Online luxury brands hot in China while more youth shop domestically

Updated 2017-12-12 14:31:15 Global Times

Luxury brand sales on e-commerce platforms in China witnessed more growth compared with that of physical stores last year. Meanwhile, a new generation of shoppers is returning to the domestic market to purchase high-end goods, experts said.

According to the China Luxury E-Commerce Whitepaper 2017, online luxury sales in China increased by 12 percent year-on-year in 2016, compared with a mere 2 percent increase in the offline market that same year.

The whitepaper, co-released on Friday by Beijing-based luxury brand provider Secoo Holding Co, China's social media giant Tencent and global consulting firm Deloitte, found that online purchases should have accounted for 8 percent of total luxury sales by the end of 2017. The paper also said that figure will increase to 9 percent in 2018 and then continue to grow each year, reaching 13 percent by the end of 2021.

In terms of consumers, the paper found that the post-1990s Chinese generation is becoming a powerful group in luxury consumption, among whom some 42 percent tend to shop online.

Taking advantage of this generation's rising disposable incomes and the booming digital trend amid the decreasing power of traditional retail - although luxury sales in physical stores are still dominant - many e-commerce platforms are targeting China's luxury market, the second-largest after the US.

'Major luxury push'

In June, Chinese e-commerce giant JD.com Inc (JD) invested 7 million in a partnership with London-based luxury retailer Farfetch, which operates an e-commerce website that unites various independent fashion boutiques, in a move to realize JD's "major luxury push," as described by Richard Liu Qiangdong, JD's chairman and CEO.

Besides that move, the company itself also launched a new online shopping platform called "Toplife" in October to give high-end global brands a comprehensive way to reach Chinese customers by using its self-operated nationwide logistics network.

As the first e-commerce luxury goods platform listed on the NASDAQ Stock Market, Secoo, an integrated online and offline shopping platform that provides luxury brand products and services, has grown rapidly to become Asia's largest online luxury transaction platform in terms of gross merchandise volume (GMV), according to California-headquartered business consulting firm Frost & Sullivan.

During the three months leading up to September 30, Secoo's GMV reached 9.6 million, representing an increase of 65.4 percent compared with that reached in the third quarter of 2016. Meanwhile, its total net revenue recorded 7.6 million, up 44.2 percent year-on-year, according to the company's third-quarter financial report.

By the end of September, Secoo had 300,000 active customers, with the amount of orders surpassing 3.72 million and the average price for an order standing at 3,500 yuan (8.7).

"Secoo is already tapping this growing demand for diverse offerings in an increasingly digital environment with its integrated online and offline strategy, including our physical offline 'experience centers,' where customers can indulge in services including yoga, photography and tea drinking, as well as personalized shopping at our boutique hotel partners," Eric Chan, CEO of Secoo, said during the company's annual gala held in Shanghai on Friday.

"The supplementary relations between online and offline sales tend to be more outstanding in China, where demand far exceeds supply," said Anne Michaut, affiliate professor at the HEC Paris business school, during an exclusive interview with the Global Times on November 30.

"The function of the physical store has transformed from being a sales base to a shopping experience provider… Potential customers are likely to purchase luxury goods after browsing online or vice versa," Michaut noted.

The future development of the luxury industry relies on the integration of different sales channels, the fulfillment of which is inseparable from some tools that promote both sales types, she said.

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