Gray market luxury goods in China, composed of counterfeits and illegally imported goods, have long been a problem for international luxury brands, both online and offline. However, a new study by Exane BNP Paribas shows that, despite efforts to combat the issue, China’s e-commerce companies still have a long way to go in getting rid of the online gray market.
A look at the number of foreign luxury brands for sale on Tmall.com reveals that the online gray market is thriving. With so many thousands of goods from each luxury brand available for sale on Tmall, the numbers most likely include some counterfeits or daigou imports. Armani, Swarovski, and Ralph Lauren have some of the highest number of products for sale on Tmall. Meanwhile, among the luxury fashion brands, Burberry and Tod’s products are probably the most difficult to find on Tmall.
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.
This suggests that given the choice, Chinese online consumers would prefer to buy directly from a luxury brand’s official online store to ensure they are getting an authentic product rather than buy from an unknown seller.
As more brands take direct control of their online stores in China, along with bolstered anti-counterfeit efforts by online shopping websites, the online gray market in China could begin to shrink.
image credit: prayitno, exane bnp paribas