Against the backdrop of a weakening global economy and continued upgrading of emerging consumer markets, luxury brands that once dominated the world in recent years have also begun to think about their relationship with consumers, descending from the distant cloud to within reach. Luxury brands are beginning to move closer to e-commerce. However, compared with other market segments, the Internet development of luxury goods is still relatively lagging behind. In fact, this is because luxury brands are afraid that online sales may damage their original exclusive image; while consumers have always been worried that they will not be able to touch the goods they paid a lot of money for when shopping online, and at the same time gave up the opportunity to visit luxury brand flagship stores. Experience value. The trust crisis has always existed, which has led to the deterioration of China’s luxury vertical e-commerce platforms. They have made many new transformation moves in the hope of getting a share of the market.
Seeking transformation
In recent years, global online sales of luxury goods have developed rapidly, and e-commerce of luxury goods has become an industry development trend. New statistics show that in 2016, the transaction size of China’s e-commerce market exceeded 10 trillion yuan, ranking first in the world, and the consumption amount was much higher than that of any other country. The profit potential of my country’s luxury goods e-commerce market is huge. In recent years, foreign luxury brands have been targeting the Chinese luxury e-commerce market. It was recently revealed that LVMH, the world’s largest luxury goods group, will officially launch its own large-scale e-commerce platform in June this year. In addition to launching all its brands, it will also introduce other luxury brands. Industry speculation suggests that this may put pressure on domestic vertical luxury goods e-commerce companies to a certain extent.
In fact, my country’s vertical luxury e-commerce has developed before 2011. In 2012, the industry entered a period of expansion and reshuffle. From 2014 to 2015, the competition in the luxury e-commerce market has become fierce, and the profit margin is narrow, resulting in exclusive E-commerce companies such as .com, Pinju.com, Jiapin.com, and Huha.com have all gone bankrupt.
Nowadays, vertical luxury e-commerce companies such as Secoo.com, Fifth Avenue, Catwalk.com, and Shangpin.com rely on capital financing to take root in the Chinese luxury goods market, and have joined the queue to seize online market share. However, it is worth mentioning that although these vertical luxury goods e-commerce companies have relied on capital financing to take root in China’s luxury goods market, they have not achieved strong development.
Compared with international e-commerce platforms, industry insiders point out that my country’s luxury goods e-commerce market is currently plagued by counterfeit goods and a mixed supply of goods, and the market development is not yet mature. How to gain trust is the primary issue for e-commerce companies to overcome difficulties. On the one hand, it is necessary to gain consumers’ trust in the authenticity of products, and on the other hand, it is also necessary to gain the trust of luxury brands. The shortcomings of the domestic vertical luxury goods e-commerce operation model have become prominent, prompting luxury goods e-commerce companies to embark on the road of transformation.
After experiencing all aspects of purchasing on behalf of others, operating on its own, and cooperating with domestic dealers, Catwalk.com found that none of these paths went smoothly, so it boldly tried a new model—bringing overseas famous stores into China. Xiu.com believes that overseas famous offline stores can be called “ground winners” and cooperate directly with “ground winners” to synchronize the other party’s full line of goods to Xiu.com and obtain 50 to 30% off the purchase price. Such a price advantage makes the product prices of Catwalk.com 80% lower than the retail prices in Hong Kong and 65% lower than the retail prices in Europe and the United States.
For a long time, luxury brands have been repelling Chinese e-commerce, but in the past year, their trend of embracing e-commerce has become increasingly obvious. In addition to changes in consumer shopping methods, another important reason is that online channels are still an important marketing channel for brands. Consumers can learn all the details of products through e-commerce channels. Even if they do not consume through online channels, they can still be promoted or converted into Offline consumption.
It can be said that the type of e-commerce currently suitable for China’s luxury e-commerce market environment should be a luxury e-commerce platform with service attributes.
This kind of e-commerce platform focuses on online customization needs and service satisfaction. The product display in offline physical stores is limited, but online channels can be expanded infinitely. Consumers obtain consumption information online and then realize their consumption needs offline. Online does not affect offline, and at the same time, it can achieve online to offline diversion and increase single store sales. This is the ideal solution for luxury e-commerce to achieve positive development at present.
Connecting online and offline is a major trend in the future of luxury e-commerce. Recently, Ferragamo and Secoo have launched a cooperation. An important reason for this cooperation is that the two partners plan to connect online and offline, allowing high-end people to circulate online and offline. That is, consumers who consume Ferragamo products on Secoo Online can make online payments, pick up the goods, try them on, and even enjoy the brand’s after-sales services at Ferragamo’s offline stores. In this way, consumers have gained trust in online purchases, and it is also conducive to the promotion of the Ferragamo brand. It can be described as killing two birds with one stone.
In the field of consumption, there is a “10,000 US dollars” indicator, that is, if the per capita GDP exceeds 10,000 US dollars, its consumption pattern will undergo a major change. Data from the National Bureau of Statistics show that in 2016, the per capita GDP of nine places including Beijing, Shanghai, Guangdong, and Jiangsu exceeded US$10,000. The era of high-quality consumption has arrived,�After nearly 10 years of brand education and wealth growth, luxury consumers have long been separated from pure product consumption. They integrate product, culture, tourism, and entertainment consumption. Luxury e-commerce and the future must not rely on price to win, but consumption. The industry is no longer the past era of pursuing speed, convenience and economy. Only by relying on excellent service and experience can luxury e-commerce companies win the favor of consumers.
Promising prospects
Although domestic e-commerce companies are pursuing innovation and change, and are striving to gain the trust of consumers, surveys show that the main group of Chinese consumers who currently purchase luxury goods through e-commerce channels are still young people, with 41% of users saying they would not. 38% of users expressed their willingness to try purchasing luxury goods online, while less than 1% expressed a high degree of trust in online shopping.
Many people in the industry are not optimistic about the cooperation between luxury goods and e-commerce. Although consumer Ms. Zhang is born in the 1990s, she still cannot accept the purchase of luxury goods online. “It is unimaginable to buy tens of thousands of yuan online.” According to the survey of “China’s Luxury Online Consumption White Paper”, Longchamp The order conversion rate is 10.8%, followed by affordable brands such as Armani Denim and COACH. The order conversion rate of high-end luxury brands is around 4%, and higher unit prices mean more thinking.
The consulting firm McKinsey released a report in 2016 that the online sales share of the fashion luxury goods industry will increase from 3% in 2010 to 12% in 2020; while NoAgency, a luxury goods and apparel retail research and consulting firm, predicts that the online sales share of the luxury goods industry will increase from 3% in 2010 to 12% in 2020. Channel sales will only reach 8% in 2020, while this channel’s share was 2% in 2012.
For the luxury goods market, after all, it is faced with high-consumption groups. According to a survey conducted by the Wealth Quality Research Institute on 3,726 high-net-worth consumers, China’s core luxury consumers with assets of more than 10 million yuan spend an average of 1.7 times more time on mobile apps than ordinary people, mainly for business and social interaction. But shopping and lifestyle experimentation have gradually become a trend. According to Euromonitor International, a market research organization, China will surpass the United States and become the world’s largest luxury goods market in the next five years. At the same time, online sales of luxury goods will continue to flourish, and online platforms are regarded as a key battlefield for major luxury goods groups in the next five years. Data show that global online sales of luxury goods are expected to grow by 9% year-on-year in 2016. Zhou Ting, director of the Fortune Quality Research Institute, believes that in 2017, luxury goods sales will fully enter the era of digital e-commerce, and e-commerce and services will be the two main directions of digital marketing for luxury brands.
The “White Paper on China’s Luxury Online Consumption” released by luxury e-commerce company Secoo and Tencent also shows that although online luxury sales currently account for a small proportion (less than 10%), online consumption is a new growth point. It is an inevitable trend for luxury brands to embrace e-commerce, and brands need to choose a method that suits them. Self-operated e-commerce platforms have higher costs and are suitable for large groups with multiple brands and companies with their own traffic; if you choose vertical e-commerce, you need to consider factors such as unified pricing and high net worth of users. The survey also found that the core consumer group of luxury goods in China is 10 years younger than other regions in the world, and a larger proportion of men are less price sensitive. Therefore, high-quality luxury brands can enter e-commerce at full price, at least The risk of trying it in China is relatively low.
According to data from the National Bureau of Statistics, China’s GDP in the first quarter of 2017 recorded a growth rate of 6.9%, the highest in six quarters. This data will also promote the steady development of the consumer market. Coupled with the turbulent international situation and the strong US dollar, the Chinese luxury goods market is expected to grow in 2017. Growth will continue throughout the year. Therefore, as the luxury goods industry embraces the new trend of e-commerce, China’s luxury goods e-commerce industry will face an important three years. The first Chinese listed luxury goods e-commerce company may soon surface.
Source: China Business Daily
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