customers. The partnership builds on the existing successful relationship between Farfetch and JD.com, which started in 2017. Since then, Farfetch has leveraged JD.com’s logistics capabilities in China, as well as JD.com’s insights into the behavior of China’s luxury consumers.
Your Own Online Store
Brands can directly merchandise foreign goods to China using their own system, without the need to pay for additional hosting fees. You can choose an e-commerce platform like Magento, which is an open source platform that offers professional solutions for e-commerce and can be customized to your brand. Magento ensures your e-commerce runs seamlessly while improving the communication between your sales teams and back-office functions.
Contact us to learn how to establish your cross-border e-commerce presence. CITCON works with merchants to establish their cross-border e-commerce presence. If you have questions about payments, marketing, or logistics, or if you want insight on how your business can succeed in China, get in touch with us.