CHINA LUXURY E-COMMERCE WHITEPAPER 2017 - Deloitte
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C H I NA L U XU R Y E-CO MMERC E WHI T EP A P E R 2 0 1 7
CONTENTS CHINA LUXURY
E-commerce Whitepaper 2017
01 CHAPTER 1 01-28
Development Trends of the Luxury E-commerce Industry
1.1 The Development of the Luxury Market
1.2 Rapid Development of Luxury E-commerce
1.3 Drivers for the development of luxury e-commerce
02 CHAPTER 2 29-54
Portrait and preferences of online luxury consumers
2.1 Portrait of core consumers in luxury e-commerce
2.2 Motivation for purchasing luxury goods online
2.3 Consumer preferences for luxury goods
03 CHAPTER 3 55-78
Challenges to and reflections on luxury e-commerce
3.1 Challenge 1: Selecting the right business model
3.2 Challenge 2: creating a unique e-commerce experience
3.3 Challenge 3: e-commerce is not simply “another new channel”:
The necessary transformation to an omni-channel model
04 CONCLUSION 79-80
01
CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
CHAPTER 1
Development Trends of the Luxury
E-commerce Industry
As a result of economic growth and changes in policy, the global
luxury market has been subject to significant fluctuations. Now, with
the recovery of the global economy, the luxury market has also seen
its own overall recovery and has experienced moderate growth. The
Chinese market, after a three-year economic downturn and a series of
economic shocks, marked a turning point in 2016 to regain momen-
tum. Against the backdrop of the moderate-to-high economic growth,
China's luxury market is expected to maintain stable increase. In this
new period of growth, the influence of global digitalization on the luxury
market continues to expand. Although traditional sales channels
remained the main distribution channel for luxury goods, the year 2016
witnessed double-digit growth of luxury goods sales through online
channels, while the growth of traditional channels was only 2% in the
same period. In China, the growth of sales through online channels is
also increasing as these new channels play a more prominent role in the
sale of luxury goods. With the rise of new generation of consumers, the
expansion of retail business digitalization and the continuous increase of
luxury e-commerce users, this trend is expected to continue.
01 02
CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.1 The Development of the Luxury Market
01 Analysis of the development trends
of the global luxury market
Figure 1. Global sales of luxury goods and growth (2011-2021)
500 450 8.00%
425 439
450 7.19% 416 7.00%
389 402
400 370 368 370 377
361 6.00%
Consumption of luxury goods begins to pick up and is 350
5.00%
expected to maintain stable growth 300
4.00%
250 3.32% 3.21% 3.56% 3.36%
3.00%
200 2.48% 2.44%
1.93% 2.15% 2.00%
After significant fluctuations, the global luxury market has started to 150
100 1.00%
experience stable growth. In the overall context of sluggish recovery of the global 0.49%
50 0.00%
macro economy, the growth of the global luxury market began to slow down from -0.48%
0 -1.00%
2011, with the year 2013 seeing negative growth. The luxury market began to 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
show signs of recovery in 2014 and 2015, which continued through 2016. Global sales of luxury goods (USD1 billion) Growth rate %
Throughout the year of 2016, the overall scale of the global luxury market
increased by 3.32% in real terms, with a total value exceeding USD389.2 billion.
Influenced by the continued recovery of the global economy, consumption of
Source: Euromonitor International
luxury goods is expected to enter into a period of stable development over the
next five years with an actual growth rate of about 3%.
03 04
CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.1 The Development of the Luxury Market
Figure 2. Percentage of global luxury consumption by region (2016)
US 美国
China 中国
China and the US lead in luxury sales. Japan 日本
23% 22%
23% 22% France 法国
In terms of sales volume, China and the US are the top two largest luxury UK 英国
markets in the world, with their sales combined accounting for over 40% of all Italy 意大利
2% 2%
global sales. In 2016, luxury sales in the US made up 22% of global sales, 2% 2% Germany 德国
followed by China’s market share of 21%. Over the past five years of strong 3% 3% Korea 韩国
economic recovery, the US has maintained a sustained high growth trend in 21% 21%
4% 4% Hong Kong 香港
luxury sales, and witnessed the highest incremental sales globally during the Canada 加拿大
5% 5%
period from 2011 to 2016, with an increase of $12 billion in absolute terms; 6% 9% 6% 9% Other countries 其他国家
Japan ranked second with an increase of $7.2 billion in luxury sales. China, 5% 5%
however, was one of the worst market performers in luxury sales growth due to
Source: Euromonitor International
the economic slowdown, exchange rate fluctuations and policy changes. China
saw negative sales growth from 2011 to 2016, which meant that the US
regained the top position as the world's largest luxury market.
Figure 3. Growth of global luxury goods sales by region (2011-2016) (USD1 billion)
0 2 4 6 8 10 12 14
US 12.00
Japan 7.20
Korea 3.34
UK 2.01
Canada 1.80
France 1.59
India 1.59
Germany 1.33
UAE 1.24
Taiwan 1.20
Source: Euromonitor International
05 06
CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.1 The Development of the Luxury Market
03 Luxury market in China
Figure 5. Percentage of sales of different luxury categories in China (2016)
酒类
Luxury consumption recovery expected to lead to stable 服装鞋类（成衣）
酒类
future growth
0%
1%0%
3%
2% Wine 皮革
In 2016, China was the world's second largest luxury market with an overall 4% 服装鞋类（成衣）
Apparels and footwear (ready-to-wear)
钟表
6% 皮革 products
0%
1%0%
sales volume of RMB498.3 billion, making up 21% of global sales and second only 3%
2% Leather 珠宝
to that of the US. After a continuous slowdown from 2013 to 2015, China's luxury 4%
7% 钟表 & watches
Clock 美妆/个人护理
market started to recover and its luxury goods sales increased by 8.4% compared 6% 珠宝
Jewellery 眼镜
with that of the previous year. It is expected that China's luxury market will enter a
7% 美妆 / 个人护理
Cosmetics/personal care products
便携式设备（电子产品）
stage of moderate and stable growth as Chinese consumers' household income
increases, luxury brands continue to adjust price spreads between domestic and 眼镜
Glasses 文具
76%
overseas markets and the impact of policy changes starts to wane. 便携式设备（电子产品）
Portable devices(electronic products)
76% 文具
Stationary
Figure 4. Luxury market sales and growth in China (2011-2021)
Source: Euromonitor International
700 10%
8% 617
596
572 574
600 552 7% 552
515 531 5%
498 4% 4%
4% 463 460 4% 4%
500
400 -1%
0% Large-scale wine consumption and rapid growth in
cosmetics consumption
300
-5%
200
-10% -10% -10%
Analyzing the proportion of sales in terms of different luxury categories, luxury
100
wine took the dominant position in China's luxury market, followed by apparel and
0 -15% footwear. In 2016, the sales of luxury wine soared to 76% of China's total luxury sales,
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
apparel and footwear followed by 7%, while leather products ranked in third place with
Luxury sales in China (RMB1 billion) Growth rate
a share of 6%.
Source: Euromonitor International
07 08
CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.1 The Development of the Luxury Market
Figure 7. Percentage of China's luxury consumption: abroad vs. domestic
In terms of sales growth during 2011 to 2016, the consumption of cosmet-
ics/personal care products experienced high growth, while that of stationary and Consumption abroad Domestic consumption
100%
clocks & watches declined. Considering that the compound average growth rate 90% 24% 22% 23%
28% 28%
(CAGR) of luxury consumption in China was -2% during this period, the 9% annual 80%
growth in luxury cosmetics/personal care products clearly stands out. Jewelry and 70%
60%
apparel & footwear followed closely with a growth of 6% and 5% respectively. In
50%
addition, the consumption of leather products, glasses and portable devices all 40% 78%
76% 77%
72% 72%
achieved an increase of 3%. Among the luxury categories that declined in sales, 30%
stationary and clock & watches were the worst performers with an average annual 20%
10%
decline of 5%, while sales of luxury wine, with a CAGR of -3%, saw a remarkable
0%
upturn in 2016. 2012 2013 2014 2015 2016
Source: Fortune Character Institute
Figure 6. CAGR of different luxury categories (2011-2016)
Consumption abroad takes up a large share while growth
starts to slow down
10% 9%
8% In terms of where this consumption took place, China's luxury consumption in
6% 5%
6% the past five years mainly took place outside of the country, with domestic consump-
3% 3%
4% 3%
tion only accounting for about 25% of the total. The growth rate of consumption
2%
0%
abroad had been higher than that of domestic consumption until 2015. In 2016, the
-2% trend reversed and, as a result, there was an increase in the proportion of domestic
-2%
-4%
-3% consumption. This shift was mainly driven by worldwide price adjustments of luxury
-6% -5% -5% goods, RMB devaluation and guidance by relevant taxation policies, all of which had
ar
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led to recovery of domestic luxury consumption stimulated by substitution consump-
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ts rso
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ot
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tion. Data from the Fortune Character Institute shows that luxury price spreads in
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pr tic
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St
&
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els -
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China in 2017 declined considerably compared with those in 2011. At a policy level,
al
Cl
p
r
d
C
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ve
O
government policies have stimulated growth in domestic luxury consumption. Taking
import duty as an example, in 2015 and 2016, the government issued several
Source: Euromonitor International
policies to reduce the import duty on apparels, cosmetics and daily necessities,
which played a role in contributing to the growth of luxury consumption.
09 10
CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.1 The Development of the Luxury Market
Figure 8. Average price spread of luxury goods between China and the world (2011-2017)
2011 average price spreads 2017 average price spreads
180
161
160
140
120
100 84 84
80
60 46 45 48
36 39
40 27
21 19 16 15 15 10
20 6
0
Perfumes Make-ups Skin-care Apparels Footwear Luggage Jewelry Watches
products
Source: Fortune Character Institute
Table 1. Changes of policies on import and export duties
Time Policies
Reduction in import duty rates for certain types of apparel, footwear,
2015.06 skin-care products and other daily necessities, as well as import duties for
June 2015 business suits, basic house decoration products, short boots, sneakers,
diapers, skin-care products, etc.
Extension of the scope of tax reduction for daily necessities, and
2016.01 reduction of import duty by imposing provisional tax rates for
January 2016 commodities with high tax rates and high-demand like luggage,
apparels, scarves, rugs, vacuum cups, sun glasses, etc.
The Ministry of Finance issued the Notice on Adjusting Consumption
2016.09 Taxes for Import of Cosmetics, which stated that the commodity
September 2016 subject to cosmetics consumption tax was adjusted to “top-grade
cosmetics”, and tax rate was reduced from 30% to 15%.
Source: Public information
11 12
CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.2 Rapid Development of Luxury E-commerce
Figure 9. Percentage of global luxury goods sales through online & offline channels
2016 sales share Growth rate
100% 91% 14%
90%
01
12% 12%
80%
The global trend of luxury e-commerce 70% 10%
development 60%
50%
8%
6%
40%
30% 4%
20%
2% 9% 2%
Weak growth in traditional channels with rapid growth 10%
in online sales 0% 0%
Offline Online
The luxury industry is faced with various challenges. In terms of sales Source: Euromonitor International
channels, traditional luxury retail channels continue to dominate but shows a lack
of momentum for sustained growth. In 2016, effective sales of luxury goods
through offline channels accounted for 91% of global sales, a year-on-year
increase of only 2%. Even though luxury goods sales via online channels is Figure 10. Luxury goods sales via online channels (USD1 billion)
relatively low, the growth in online channels is more prominent. In 2016, online
sales in the global luxury market represented 9% of the total, an increase by 12%. US China UK Japan Germany Korea
In terms of market segment, during the period from 2011 to 2016, luxury goods 12.00
sales through online channels in the US reached the peak amount of USD10.5
10.00
billion. At the same time, benefiting from a booming e-commerce industry in the
Chinese market, online sales in China's luxury goods sector have also rapidly 8.00
increased, ranking second in global sales volume after the US market. Following 6.00
the acceleration of omni-channel development in luxury brands and the shift in the
4.00
trend of luxury goods consumption, the penetration of online channels in the
luxury market will gradually grow. 2.00
0.00
2011 2012 2013 2014 2015 2016
Source: Euromonitor International
13 14
CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.2 Rapid Development of Luxury E-commerce
02 Trends in the development of luxury
e-commerce in China
Figure 12. Percentage of luxury goods sales through online/offline channels by category (2016)
Offline purchase Online purchase
100% 2% 0%
5% 3%
95% 10% 9% 9% 8% 8%
90%
Traditional channels dominate while online sales grows 85%
rapidly 80%
75% 98% 100%
95% 97%
70% 91% 91% 91% 93% 93%
While traditional sales channels continues to be the mainstream, the market
65%
share has seen a decline. In 2016, luxury goods sales through offline channels
60%
accounted for 91.1% of the total, a year-on-year decrease of 1%. During 55%
2012-2016, the share of luxury goods sales through offline channels went down 50%
while penetration of online channels gradually increased. Although the share of
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online luxury goods sales remains currently small, it’s important to note its rapid
w
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Gl
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ni ev
w
at
od s/p
rp
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&
St
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he
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ks
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growth. Driven by the shift in consumer behavior and the omni-channel develop-
le b
t
y- ls a
oc
at
re e
(e orta
ca sm
Le
Cl
ad re
Co
P
(re ppa
ment in luxury brands, the share of luxury goods sales through online channels
A
is predicted to grow, expected to reach 13% by 2021. Source: Euromonitor International
Figure 11. Percentage (Forecast) of luxury goods sales in China based on channel (2011-2021)
Offline Online In terms of the luxury categories, consumer preferences for purchasing
100% 1% 3% 5% 7%
luxury goods vary by the different categories of goods. For example, in 2016,
95% 8% 9% 8% 9% 10% 11% 13%
90%
online wine purchases took up 10% of total wine purchases – the highest of all,
85% followed by apparels and glasses at 9%, and leather products, cosmetics and
80% personal care products ranked in third place with a share of 8%. Online purchase
75% 99% 97% 95% 93% 92% 92%
ratios of other categories were significantly lower than the above categories.
70% 91% 91% 90% 89% 87%
65%
Statistics showed that online purchase ratio of luxury portable devices (electron-
60% ics) was nearly zero, and those of luxury stationary, jewelry, and clock & watches
55% were also very low, all lower than 5%.
50%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Euromonitor International
15 16CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.2 Rapid Development of Luxury E-commerce
Omni-channel strategy continues to develop
Secoo provides consumers with integrated omni-channel platforms for the
offline and online purchase of luxury goods, including the Secoo website,
mobile app and offline experience center. The online platform has been
designed to provide convenient services for consumers to choose products,
Analysis of Secoo Business Data place orders and finish payments. The offline experience center serves as a
complimentary channel that provides high-quality consumer and membership
Using Secoo Group, the leading vertical luxury e-commerce company, as a services and experience. Online channels remain the major sales channel for
case study: (NB. Gross Merchandise Volume (GMV) is used instead of business Secoo platform. From 2015 to the first half of 2017, GMV generated from online
revenue) channels accounted for over 70% of the business revenue of all platforms.
Business scale grows rapidly with increased profitability
Figure 15. Secoo business revenue: online vs. offline
Figure 13. Secoo GMV scale and growth rate (2012-2016)
Offline Online
100% 7%
12%
27%
RMB1 million Source: Secoo 80%
60%
93%
As reported by Frost & Sullivan, Secoo grew into Asia’s largest online 40% 73%
88%
platform for luxury goods in 2016 in terms of GMV. During the period from 2012 20%
to 2016, Secoo's GMV saw exponential growth from RMB488 million in 2012 to
0%
RMB3,470 million in 2016. Over the past five years, Secoo's GMV has 2015 2016 First half of 2017
maintained a relatively high growth rate, which also reflects the overall growth
trend of the luxury e-commerce industry. Source: Secoo
17 18CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.3 Drivers for the development of luxury e-commerce
Figure 17. Percentage of channels for the purchase of luxury goods
Online purchase Offline purchase
01 The rise of new-generation consumers
boosts growth of online consumption 婴儿潮一代
Baby boomers
28% 72%
X 一代 34% 66%
Gen X
China’s luxury goods consumers are getting younger. According to the
千禧一代 42% 58%
statistics of the World Luxury Association, the average age of China’s luxury Millennials
buyers has dropped from 35 to 25, which will inevitably affect the strategies of
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
luxury market players. It is predicted that this trend will further progress in the
future. Data from Euromonitor shows that, in 2015, millennial and Gen Z Source: Euromonitor International
consumers made 34% of total social income, and the ratio is expected to
Notes: Gen Z (born after 1995), millennials (born between 1985 and 1995), Gen X (born between
increase to 50% in 2025. This means that half of all social wealth will be owned
mid-1960s and late 1970s) (35-54 years old), baby boomers (born between 1946 and 1964).
by millennials and Gen Z, the new generation consumers that will become a
major consumer group in China's luxury market within the next decade.
Figure 16. Percentage of social wealth ownership For this new generation consumers whose lives increasingly revolve
Gen Z Millennials Gen X Baby boomers around the internet, online shopping remains their preferred choice for purchas-
ing products. According to Deloitte Luxury Multi-country Survey for 2017 Global
Powers of Luxury Goods, 42% of luxury goods purchases through online
2025 17% 33% 29% 22%
channels were made by millennials, higher than that of Gen X (34%) and the
baby boomers (28%), reflecting the higher degree of acceptability and usage of
online channels for the purchase of luxury goods among this new generation
consumers. The trend also shows that online channels are playing an increas-
2015 4% 30% 34% 33%
ingly important role in luxury consumption. Therefore, luxury brands will face the
major challenge of having to address the needs and consumer behavior of the
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
millennials in the future. The results is that it has become more important for
Source: Euromonitor International
businesses to establish omni-channel strategies.
Notes: Gen Z (born after 1995), millennials (born between 1985 and 1995), Gen X (born between
mid-1960s and late 1970s) (35-54 years old), baby boomers (born between 1946 and 1964).
19 20CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.3 Drivers for the development of luxury e-commerce
Meanwhile, digital media has emerged to become an important channel for
the new generation of Chinese consumers in receiving information on luxury
goods. Statistics show that the new generation of Chinese consumers get as
much as 75.6% of their fashion information from digital media and only 24.4%
from traditional media. Specifically, of all the digital media, brand websites make
up the highest share at 18.3%, vertical fashion websites follow by 16.4%,
followed by social media at 15%. For traditional media, fashion magazines serve
as the major channel to get fashion information with a share of 17.6%, while
6.8% of information is communicated by friends and families. This reliance of
new generation consumers on digital media will influence their choice of
02
consumption channels. Increased digitalization in retail provides
support for luxury e-commerce
Figure 18. Percentage of fashion information received by new generation of Chinese consumers by channel
development
其他, 0.0% 其他, 0.0% China has a unique digital environment. There have been far-reaching
走秀视频, 8.5%走秀视频, 8.5%
朋友/家人, 6.8% 朋友/家人, 6.8% effects on many aspects of the retail industry as digitalization continues to take
走秀视频 Fashion
走秀视频 show videos root. Statistics show a significant and rapid increase in mobile data usage,
时尚杂志, 17.6% 品牌网站, 18.3%
品牌网站 Brand
品牌网站 websites third-party mobile payment and logistics over the past several years. China now
时尚杂志, 17.6%
时尚网站 Fashion websites
品牌网站, 18.3% 时尚网站
has the highest online sales ratio in overall retail sales of anywhere in the global
社交媒体 Social media
社交媒体
名人 Celebrities
名人 market. On the whole, 57% of China’s retail sales are now influenced by the
微博/博客 Weibo/blog
微博/博客, 6.6% 微博/博客
微博/博客, 6.6% 时尚杂志
growth of digitalization. In light of this trend, digital capability will be a key factor
时尚网站, 16.4%
时尚杂志 Fashion
朋友/家人magazines, determining the future success of enterprises.
朋友/家人 Friends/families,
名人, 10.8%
时尚网站, 16.4% 其他
Although offline channels remain the major channel for luxury goods sales
其他 Others
名人, 10.8%
社交媒体, 15.0%
in China, luxury e-commerce is gaining momentum with a steady growth in
社交媒体, 15.0%
recent years driven by the continuous enhancement of digitalization within the
Source: Deloitte luxury report Bling it on retail industry. In context of China’s unique digital environment, an increasing
number of luxury brand players have realized the importance of developing
digital sales channels for the China market.
21 22CHAPTER 1 CHINA LUXURY
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1.3 Drivers for the development of luxury e-commerce
Figure 20. Interactions with digital carriers in each phase of consumption
Figure 19 China’s unique digital dynamics Purchase stage
Mobile internet
market size RMB 27 trillion
Unit: RMB100 million
Generating Browsing Selecting Purchasing Returns/service
38.2% demand /searching /verifying
online sales in overall
retail sales 14124.1 14823.3 14989.3
53% of consumers 55% of consumers 50% of consumers 41% of consumers 48% of consumers
12977.6
10844.7
Year-on-year
growth use search engines conduct search and are recommended make purchases expect to make
Highest worldwide study through products by friends online and choose requests to return or
38% of consumers third-party product and families via home delivery or get a refund through
(global average ratio is get product comparison websites social media picking up in stores smart phones or by
8.6%) Third-party mobile information via computer
social media 54% of consumers 49% of consumers
2016 2016 2016 2016 2017
payment
would browse the would read product
Q1 Q2 Q3 Q4 Q1
Transaction volume
official website comments online in
Source: UN
before going to this phase
offline stores
Consumers spend half of 57% of retail sales is 36% of consumers
their time on major under digital influence Logistics demand obtain feedback via
internet company driven by social network sites
products e-commerce
48% The number of 2016 Source: Deloitte Cross Digital Divide
42% Offline Only Online retail
12% 8% Alibaba 13 packages
17% 30 % delivered
18% Baidu %
19% 16% Tencent 57
2006
In this new digital environment, luxury brands have made numerous
PC Mobile
% attempts to enter the world of online sales. According to the L2 report, as of
Digital Influence 1 Billion 30 Billion
May 2017, only 9% of fashion brands did not have online sales channels, 57%
lower compared with the figure last year. The number of luxury brands running
Source: Deloitte China Digital, Enfodesk, iResearch direct e-commerce platforms and WeChat e-commerce has grown significantly
from 2014 to 2017. As of May 2017, 40% of fashion brands and 38% of luxury
watch & jewelry brands have developed direct e-commerce business, an
Based on a survey by Deloitte on consumer behavior, 85% of consumers
increase of 20% and 24% respectively compared with that of 2014. At the
state that they are influenced by digital carriers to varying degrees. Before
same time, luxury brands are also beginning to make inroads into WeChat's
making the decision to purchase, consumers may be influenced by a number of
one-to-one ecological system to sell small-lot products. This has resulted in 6%
key factors including website information, social media and user comments;
of fashion brands and 14% of watch & jewelry brands now operating WeChat
nearly half of consumers expect to have continual after-sale service through
shops.
online channels after purchase. Digitalization has penetrated every aspect of
consumer needs, and omni-channel strategy has become one of the important
paths for enterprise development.
23 24CHAPTER 1 CHINA LUXURY
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1.3 Drivers for the development of luxury e-commerce
Figure 21. Usage of online channels by luxury fashion brands
2014 2016 2017
50%
45% 43%
40%
35% 33% Figure 23. Social media usage
30%
25% 23%
20% 20%
20%
15%
10%
5% 5%
5%
0% 0%
0%
Direct brand websites E-commerce platform WeChat Shops
Source: L2
Figure 22 Usage of online channel by luxury watch & jewelry brands
Youku Weibo WeChat
2014 2016 2017
35% 33% Source: L2
30%
25% 22% 22%
20% 17%
14% 14% 14%
15%
Based on this current trend, despite multiple online sales attempts, luxury
10%
brands are yet to transform their network influence into actual increase in sales.
3%
5% Luxury brands need to utilize more diverse and innovative methods to build
0%
0% connections with consumers. By doing this, luxury e-commerce would be able
Direct brand websites E-commerce platform WeChat Shops
to enter a new round of opportunities for growth.
Source: L2
Luxury brands are also operating more digital channels and using them as
a means of marketing. WeChat and Weibo are the social media most used by
luxury brands for digital marketing. The L2's survey results show that almost all
the brands surveyed conducted marketing promotions through WeChat and
Weibo in 2017. At the same time, luxury brands are shifting their focus to the
most popular short video and stream media platforms.
25 26CHAPTER 1 CHINA LUXURY
E-COMMERCE WHITEPAPER 2017
1.3 Drivers for the development of luxury e-commerce
Against the backdrop of geographical limitations and store adjustments,
certain luxury brands are beginning to embrace e-commerce channels, which
have helped them reach out to more consumers. According to Secoo’s
business data, in the fiscal year of 2016, Secoo provided products and
services to a total of 300,000 consumers covering 379 cities and, to a certain
extent, helped luxury brands connect with more consumers in more regions.
Although in terms of total number of consumers in different cities the top 30
cities were still first-tier and major second-tier cities covered by traditional
luxury sales channels, those from the other 349 cities accounted for nearly
38% of the total. In this sense, the purchase power in places beyond first and
03
second-tier cities is also of great importance if luxury brands want to realize
E-commerce is helping luxury brands higher sales growth.
reach out to more consumers
Figure 24 Percentage of total consumers
Although traditional sales channels remain the primary method for luxury
goods sales, the development of luxury e-commerce has also enabled many
luxury brands (especially some niche brands) to connect and interact with more 37.91% Top 30 cities by the number of consumers
consumers. Luxury brands have always been relatively cautious in terms of store
Other 349 cities
development, as they tend to open and run their stores mainly in first-tier and
62.09%
some key second-tier cities, which results in a lack of effective methods to build
connections with consumers in areas without stores. Meanwhile, luxury brands
are also making adjustments to their existing stores to better improve their value
and reduce costs. Results of a survey conducted by Bernstein, an investment
research firm, show that from July 2016 to July 2017 a total of 62 offline stores
were closed by the 36 luxury brands surveyed.
Source:Secoo
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CHAPTER 2
Portrait and preferences of online
luxury consumers
An increasing number of luxury brands are considering or have
moved into the booming e-commerce sector. However, who are the
core luxury consumers online who have stimulated this growth? Why
do they choose to purchase online? What are their preferences?
Answers to these questions are what these brands aim to address
when developing their e-commerce strategies.
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CHAPTER 2 E-COMMERCE WHITEPAPER 2017
2.1 Portrait of core consumers in luxury e-commerce
Age Factor: Post-90s main force are already aged 27
Millennials have become the main force of consumption in China’s luxury
market with even younger consumers joining them. Although they have a
much smaller income and/or a lower amount of assets than their parents,
they do have more disposable income and are more willing to spend. No
longer concentrated in core cities, these millennials are now spread over
various key cities and surrounding areas in China. Their expenditure mainly
revolves around cars, education, sports and finance in daily life, with a
particular fondness for sports and foreign travel as well as migrating/studying
overseas and education.
The TGI index: Unless otherwise stated, the TGI index herein refers to
the ratio of target groups’ corresponding behaviors and Tencent users’,
In Depth Docking of Secoo and Tencent
reflecting the difference between target groups’ performance regarding a
In order to gain an accurate understanding of Secoo’s 15 million
certain behavioral characteristic and the overall level. Generally, when TGI
exceeds 100, target groups are considered to have significant characteris- users’ Internet behavior except from Secoo app, Secoo collaborates
tics. The higher the value, the stronger the target groups’ characteristics are. with Tencent, which has the most users on the Internet in China, by
docking Secoo users’ IDFA to Tencent database. Thus It makes
consumer path be clear at a glance.
Abundant Cross-platform Data
Tencent provides media, social network, entertainment, Internet
and mobile phone value-added services and operate online advertising
services. This whitebook is benefited from the Secoo’s user behavior
data of Tencent’s multiple platforms at different devices and time frames.
Scientific 6 Key Labeling Systems
Tencent’s DMP profiling technology categorizes users on 6 labeling
systems, namely essential characteristics, social network behavior,
media interest, app using behavior, business interest and entertainment
preference, to present crowd characteristics of Secoo’s 15 million users
in depth.
31 32illennials have b
CHINA LUXURY
CHAPTER 2 E-COMMERCE WHITEPAPER 2017
2.1 Portrait of core consumers in luxury e-commerce
Research Methodology
The whitebook makes an all-dimension analysis of the real time full
data of Secoo’s users from 2014-2016 to achieve theaccurate profiles of
them.
The docking to Tencent’s big data makes it possible to analyze
Secoo’s user behavior chain,including 4 brand exposur eelements,
platform redirect element and 5 e-commerce conversions elements.
Note:This white book is made inOctober,2017.A year in thiswhitebook
in dicates the period from the previous October to September of the
year.For example,the year 2016 means October 2015 to September 2016.In
addition,all the Secoo’s data is from online data of Secoo Mall.
33 34CHINA LUXURY
CHAPTER 2 E-COMMERCE WHITEPAPER 2017
2.1 Portrait of core consumers in luxury e-commerce
Age Factor: Post-90s main force are already aged 27
50% of online luxury consumers are aged between 25 and 35,
with nearly 30% of them aged between 25 and 30. Another 15% are
even younger, between 18 and 24. The percentage of the 18-30 age
group is increasing, which means that the post-90s generation has
gradually become a new force of consumption in the market.
Figure 1. Online luxury consumers by age
Luxury consumers by age
100% 100% 100%
4% 5% 4% 1 17 Aged 1-17
13% 15% 18 24 Aged 18-24
Millennials have become the main force of consumption in China’s luxury 15%
market with even younger consumers joining them. Although they have a
much smaller income and/or a lower amount of assets than their parents, they 28%
28% 29% 25 30 Aged 25-30
do have more disposable income and are more willing to spend. No longer
concentrated in core cities, these millennials are now spread over various key
cities and surrounding areas in China. Their expenditure mainly revolves 22%
21% 21% 31 35 Aged 31-35
around cars, education, sports and finance in daily life, with a particular
fondness for sports and foreign travel as well as migrating/studying overseas
16% 15% 15% 36 40 Aged 36-40
and education.
The TGI index: Unless otherwise stated, the TGI index herein refers to the 15% 41 50 Aged 41-50 and
14% 14%
above 51
ratio of target groups’ corresponding behaviors and Tencent users’, reflecting 2% 2% 2%
51
the difference between target groups’ performance regarding a certain behav- 201510-201609 201610-201709 201510-201709
ioral characteristic and the overall level. Generally, when TGI exceeds 100,
target groups are considered to have significant characteristics. The higher the Source: secoo.com, Tencent
value, the stronger the target groups’ characteristics are.
35 36CHINA LUXURY
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2.1 Portrait of core consumers in luxury e-commerce
Figure 2. Online luxury consumers at city level
Luxury consumers at city level
Beijing
Core
cities Guangdong
Province
Sichuan
Province
Other
cities
Shanghai
Key
cities Jiangsu
Province
Zhejiang
Province
Core cities: Beijing, Shanghai, Guangzhou
Key cities: Shenzhen, Chengdu, Wuhan, Dalian, Shenyang, Tianjin,
Hangzhou, Ningbo, Nanjing, Chongqing, Changsha, Wuxi, Qingdao, Suzhou
Source: secoo.com, Tencent
Figure 3. Comparison of purchase behaviors at city level
Regional factor: Frequent and increased number of
Comparison of purchase behaviors at city level
purchases in non-core regions
Percentage of
Annual consumption Percentage of purchasers
frequency re-purchasers consumed at least
three times
22%
Calculating by number of consumers, core cities and key cities still
account for nearly 50%. In particular, the number of luxury buyers in core Top 20 (other cities)
52%
cities is well above the average among the total urban population. By
province, Sichuan has outstanding performance. In terms of purchasing 26%
power, purchases in core cities tend to be stable and rational, while Core cities
medium and small-sized cities in non-core regions are showing strong
momentum. Looking at purchase frequency and repeat purchases, all the
Key cities
top 20 cities are non-core/key cities, where the average annual consump-
tion frequency is 40% higher than that in the core cities, and the percentage
Core cities: Beijing, Shanghai, Guangzhou
of consumers making repeat purchases and for three times and above Key cities: Shenzhen, Chengdu, Wuhan, Dalian, Shenyang, Tianjin,
Hangzhou, Ningbo, Nanjing, Chongqing, Changsha, Wuxi, Qingdao, Suzhou
among the total purchasers outperforms core and key cities.
Source: secoo.com, Tencent
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CHAPTER 2 E-COMMERCE WHITEPAPER 2017
2.1 Portrait of core consumers in luxury e-commerce
Figure 5. Online luxury consumers by educational background
Luxury consumers by education background
Doctor,
Postgraduate, 1%
6% Junior high
school and
below, 22%
Identity Factor: highly educated, male and married
Senior high school,
Most luxury consumers are highly educated with 67% having a bache- TGI=130 10%
lor’s degree, a slight increase over the previous years. According to gender,
Undergraduate,
men make up 51%, slightly higher than women. This is partly due to the 60%
business needs of highly educated men. Luxury consumers mainly comprise
of married couples as well as mothers & infants. Junior high Senior high Undergra Postgra
Doctor
school and below school duate duate
Luxury consumers by gender Source: secoo.com, Tencent
Figure 6. Online luxury consumers by family status
Luxury users by family status
奢侈品用户婚恋状态
Single
Married
Infants and
mothers
0 50 100 150 200
Figure 4. Online luxury consumers by gender
Source: secoo.com, Tencent Source: secoo.com, Tencent
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CHAPTER 2 E-COMMERCE WHITEPAPER 2017
2.1 Portrait of core consumers in luxury e-commerce
Interests: extreme sports, tourism and immigration,
overseas education
Luxury consumers are interested in studying abroad and education as
well as healthy sports, finance and cars. Compared with previous years, they
continue to enjoy travel and education, while the data of this year indicate a
growing enthusiasm for extreme sports, immigration and studying abroad. Figure 8. Device brands used by online
Over 60% of luxury consumers purchase high-end mobile phone brands, with Over 50% of luxury consum- luxury consumers
half of them being Apple fans. Luxury consumers have downloaded APPs ers use high-end mobile phone
Preference
related to health, communication, office and wealth management onto their brands, with one third of them
mobile phones, and use online ticketing, astrology and food services more being Apple fans. Huawei, a
through WeChat. For entertainment, they prefer purchasing objet d’art as well domestic mobile phone brand,
as music such as blues, Latin and jazz. These activities strongly suggest that ranks the second place.
luxury consumers are choosing to spend more on experiences and an overall
better quality of life.
Luxury consumers are more interested in education, sports, finance and
cars. In terms of sports, compared with previous years, their attention to more
niche extreme sports and aquatic sports has increased over 50% in compari-
Source: secoo.com, Tencent
son to gym activities. There is also an increased interest in immigration/study-
ing abroad as well as language and education programs.
Luxury consumers download more APPs about travel, health, communi-
Figure 7. Online luxury consumers by commercial preference cation, office, wealth management on their mobile phones. Online games and
mobile phone games, which have become highly popular this year, are still yet
Cars
Finance
Education to attract them.
Sports
Figure 9. Mobile phone APPs online luxury consumers preference
Games
Job hunting and recruitment
Animation and novels
Luxury consumers by Travel
commercial preference
Preference for Communication
Health
Office
mobile phone Wealth management
APPs Online games Utility
Sports Business service Education
Role play
Aquatic sports Immigration |studying abroad Language training
Extreme sports Marketing and public relations
Running and cycling
Ball games
Sports equipment
Gym Activities
Source: secoo.com, Tencent
Source: secoo.com, Tencent
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2.1 Portrait of core consumers in luxury e-commerce
Luxury consumers particularly use online ticketing, astrological and
food services through WeChat services.
Figure 10. WeChat Service preference of online luxury consumers
In terms of recreational activities, luxury consumers pay more attention
Preference for WeChat Service
to objet d’art, TV series, cultural and artistic pursuits than other groups of
people. Their enthusiasm for comedy and variety shows has declined over
Food
the last year while their interest in TV series, culture and art grows. As for
musical preferences, they prefer European and American music from the
1970s to the 1990s, with a particular keenness for the blues and jazz as well
Constellation
as Latin music.
Online ticketing
Figure 12. Recreational activities of online luxury consumers
Recreation (TGI index)
Source: secoo.com, Tencent
Recreation Track era Music genre
Cultural articles and
248 1970s 188
Luxury consumers prefer to travel in Europe and Asia. Among these antique
199
destinations, the UAE, Italy, France and Germany are the main tourist choices. TV series 157
1980s 147
Culture and art 156
Figure 11. Foreign travel preference of online luxury consumers 178
1990s 128
Animation 147
Preference for foreign travel
Books and magazines 146 2005-2009 109 159
KTV 144
2000-2004 110
159
Movie 126
Entertainment and 2010-2014 105
gossips/ Constellation & 115
jokes 144
100 2015 and beyond 101
Variety show
UAE Italy France Germany Singapore Japan Portugal
Source: secoo.com, Tencent Source: secoo.com, Tencent
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2.2 Motivation for purchasing luxury goods online
Figure 14. Luxury purchasing methods
Luxury purchasing methods How would you prefer to purchase your favored luxury goods?
(240 samples aged averagely 20-30)
Purchase online, pick Others
up from offline outlets
11.3%
0.4%
The millennials have made their grand debut into the world of luxury
consumption. They follow the principle of “being good to yourself”, just as they 24.3%
follow their favorite fashion icons when dressing up for parties and events.
Purchase online, deliver
Aside from the quality aspect that they value when purchasing luxury goods, home/company 64.0%
Offline physical stores
“being good to yourself” remains their primary motivation. Compared with their
parents, this generation is more individualistic and see luxury goods as a means
of achieving a higher quality of life.
Source: Deloitte’s luxury report Bling it on
Figure 13. Motives for luxury purchase
Motives for luxury purchase I want to be good to myself Figure 15. Reasons for online luxury purchases
17.8%
What is the main reason What do you value most in online luxury purchases?
for luxury purchase? Luxury goods are high quality
17.8% (Single choice)
(240 samples aged
averagely 20-30) I want the latest
15.6% 8,932 respondents
It makes me feel cool
14.9% Coverage in my region:10.2%
It makes me look awesome
11.6%
Luxury goods last longer Flexible purchase:17.24% Other: 36.89%
9.7%
I want to amaze my friends/
family members/colleagues 5.4%
Influenced by celebrities and stars
4.4%
Luxury brands/ companies have
higher ethical standards 2.7%
Convenient order placemnet: 35.75
Source: Deloitte’s luxury report Bling it on
Source: secoo.com
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2.2 Motivation for purchasing luxury goods online
Figure 16. Future trends of online luxury purchases
No, because:
Will you spend more online (including times
and amounts) in the future?
8,932 respondents
Yes:
Source: secoo.com
As a result, the younger generations are more accustomed to searching
for the latest fashion online. About 35% of these consumers purchase luxury Figure 17. Reasons for purchasing luxury goods in physical stores
goods online, while almost 100% of them will increase the frequency or
number of online purchases in the future. This is a completely logical predic-
Consumption motivation I can touch/experience
tion, especially given the convenience of online shopping in be able to in physical stores products 25.0%
purchase from an incredibly large range of goods without even setting foot into
What is the main reason for I can try on products 21.3%
a physical store. These consumers still make purchases primarily at physical luxury purchase in physical
stores? (240 samples aged It is easier to compare
stores, but more interestingly, their visits to physical stores are not for products/styles 15.9%
averagely 20-30)
shopping per se but to see and experience the product firsthand. In most
Browsing is more convenient 14.0%
cases, consumers have already done their homework online before going to
the offline stores to simply do what they can’t do online. In other words, online Suggestions/help from 14.0%
professional salesclerks
and offline channels are not in opposition to each other in the eyes of these Greater range of
consumers but two stages in completing the whole shopping experience. products/more sufficient stock
compared with online channels
7.8%
However, it also reflects that physical stores of luxury brands are becoming Enjoy shopping experience 2.0%
less attractive to young people. In order to appeal to this consumer group,
brands need to consider how to create an unparalleled shopping experience
Source: Deloitte’s luxury report Bling it on
through online and offline integration.
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2.3 Consumer preferences for luxury goods
Figure 18. Demands for customized luxury goods
Customized demands Are you willing to pay extra fees for customized luxury goods? (240 samples
aged averagely 20-30)
No
20.9%
Niche brands meet the demand of the masses
40.6% Definitely yes
As popular culture becomes segmented, a greater number of
consumers are increasingly attracted to niche brands, reflecting the
more specialized trends within fashion while also aiming to meet the
consumers’ demand for more unique individualized products. For
example, as Chinese hip-hop culture is emerging from underground to
Maybe
38.5%
more mainstream, more young people are beginning to recognize and
follow the fashion brand Supreme. Their pursuit of personalized
products will promote the development of niche brands in more
vertical sectors. Moreover, personalized custom-made products meet
Source: Deloitte’s luxury report Bling it on
most of the expectations of luxury consumers, even if it is at an extra
cost.
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2.3 Consumer preferences for luxury goods
Figure 19. Deciding factors for purchasing luxury goods-
What do you look for the most when deciding to purchase luxury goods? (Only one choice)
8,932 respondents
Price 26.04%
Consumer experience 11.31%
Professional Key Opinion Leaders (KOLs)
Younger generation consumers tend to think more carefully before
making decisions. They are no longer satisfied with how unique a Style 35.17% Quality 27.49%
product is, with value maximization being a main consideration. Other
important factors which guide their decisions are style, quality, price and
overall suitability. In terms of the question where this influence on their Source: secoo.com
decision-making comes from, fashion brands still hold sway over
consumers’ decision-making. In China, most consumers will search for Figure 20. Deciding influences on purchasing luxury goods
information released on brands’ official websites or in flagship stores. It
Deciding influences Which of the following has the greatest influence on your decisions to purchase
is also the reception of these luxury trends by celebrities and key opinion luxury goods? (240 samples aged 20-30 on average)
leaders (KOLs) that also hold a strong influence over the younger
demographic purchase decisions. Your friends
19.2%
An important factor to note is that as niche fashion grows, the
influence of stars and celebrities on the popularity of luxury goods has
Brands
lowered to 4.4%, while KOLs’ influence has substantially increased. 44.8%
KOLs have become segmented as well, with more professional KOLs
becoming more specialized in and focused on a certain field, such as in
hip-hop culture, cocktail culture and history. These individuals or groups
Your favorite celebrities 36.0%
may not be particularly famous and could even be completely unknown
/influencers
outside their own circle, but, with an increasingly-specialized expertise
and deeper understanding of fashion trends, they have gained attention
and recognition from an increasing number of young people who are Source: Deloitte’s luxury report Bling it on
looking for more niche culture.
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2.3 Consumer preferences for luxury goods
Figure 22. Luxury characteristics
Characteristics of luxury goods What are the key characteristics of luxury goods that attract you
Multi-brand loyalty compared with non-luxury goods? (240 samples aged 20-30 on
average)
This consumer group shows higher loyalty to brands. Nearly 60% of
31.4%
them consistently purchase the products of a few certain brands with around High-quality products
26.4%
35% making selections across many brands. As the Chinese market grows Unique products
10.9%
increasingly more mature, consumers have more brand choices, which Back Stories
8.8%
places more challenges on these brands. How to improve consumer loyalty Tradition/reputation
6.7%
is a question of long-term strategy. Unique products with excellent quality are Celebrity endorsement
6.3%
the main reason for consumers why choose to keep following a brand. Somehow relevant to me
4.2%
Another guiding factor for this younger generation of consumers is social Interesting
responsibility, therefore they also value brands’ social sustainability and 2.5%
Inspiring
ethical standards. Aside for merely purchasing a nice-looking product, luxury 1.7%
Popular among friends
consumption is also a reflection of the consumer’s identity and what they
want from life and society as a whole. Brands need to create positive
messages on sustainability and social responsibility, in order to build a Source: Deloitte’s luxury report Bling it on
long-lasting connection with consumers.
Figure 23. Attention to sustainability
Figure 21. Luxury brand loyalty
Attention to sustainability Are you concerned about a brand’s sustainability and ethical standards
Brand loyalty Which is the most accurate description that applies to you when you purchase before purchasing products? (240 samples aged 20-30 on average)
luxury goods? (240 samples aged 20-30 on average)
Never
I only consider one brand I like Rarely
8.0%
I only buy what I like, 6.7% 0.4%
regardless of brands 6.7%
I mainly consider a few favorite brands
51.9% Always 38.5% 53.1% Sometimes
I consider a range of brands I like 34.7%
Source: Deloitte’s luxury report Bling it on Source: Deloitte’s luxury report Bling it on
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CHAPTER 3
Challenges to and reflections on luxury
e-commerce
Following the shift of consumer power to younger generations
and the continuous development of commercial digitalization, e-com-
merce is now the new frontier for luxury brands. Prior to 2016, luxury
brands had already started to make their online presence known with
digital marketing, with an impressive array of remarkable luxury digital
marketing cases. However, only a few brands made the leap into
digital sales, e-commerce, but they did not go any further. However,
since 2016, more and more players in the luxury market have started
to develop their online capabilities, seeking to connect digital market-
ing and sales. A closed loop with higher conversion rate has been
formed, and transformation has been significantly enhanced in terms
of depth and breadth.
However, throughout the process of e-commerce development
for numerous luxury brands, there has yet to be a recognized
successful case study. Most luxury brands are still at the trial and
exploration stage. We have observed that after stepping beyond the
boundaries of their more-traditional sales practices, luxury brands
have faced enormous challenges that are far beyond their expecta-
tions. The challenges confronting luxury brands mainly fall into the
following three areas:
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Challenge 3: E-commerce is not “another new channel” – the necessity
of transforming to an omni-channel business model
Challenge 1: Selecting the right business platform As consumers become more demanding and retail technologies
Compared to the familiar offline channels, online channels are a continue to develop, retail models across the world, especially in China,
brave new world for luxury brands. This is against the backdrop of have started on the path of developing from the traditional
e-commerce development in the Chinese market long surpassing the channel-based purchase model to a scenario-based purchase model.
European and US markets. Therefore, there is only so much that multina- Online and offline channels are no longer divided in the eyes of many
tional companies can learn from foreign markets. How should a brand consumers. All consumers need are personalized shopping experiences
choose between integrated e-commerce platforms, vertical e-com- that are convenient and seemingly seamless; or to put it more succinctly,
merce platforms, social platforms and self-built brand websites? How “what they think is what they see, what they see is what they get”.
should the operational difficulty and input-output ratio of different Therefore, for luxury companies, e-commerce is not simply about setting
platforms and models be considered? How to align with the brand’s own up an “e-commerce department”, separate from existing channels, but
offline channels and maintain the price systems between different aims to links digital marketing as well as sale and offline channels as a
channels? Does the platform’s image match the brand? How to fight whole. A transformation to an omni-channel business model is needed.
against counterfeits? Does a company need to consider different models Luxury companies need to consider how to move away from the
or even composite models during different periods and under different separated channel-based business model and internal management,
circumstances? These are all pressing issues that need to be addressed and build a truly customer-oriented, omni-channel, high-end experience
by luxury companies. as well as an effective operation plan behind.
Challenge 2: Creating a unique e-commerce experience
Customer experience is a key concern for luxury brands, in which
high standards with impeccable detail is at its core. Consumption paths
and key influence points of online luxury goods are notably different from
those in their offline counterparts. Driven by the digitalization trend, the
existing high standards of consumer experience are further extended.
Apart from how products are displayed online, the customer experience
is more of a question of the transmission and interaction of customized
information based on the in-depth analysis of the consumer. Luxury
e-commerce requires more than flawless visual presentation. Compared
to the precision marketing of mass consumer products, there needs to
be a focus on customized exclusive service, which attracts to internet
natives’ self-oriented digital experience.
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3.1 Challenge 1: Selecting the right business model
Figure 1. Interpretations of the models for luxury brands to enter the e-commerce market
Integrated Vertical
e-commerce e-commerce Social platform Self-built website
platform platform
Brief Enter large integrated Enter vertical Enter social platforms Establish the official
platforms, and set up e-commerce that manage users website with the brand
introduction direct-sale stores for platforms, and through brand names name as the domain
of the model the brand cooperate in a variety and deliver a variety of name
of ways services
• Set-up can be • Be able to quickly • Huge number of • Be able to maintain
completed more develop customized active users on the high level of
quickly on an solutions by mainstream social consistency and
already-developed partnering with platforms flexibility of brand
platform based on its professionals in the • Be able to achieve a image
templates luxury e-commerce variety of functions, • Full control of content
• Relatively low industry including online sales, and platform
investment with direct • Relatively low marketing, customer • Ownership of all
access to ready-made investment, with relationship resources, including
Advantages templates access to management, etc. user data, etc.
• Integrated platforms resources and the • Simple model • Creating an
have certain traffic high-end image of construction of independent space
advantages the platform WeChat public to interact with
• Be able to benefit from • Directly facing the account and consumers
the technical and luxury users and micro-stores
resource advantages potential users to (Weidian) and
of the platform by achieve higher relatively low
Given China’s unique digitalization environment, online retail has become leveraging more digital conversion rate; threshold
means users’ acceptance • Socialization is in line
a significant part of the overall retail market. Due to its continuous rapid of full- price with the major trends
products is higher in the Chinese market
growth, the penetration of online retail has increased year on year. Meanwhile,
digital marketing has become an important way for brand companies to carry • Customer experience • Starting at a late • The role of social • Requiring large-scale
and content are stage, it takes a platform is more investment in the
out marketing and manage their users in China. The core issue remains subject to the certain amount of related to customer early period and
platform's constraints time to accumulate operations than ongoing investment in
though of how brand companies should set out their online strategies based • Rising platform costs user resources and e-commerce the later period with
• The public platform to fully utilize word • In order to better high investment risk
on their own conditions, this report summarizes the representative models may have an impact on of mouth, and serve consumers , • High demands for
the brand image forms a positive WeChat can serve as multifaceted resource
used in the Chinese market. Different models have their own respective • Platform users are business model a diversion tool rather mobilization and
Points to note mostly price sensitive • The professional than a complete integration, and
characteristics, and luxury brands should design their online strategies in a users who look for level of each vertical solution. higher demands for
discounts and platform is uneven, internal management
systematic manner based on their own strategic directions, brand needs and promotions and the brand and operation
• Possibility for needs to be • There is a need to
brand characteristics. counterfeiting by other cautious in making continuously
sellers on the platform the right choice. encourage users and
accumulate traffic
Source: Deloitte Analysis
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