China’s e-commerce is booming and international luxury brands are discovering new ways to reach China’s growing online shopping population.
A study by Exane BNP Paribas has found that luxury brands have four options when tackling China’s e-commerce market.
The first option for luxury brands, which 17 percent of brands use, is a directly operated Chinese e-commerce site, as companies such as Coach and Hugo Boss operate. However, this option can be fraught with difficulty due to China’s firewall, which has the tendency to greatly slow down the e-commerce sites unless they are properly hosted within China using a Chinese DNS service.
The second option is a single-brand Chinese e-commerce store administered by a third-party within China, which makes up 17 percent of international luxury brand e-stores.
The third option is the creation of a global e-commerce website that will deliver to China. However, the problems with this approach include the aforementioned firewall, as well as the logistics of shipping to China. This strategy is used by 7 percent of luxury brands.
The fourth option, which has been embraced by Burberry, Estée Lauder, Zara, and more, is to set up a store on a third-party platform such as Tmall, which 7 percent of brands currently do. In this way, the companies don’t have to worry about the firewall or logistics of delivering to China, but they do have to give up a piece of the revenue to the hosting e-commerce site.
The leading international luxury brands in e-commerce, such as Burberry, have embraced a combination of these e-commerce options to reach the most Chinese consumers. As online shopping in China matures, more international luxury brands will follow Burberry’s lead.
image source: balenciaga