L’Occitane began selling on Tmall on December 1st, but its products had been available on the site for some time by third-party vendors, often times in the form of gray-market goods that were bought outside of China and sold to buyers on Tmall.
“This is the only way we can assure that expired and damaged goods are not sold,” L’Occitane’s president of the Asia-Pacific region, Andre Hoffman, told The Wall Street Journal. “Our goal is to be the only authorized seller of L’Occitane products.”
Burberry, which opened its official Tmall store in April of this year, saw the number of gray market goods drop precipitously after the debut of its store, according to L2′s recently published Digital IQ Index. The chart below illustrates the extreme disparity between the number of gray market goods on sale prior to Burberry launching its store and the number for sale afterward.
The decrease in the number of gray-market Burberry items on Tmall is no coincidence. Alibaba has made an effort to remove high-end gray-market goods for some companies in order to attract more luxury brands to the site.
Analysts at YipitData found that when Burberry and Estée Lauder opened their Tmall stores this year, third-party sellers of the brands’ goods disappeared very quickly. However, the disappearance of third-party sellers of L’Occitane products has not happened yet – probably too early since the online store just launched a few days ago. YipitData counts 1,400 third-party L’Occitane goods on the website. L’Occitane is still working with Alibaba to find ways to combat third-party sellers.
“High-end brands are certainly of interest to Chinese consumers and we are going to continue to grow these brands on the (Tmall) site,” said an Alibaba spokesman.
L’Occitane had been in talks with Alibaba for months prior to the opening of the online store due to concerns about protecting its image.
CLSA Asia-Pacific Markets analyst Paul McKenzie wrote in a September 2013 report that L’Occitane “deliberately avoided the Chinese marketplace sites and views them more of a hindrance than a benefit to its business. It sees the Chinese online shopper as having become conditioned to expect cheap and discounted prices on marketplace sites versus physical stores, something it (correctly in our view) is not willing to succumb to.”
Clearly, the company could no longer resist the allure of China’s booming e-commerce market and Tmall’s 45 percent control of China’s business-to-consumer online sales, as well as the chance to improve its image in China by positioning itself in front of third-party sellers on Tmall.
image source: loccitane.tmall.com