Luxury companies are finding Chinese consumers and the Internet super irresistible — the two key industry growth drivers.
It is “impossible to exaggerate the importance of China for us, as for everyone, and e-commerce is about reaching out to that,” said John Hooks, deputy chairman of the Armani Group. China, which accounts for 10 percent of Armani’s $2 billion global sales, could easily increase to 20 percent according to Hooks.
The company wants to reach “the younger, computer-savvy, affluent consumer, and the new breed of mobile Chinese.”
Concerns about weakening the brand image have kept the luxury sector offline. Now we are seeing more luxury companies develop online strategies to keep their brands relevant and competitive. Also, now the tools are available to create the same luxury feel that you have in a store. Still considerably small, online sales of luxury goods are expected to rise to account for 5 percent of all luxury goods sales in 2011, up from 4 percent this year, according to research group Precepta.
In China, concerns about counterfeiting have kept many luxury brands offline, but with Chinese consumers becoming more discriminate about their luxury purchases, this concern has subsided.
The Chinese are avid web users with one-third of its population using the Internet. While only 30 percent of the 420 million web users shop online compared to the global average of 86 percent, online sales are growing at about 78 percent a year. Online sales are estimated to reach RMB569bn ($85.6 bn) next year, according to internet research firm iResearch.
Chinese online shoppers are “even younger, more educated and wealthier than (general) online users,” according to a recent McKinsey report. Apparel and digital products are most popular with Chinese online shoppers.
Taking advantage of the soaring online commerce growth, Taobao, China’s leading retail e-commerce group has been expanding aggressively. The company is rolling out major plans to improve services and quality.
Over the past few months, a number of foreign consumer companies have launched their own online stores in China, including two multi-brand sites, 5lux.com and shangpin.com, which offer European and US fashion brands. Shangpin.com is a membership site that carries over 200 luxury brands. The company is backed by venture money — Disney’s venture capital arm, Steamboat Ventures, and Morningside Capital.
Luxury e-commerce specialist Yoox Group, which developed and manages the Chinese Emporio Armani site, operates online stores for 23 brands including Dolce & Gabbana, Roberto Cavalli and Valentino in Europe, United States, and Japan. For China, Yoox expects to open six more mono-brand luxury online stores beginning in 2011 supported by its new distribution center in Shanghai.