China Jumps To New York; Luxury Jumps To China


Earlier this month, New York City hosted the fashion event of the year, New York Fashion Week, a gathering of thousands of business executives, models, designers, PR experts, and others from the fashion world, making it the must-attend event of the fashion elite. This year also saw two major new participants: Alibaba and JD. (JD had minor participation last year as well.)

Alibaba signed an agreement to bring parts of the show to its China audience through a “See-Now, Buy-Now” program. And NYFW established a “China Day” to help Chinese designers reach global audiences. For its part, JD held its own runway show and launched an online channel, “U.S. Fashion Mall.”

So China’s two internet giants are going head-to-head in the fashion space, and NY is the latest front. But the emergence of luxury e-commerce in China goes way beyond NY and way beyond fashion.

Indeed, this year has seen an e-commerce taboo shattered. Conventional thinking held that e-commerce might work fine for everyday consumer products or groceries, but it would not be a successful channel for luxury goods. The arguments for this view were almost self-evident: a successful luxury brand depends in part on exclusivity, and e-commerce stands for the opposite – universal accessibility. How does the luxury culture born in the salons of Paris and the fashion shows of Milan square with the one-click culture of e-commerce?

And yet the China experience this year has thrown that conventional wisdom in the trash can. Beyond the moves in fashion, JD introduced its “White Glove” delivery service, adding a high-end concierge dimension to its luxury offering. It invested $400 million in global luxury etailer Farfetch, with whom it will open a joint platform. In turn, Tmall launched its Luxury Pavilion in August; and JD fired back by launching a luxury watch channel. And a number of luxury-only sites have flourished, such as and Back to fashion, there are other luxury verticals that are fashion pure-plays, such as and What’s going on?

First, e-commerce continues to gain consumer acceptance. Whereas 20 years ago it was only a place to buy books, and 15 years ago, you could manage your bank account online, today consumers are increasingly comfortable with a growing range of online purchases from education and other services, to expensive products. Land Rover has a model that is exclusively online. Consulting Group L2 notes that 10 of the 18 luxury auto brands have Tmall stores. No surprise that luxury items would over time gain online acceptance. And no surprise that China leads the way. Bain tells us that China accounts for 30% of the global luxury spend .

Second, the luxury brands saw an opening. Remember there are distinct advantages to e-commerce, as well as possible disadvantages. E-commerce allows the brand to know the customer and capture customer information. Loyalty programs are possible. Events can be managed through customer history. Cross-sell and renewal activity are now possible. Louis Vuitton will attach a high value to knowing which customers buy a new bag annually. Secoo worked with Tencent to create profiles of its 15 million customers.

Third, the e-commerce model can be adjusted. Luxury brands can harvest the upside of e-commerce and guard against the potential downside. Exclusivity is balanced against universality. A brand can have a store on TMall for the general public and it can also have a store on the TMall Luxury Pavilion, on which only those consumers who are invited may participate. Tmall and JD are setting up a ladder of activity. At the base is the traditional open platform similar to Amazon in the U.S. Up a step is an exclusive platform, which is by invitation-only. It is a little like a bank offering retail service to anyone with an account, but that account has to reach a certain threshold of activity for the customer to be directed to the private bank.

By Frank Lavin


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