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Luxury websites target markets in smaller cities
September 29, 2011, Thursday
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Print Edition
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WHILE some online luxury retailers are expanding their product portfolio to the middle-to-lower end of the market, others have decided to reinforce their core commitment to satisfy the Chinese consumer's ever-growing desire to look chic and expensive.
Founded in 2008, Meici is among the first in China to make luxury goods a click away, and one of the few still sticking to the high-end route. About 50 percent of its annual revenue now comes from the country's second- and third-tier cities.
A sizeable body of luxury goods consumers has been nurtured in the economic boom that's spread inland from the big coastal cities. The number of such "emerging markets" will double from 30 to 60 in the next five years, with consumption levels approaching those of major metropolises, McKinsey said in a report earlier this year.
From my point of view, the spawning of online luxury stores is a new channel to spread the luxury brand craze to corners of the country where high fashion has not penetrated before.
Chen Liang, founder and partner of Taishan Angel Investment, said he expects high-fashion retailers with over 5 billion yuan in annual sales to proliferate in the next two to four years, though it is too early to predict who will be the outstanding ones.
Some retailers offer huge discounts and limited-time promotions to sell out-of-fashion stocks, trying to fill the gap of luxury outlets in the market.
"Big incentives are very effective in boosting impulse shopping, which is a hefty contributor to luxury goods consumption," said Yang Peifeng, CEO of Vipstore.com.
Founded in 2009, the store received tens of millions of dollars worth of D-round financing from five venture, or angel, investors last week. With 2 million users now and monthly sales in eight digits, the store has yet to break even. D-round financing refers to the fourth stage in the seed stage financing cycle of a new business' growth.
The surge of fashion magazines and websites has made consumers savvier about luxury brands, designs and prices.
Some online sites choose to market the latest fashions at a small discount and charge extra for value-added services such leather care and tailor-made embroidery.
There are also some special treats. Yoox, an Italian-based online luxury retailer, is set to launch its first branded store in China later this year, providing consumers try-on services and doorstep refunds.
Such value-added services not only create new revenue points and site distinction in a highly competitive market, but more importantly, they offset the cost of discounts to keep the luxury image noble.
"After all, image is where the brand premium comes from," said Wang Hao, CEO of Meici.
For online retailers who simply advertise high fashion alongside with lower-priced brands to create an all-inclusive product portfolio, it is more difficult to reassure shoppers that the big-ticket items are worth their price tags.
People still hold their purse strings tight when it comes to online luxury shopping. According to China E-commerce Research Center, deals in that segment transacted on the Internet accounted for only 5 percent of sales globally last year.
And Chinese online sellers, like their boutique counterparts in the country, have a price challenge to surmount.
Chinese luxury shoppers spent US$50 billion in Europe last year, four times the sum spent in China, the World Luxury Association said in a June report, citing a yawning gap between prices at home and abroad.
According to the association, luxury goods are sold at prices 72 percent higher on the Chinese mainland than in France.
Online retailers will need to forge closer ties with top-flight brand makers overseas.
Despite having built up their own online portals and dipped their toes into e-commerce, most luxury brand makers have shied away from online sales because they haven't seen it as a promising growth area.
Founded in 2008, Meici is among the first in China to make luxury goods a click away, and one of the few still sticking to the high-end route. About 50 percent of its annual revenue now comes from the country's second- and third-tier cities.
A sizeable body of luxury goods consumers has been nurtured in the economic boom that's spread inland from the big coastal cities. The number of such "emerging markets" will double from 30 to 60 in the next five years, with consumption levels approaching those of major metropolises, McKinsey said in a report earlier this year.
From my point of view, the spawning of online luxury stores is a new channel to spread the luxury brand craze to corners of the country where high fashion has not penetrated before.
Chen Liang, founder and partner of Taishan Angel Investment, said he expects high-fashion retailers with over 5 billion yuan in annual sales to proliferate in the next two to four years, though it is too early to predict who will be the outstanding ones.
Some retailers offer huge discounts and limited-time promotions to sell out-of-fashion stocks, trying to fill the gap of luxury outlets in the market.
"Big incentives are very effective in boosting impulse shopping, which is a hefty contributor to luxury goods consumption," said Yang Peifeng, CEO of Vipstore.com.
Founded in 2009, the store received tens of millions of dollars worth of D-round financing from five venture, or angel, investors last week. With 2 million users now and monthly sales in eight digits, the store has yet to break even. D-round financing refers to the fourth stage in the seed stage financing cycle of a new business' growth.
The surge of fashion magazines and websites has made consumers savvier about luxury brands, designs and prices.
Some online sites choose to market the latest fashions at a small discount and charge extra for value-added services such leather care and tailor-made embroidery.
There are also some special treats. Yoox, an Italian-based online luxury retailer, is set to launch its first branded store in China later this year, providing consumers try-on services and doorstep refunds.
Such value-added services not only create new revenue points and site distinction in a highly competitive market, but more importantly, they offset the cost of discounts to keep the luxury image noble.
"After all, image is where the brand premium comes from," said Wang Hao, CEO of Meici.
For online retailers who simply advertise high fashion alongside with lower-priced brands to create an all-inclusive product portfolio, it is more difficult to reassure shoppers that the big-ticket items are worth their price tags.
People still hold their purse strings tight when it comes to online luxury shopping. According to China E-commerce Research Center, deals in that segment transacted on the Internet accounted for only 5 percent of sales globally last year.
And Chinese online sellers, like their boutique counterparts in the country, have a price challenge to surmount.
Chinese luxury shoppers spent US$50 billion in Europe last year, four times the sum spent in China, the World Luxury Association said in a June report, citing a yawning gap between prices at home and abroad.
According to the association, luxury goods are sold at prices 72 percent higher on the Chinese mainland than in France.
Online retailers will need to forge closer ties with top-flight brand makers overseas.
Despite having built up their own online portals and dipped their toes into e-commerce, most luxury brand makers have shied away from online sales because they haven't seen it as a promising growth area.
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