Chinese online retailers hope to challenge industry trend

Chinese online retailers hope to challenge industry trend

Online retailers have an advantage in not facing the geographical restrictions that their brick-and-mortar counterparts do. -China Daily/ANN
Fri, Apr 12, 2013
China Daily/Asia News Network

Chinese online luxury retailers have big ambitions, despite the market’s slower growth in recent years. Sun Yafei, CEO of Fifth Avenue Globe – one of the earliest online luxury retailers in China, said she plans to double her website’s turnover in 2013, as the company’s sales in 2012 already doubled from the previous year. As sales growth in China’s luxury market declined in the past year, some luxury brands said they would slow the expansion of their store networks and integrate their channels in the market in 2013. The Internet would be an effective distribution channel for the brands, Sun said.Brands’ attitudes to online retailers also changed in 2012, some business insiders said, although they remain cautious about e-commerce.

“It is much easier to get the brands’ permission now,” said Sun.

Fifth Avenue Globe has been granted permission from more than 300 brands and distributors to sell their goods, up from around 100 in 2012, she said.

The number of overseas buyers, which used to be a major source of goods for the website, is falling, Sun added.

In September 2012, Zoshow.com, a Chinese online fashion retailer, got permission from Italian luxury goods company Salvatore Ferragamo Italia SPA to sell its goods.

Its permission shows that international luxury brands have started to accept Chinese online retailers.

“E-commerce is a trend in every industry and luxury brands, which do well in the area, and always keep in step with the trends,” said Rupert Hoogewerf, who released Tycoons of Luxury 2013 on March 6. He said that Chinese consumers accounted for 20 per cent of global luxury goods purchases.

On the other side, luxury brands are also building up their own online distribution channels.

Hugo Boss AG, the luxury company based in Germany, launched its official Chinese online store on Feb 27.

Gucci is also preparing its online store in China, although it remains unclear when it will actually open, said a staff member from Gucci China Trading Ltd’s marketing and communication department, who wished to remain anonymous.

Gucci already runs online stores in 27 countries and regions worldwide, and its revenue from e-commerce sees double-digit growth annually, according to its annual report.

It used to be very difficult for online retailers to cooperate directly with luxury brands, because the brands were worried that online retailers’ low price strategy could undermine the brands’ pricing system.

Some brands even fought against the retailers then.

Swarovski (Shanghai) Trading Co Ltd, for example, accused 360buy.com, a major online retailer, of selling its products without its permission in March 2012.

As the brands’ attitude is changing, online luxury retailers can expect to attract more suppliers.

In addition, online luxury retailers have not been greatly affected by the government’s policy to forbid public spending on luxury items, which was launched at the end of 2012.

“The items on our website are not suitable as business gifts,” said Lang Xueyue, vice-president of Shangpin.com, a members-only luxury online retailer.

Officials prefer popular styles as gifts, but online retailers supply very distinctive luxury items, Lang said.

Business gifts accounted for a very small proportion of the website’s sales, she said.

Online retailers still can enjoy even triple-digit growth, Lang said.

Statistics from the China e-Business Research Center show that in the first half of 2012, China’s online luxury market was worth 13.5 billion yuan (S$16.7 billion), up 58 per cent year-on-year.

Some analysts predict that China’s online luxury market will keep growing dramatically.

The China e-Business Research Center forecast that online luxury sales could be worth as much as 23.76 billion yuan by the end of 2013.

The figure may reach 37.24 billion yuan by 2015, according to iResearch Consulting Group, an organisation focusing on research in China’s Internet industry.

Online retailers also have an advantage in not facing the geographical restrictions that their brick-and-mortar counterparts do.

“Shangpin.com covers 400 cities in China now, even some very small cities I had never heard of before,” said Lang.

Some residents of small cities have the consumption power, but luxury brands cannot afford to open stores there.

“We gather consumers from small cities online,” Lang said.

However, online luxury retailers still have to continue completing their business models and building up their reputations.

Consumers usually have doubts about spending so much money online and a fake luxury item from one retailer can hurt the entire industry, Sun said.

On the other hand, setting them apart from other online retailers, low prices cannot be a magic weapon of luxury retailers any more.

If retailers want to get permission to sell famous brands, they have to keep the brands’ pricing system, although the brands sometimes offer special discounts to online customers.

“The convenience of online shopping is what we supply to our consumers,” Sun said.

It will take a long time to get consumers used to shopping for luxury goods online.

Online retailers need to be patient if they want healthy growth, she added.

Shi Jing contributed to this story.