There’s no better illustration of where China’s once almighty luxury market has gone than the events three weeks ago. On a Tuesday at the Hyatt Regency in the east coast city of Hangzhou, Hermes held a sale. Until then, such discounting at upscale retailers like Hermes was unthinkable in China. Now, it seems Ferragamo and Armani will follow suit—with sales on suits.
Then Burberry did the unthinkable: it opened a storefront on Tmall.com.
Tmall, the wildly popular Amazon-meets-eBay site run by the Alibaba group, is an anything-goes Internet bazaar where Chinese shoppers dump a large portion of the nearly $300 billion in online shopping done in China last year. The marketplace has governments like France and Britain tripping over themselves to sign memorandums of understanding to give their nation’s products Tmall platforms.
So far, Burberry’s experiment has seen mixed results.
High prices and a lack of consumer confidence about counterfeits still plague the brand. While the brand has attracted a lot of attention and traffic, over a quarter of all products purchased are being returned, a rate four times the Tmall average. And as Neiman Marcus recently learned in China with its Glamour Sales web portal, Chinese consumers won’t pay full price online.
However, selling on Tmall allows brands to solve problems with the “gray market,” the array of Tmall products made up of both counterfeits and items bought overseas and re-sold. “Hundreds of gray-market Burberry products instantly disappeared from Tmall upon the launch of the official brand store,” said Booker, adding, “For many luxury brands, the gray market and counterfeits have been hugely destructive to their bottom line in China, and a Tmall shop—though it lacks exclusivity—is an easy way to consolidate control online.”
It remains to be seen if Burberry’s Tmall experiment will be a genius move or dilute the strength of the brand in China, but it’s worth noting that Coach flirted with a Tmall presence back in 2011, in which its four week experiment was less than successful, with Coach reporting 3.5 million visitors and almost no sales.
With the low-hanging fruit now plucked, luxury brands are facing up to the necessity of an online strategy for China. Starwood Hotels & Resorts recently launched a Mother’s Day promotion on Weibo, for example, and are just one of many international brands looking to make a presence on China’s social networks.
Read more at Brand Channel.