2017 CHINA LUXURY E-COMMERCE WHITEBOOK - Deloitte
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CHINA LUXURY
E-COMMERCE WHITEBOOK
2017
W W W.SECOO.COM
CONTENTS CHINA LUXURY
E-COMMERCE WHITEBOOK
01 CHAPTER 1 01-28
Development Trend of Luxury E-commerce Industry
1.1 Development Situation of Luxury Market.
1.2 Rapid Develpment of Luxury E-commerce
02
1.3 Driving Factors of Luxury E-commerce
CHAPTER 2 29-54
Portrait and Preferences of Luxury Network Consumers
2.1 Introduction to Data Sources
2.2 Portrait of Luxury E-commerce Core Consumers
2.3 Luxury Network Consumption Motivation
03
2.4 Luxury Consumption Preference
CHAPTER 3 55-78
Challenges to and Reflections on Luxury E-commerce
3.1 Seleting a Suitable Business Model
3.2 Creating Unique E-commerce Experience
3.3 E-commerce is Not "Another New Channel" a Reform in
04
Omni-channel Business Model is Urgent
CONCLUSION 79-80
01
CHINA LUXURY
E-COMMERCE WHITEBOOK
CHAPTER 1
Development Trend of Luxury
E-commerce Industry
Worldwide luxury market has seen obvious fluctuation due to
economic growth and strategy changes. As the global economy
continues to recover, the luxury market also welcomes an overall
recovery and constant moderate growth. Chinese market, after a
three-year economic downturn and a series of economic shocks,
has begun to revitalize in 2016. Hopefully, china luxury market could
maintain a stable growth trend under the big picture of
medium-to-high-speed economy development. In addition, the
influence of the development of global digitalization on the luxury
market is becoming more obvious. Although the traditional sales
channel still serves as the major distribution way of luxury, the year
2016 has witnessed a double-digit growth of online sales channel
while the growth of traditional channel was only 2% in the
corresponding period. In china, the growth of online channel is also
prominent with its penetration gradually deepened. The rise of new
generation of consumers, the deepening of the digitalization of retail
business and the constant increase of luxury e-commerce users will
help to continue the trend.
01 02
CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.1 Development Situation of Luxury Market
01 Development Trend Analysis
of Worldwide Luxury Market
Figure 1 Worldwide Luxury Sales and Growth Rate (2011-2021)
500 9.00%
7.19% 450
450 8.00%
402 416 425 439
400 389 7.00%
361 370 368 370 377
350 6.00%
300 5.00%
3.32% 3.56% 3.36%
250 4.00%
Luxury consumption begins to pick up and it can 3.21%
2.48%
hopefully maintain stable growth in future. 200 3.00%
2.44%
1.39% 2.51%
150 2.00%
After an obvious fluctuation, the worldwide luxury market has started to
100 1.00%
grow stably. In the overall context of fragile recovery of global economy, the 0.49%
growth speed in worldwide luxury market started to slow down since 2011, 50 0.00%
-2.48%
and negative increase occurred in 2013; while in 2014 and 2015, there was 0 -1.00%
recovery lasting through 2016. Throughout the year of 2016, the actual overall 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
scale of worldwide luxury market has increased by 3.32%, over $389.2 billion.
Influenced by the recovery of global economy, the worldwide luxury consump-
tion is expected to step into a stable development stage in next five years with Sales of Worldwide Luxury ($, 1 billion) Growth rate
about 3% increase rate.
Source: Euromonitor International
03 04
CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.1 Development Situation of Luxury Market
Figure 2 Percentage Countries Taking up in Worldwide Luxury Market (2016)
The United States
The luxury sales in China and the United States hold a lead. China
23% 22% Japan
In terms of sales scale, China and the United States are the two largest France
luxury markets, with their total sales accounting for over 40%. In 2016, the 2% England
luxury sales of the United States took up 22% of global sales; China market, 2% Italy
with its percentage of 21%, ranked second only to it. In the past five years, 3% Germany
owing to the strong economic recovery, the luxury sales of the United States 4% 21% Korea
have remained a continual high growth trend, and in the period between
5% Hong Kong
2011-2016, the country has become the luxury market with largest increase
amount worldwide, with absolute increase of $12 billion; Japan ranked second
5% 6% 9%
Canada
Other Countries
with that of $7.2 billion. But during the same period, China luxury market
performance has been regarded as one of the worst due to economic
Source: Euromonitor International
slowdown, exchange rate fluctuations and strategy changes, which resulted in
negative sales growth and to some extent contributed to the United States’
becoming the largest luxury market. Figure 3 Worldwide Luxury Sales Growth ($1 billion) (2011-2016)
0 2 4 6 8 10 12 14
The United States 12.00
Japan 7.20
Korea 3.34
England 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
CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.1 Development Situation of Luxury Market
03 China Luxury Market Status
Figure 5 Percentage of China Different Luxury Categories Sales (2016)
Luxury consumption recovery may lead to stable
growth in future.
Wine
Apparels and footwear (ready-to-wear)
In 2016, with overall sales reaching up to RMB 498.3 billion, China luxury
Leather products
sales ranked second only to the United States, taking up 21% of global sales.
Clock & watch
China luxury market has started to recover since the slowdown from 2013 to Jewellery
2015, and its luxury sales have increased by 8.4% compared to the last year. Cosmetics/personal care products
It is prospected that hopefully China luxury market can step into a mild and Glasses
stable growth stage afterwards with home income increase, luxury brands’ Portable devices (electronic products)
adjustment of its price spreads in domestic and overseas markets, and the Stationary
waning impact of strategy changes.
Figure 4 China Luxury Market Sales and Growth Rate: 2011-2021
Source: Euromonitor International
Large scale of wine consumption and quick growth
of cosmetics consumption
Seen from the aspect of proportion of different luxury categories, luxury
wine are in the absolute dominant place, closely followed by apparel and
footwear. In 2016, the percentage wine luxury accounting for overall China
China luxury sales (RMB 1 billion) Growth rate luxury sales soared to 76%, apparel and footwear 7%, leather products 6%,
ranking the third place.
Source: Euromonitor International
07 08
CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.1 Development Situation of Luxury Market
Figure 7 China Luxury Consumption Percentage: Abroad VS Domestic
From the growth status from 2011 to 2016, it can be concluded that
during the period, the consumption of cosmetics/personal care products Abroad consumption Domestic consumption
has increased, while that of stationary and clocks & watch declined.
Considering that the compound average growth rate of China luxury
consumption has been -2%, the 9% annual growth in fields of cosmet-
ics/personal care luxury was quite conspicuous, followed closely by 6%
and 5% respectively in jewellery and apparel & footwear. In addition, the
consumption of leather products, glasses and portable devices has
increased by 3%. Among all luxury categories that experienced sales
decline, stationary and clock & watch has been in the bottom with 5% of
annual fall; the wine luxury sales began to recover significantly in 2016
again from its compound average growth rate of -3%.
Source: Fortune Character Institute
Figure 6 Compound Annual Growth Rate of Different Luxury Categories (2011-2016)
Consumption abroad has high share and
the growth speed starts to slowdown.
Seen from the proportion of consumption amount, in the past five
years, the transaction of China luxury mainly took place in abroad, with
only about 25% of domestic consumption. The growth speed of
consumption abroad has been higher than that of domestic consumption
till 2015, while the trend began to reverse in 2016 when there was an
increase of the proportion of domestic consumption as a result. It is
believed that this trend reversion is mainly a result of price adjustment of
products
Cosmetics/personal care
Jewellery
Apparels and footwear
Leather products
Glasses
(electronic products)
Portable devices
Overall luxury market
Wine
Stationary
Clock & watch
(ready-to-wear)
luxury worldwide, RMB devaluation and relevant taxation strategy, all of
which have led to recovery of domestic luxury consumption stimulated by
substitution consumption. Data from the Fortune Character Institute has
shown that compared to 2011, the China luxury price spread of in 2017
has declined obviously. At the policy level, relevant government policies
have stimulated the increase of domestic luxury consumption. Taking
import duty as an example, in 2015 and 2016, the government has
Source: Euromonitor International published several policies to reduce the import duty of apparels, cosmet-
ics and daily necessities, which have to some extent contributed to the
increase of luxury consumption.
09 10
CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.1 Development Situation of Luxury Market
Figure 8 Average Price Spreads between China Luxury and Worldwide Luxury (2011-2017)
2011 average price spreads 2017 average price spreads
Perfumes Make-ups Skin-care Apparels Footwear Luggage Jewellery Watches
products
Source: Fortune Character Institute
Table 1 Adjustment Policies of Import and Export Duties
Time Policies
Reduce the import duty rate of some apparels, footwear, skin-care
products and other daily necessities, as well as the import duty of
June 2015 business suits, roughcast house decoration products, bottines, sneakers,
diapers, skin-care products, etc.
Enlarge the duty reduction scope of daily necessities, and reduce import
duty by taxing with temporary rate for commodities with high duty rate yet
January 2016
high-demand like luggage, apparels, scarves, rugs, vacuum cup, sun
glasses and so on.
The Ministry of Finance issued Notice on Consumption Tax of Cosmetics
Import and Export, which stated that the cosmetics consumption taxation
September 2016 object has been adjusted to “top-grade cosmetics”, and reduced the duty
rate from 30% to 15%.
Source: Public Information Consolidation
11 12
CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.2 Rapid Development of Luxury E-commerce
Figure 9 Percentage of Different Sales Channels in Worldwide Luxury Consumption
2016 sales percentage Growth rate
01 Development trend
of worldwide luxury e-commerce Offline Online
There is a lack of growth in traditional channels, Source: Euromonitor International
but a rapid growth in online sales.
Figure 10 Online Luxury Sales ($1 billion)
The luxury industry is faced with various challenges. In terms of sales
channel, the traditional retail is still in domination, yet with a lack of power. Korea The United States China England Japan Germany
In 2016, the percentage of effective luxury sales through traditional offline
channels reached 91%, with only 2% year-on-year growth. Despite that
the percentage of the online sales was low as 9%, its 12% of growth rate
was quite worth noticing. In terms of market segment, during the period of
2011-2016, the online sales of the United States have come to $10.5
billion, being in the first place. At the same time, benefiting from the rapid
development of the overall e-commerce industry, online channels for
China luxury have developed with great leaps, ranking second only to the
United States. Luxury brands begin to speed up constructing their sales
channels and the consumption trend starts to change, which will lead to
deeper penetration of online luxury sales. Source: Euromonitor International
13 14
CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.2 Rapid Development of Luxury E-commerce
Figure 12 Proportion Distribution of Different Channel Sales of Different Categories (2016)
Offline purchase Online purchase
Traditional channels still take predominance with
rapid growth of online sales.
With traditional sales channels still being the mainstream, its share
continues to decline. In 2016, the offline sales accounted for 91.1%, with
1% of year-on-year decrease. From 2012 to 2016, the share of offline
luxury sales has declined constantly while the online penetration has
begun to increase. Despite of its small share at present, the rapid growth
of online luxury sales cannot be ignored. Influenced by consumer habits
change and omni-channel construction of luxury brands, online sales will
Apparels and footwear
Glasses
Leatherproducts
Cosmetics/personal
Clocks & watches
Jewellery
Stationary
(electronic products)
Portable devices
(ready-to-wear)
Wine
care products
hold bigger and bigger share that is predicted to reach 13% in 2021.
Figure 11 Percentage (Prediction) of Different Sales Channels in China Luxury Consumption (2011-2021)
Offline Online
Source: Euromonitor International
Seen from the aspect of category segment, consumers of different
categories of luxury prefer different purchase channels. For example,
online purchase of wind takes up 10%, ranking highest, followed by 9% of
apparels and glasses, 8% of leather products, cosmetics and personal
care products, being in the third place. While online purchase of some
other categories only occupies smaller percentage. According to
statistics, the online purchase of luxury portable devices (electronics) is
near to zero, and that of luxury stationary, jewellery, and clock & watch is
Source: Euromonitor International less than 5%.
15 16CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.2 Rapid Development of Luxury E-commerce
Continual Promotion of Omni-channel Strategy
Secoo provides consumers with an integrated offline and online
omni-channel for luxury purchase, including Secoo websites, mobile APP and
offline experience center. The online platform is established for consumers to
enjoy convenient services of selecting products, placing orders and finishing
Secoo Business Data Analysis
payment. And the offline experience center serves as a complimentary
channel that provides high-quality consumer and membership service and
Taking Secoo Group, the leading luxury vertical e-commerce as an experience. Viewing from the channel performance, online selling still acts as
example (here Gross Merchandise Volume (GMV) is applied instead of the major sales channel for Secoo platform. From 2015 to the first half of 2017,
business revenue): rapid growth of business scale and stronger earning the proportion of the online GMV is over 70% in the whole-platform business
capacity. revenue.
Figure 15 Secoo Business Revenue: Online VS Offline
Figure 13 Secoo GMV Scale and Growth Rate (2012-2016)
2012 2013 2014 2015 2016
Offline Online
488 806 1,657 2,572 3,470
RMB 1 million
Source: Secoo
According to Frost & Sullivan Report, based on GMV data, Secoo has
grown into Asia’s largest online luxury transaction platform in 2016. The period
from 2012 to 2016 has witnessed a multiplied GMV increase from RMB 488
million in 2012 to RMB 3, 470 million in 2016. In the past five years, Secoo
transaction volume has continually remained higher growth rate, which reflects First half of 2017
the growth trend of overall luxury e-commerce industry.
Source: Secoo
17 18CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.3 Driving Factors of Luxury E-commerce
01 New-generation consumers promote
the online consumption growth. Figure 17 Percentage of Different Channels for Luxury Purchase
Offline purchase Online purchase
China’s buyers of luxury tend to beome younger. According to the
statistics of World Luxury Association, the average age of China’s luxury
buyers is now 25 years old, 10 years younger than that in the past, which will
definitely affect the structure of luxury market participants. It is predicted that
this trend will continue in the future. Data from Euromonitor has shown that in
2015, the millennial generation and generation Z consumers own 34% of total
social income, which may increase to 50% in 2025 as forecast. Till then, new
generation consumers, represented by millennial generation and generation Z
consumers, will own half of the total income, and become the major consumer
group of China luxury market in 10 years.
Source: Deloitte Luxury Multi-country Survey for 2017 Global Powers of Luxury Goods
Figure 16 Percentage of Social Wealth
Notes: Generation Z (born after 1995), millennial generation (born from 1985-1995), Generation
X (born between the middle of the 1960s and the end of the 1970s) (35-54 years old), baby boomers
Generation Z Millennial generation Generation X Baby boomers (born between 1946 and 1964).
For new generation consumers as net users, online shopping is the major
method to purchase stuff since their birth. According to Deloitte Luxury
Multi-country Survey for 2017 Global Powers of Luxury Goods, 42% of
millennial generation consumers tend to purchase luxury online, higher than
Generation X (34%) and baby boomers (28%), which has reflected that new
generation consumers have higher-degree of acceptability and usage of
online channels when it comes to luxury purchase and that online channels
are becoming more and more important for luxury consumption. For luxury
brands, how to adapt to the new consuming habits of new generation
Source: Euromonitor International consumers will become a big challenge, and omni-channel strategy will
Notes: Generation Z (born after 1995), millennial generation (born from 1985-1995), Generation
become more and more important.
X (born between the middle of the 1960s and the end of the 1970s) (35-54 years old), baby boomers
(born between 1946 and 1964).
19 20CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.3 Driving Factors of Luxury E-commerce
Meanwhile, emerging digital media have become important channels for
Chinese new generation consumers to acquire luxury related information.
Emerging digital media account for as high as 75.6% in all the channels from
which the Chinese new generation consumers acquire fashion information,
while the traditional media only take up 24.4%. Specifically, among all the
digital media from which consumers get fashion information, brand websites
02
occupy 18.3%, being in the first place and followed by vertical fashion
websites of 16.4% and social media of 15%. Among traditional media, fashion The digitalization of retail industry supports
magazines, being the major channel, take up 17.6%, and friends and families the development of luxury e-commerce.
6.8%. The dependence degree of new generation consumer on digital media
will surely be an influencing factor of the choice of consuming channel.
Figure 18 Percentage of Channels from which Chinese New Generation Consumers Get Fashion Information China’s unique digital environment and deepening of digitalization have
imposed far-reaching impact on many aspects of retail industry. Statistics
have shown that in the past several years, there have been significant and
Others
Catwalk videos
rapid increase in the usage amount of mobile network, third-party mobile
Friends/families Catwalk videos
Brand websites payment and logistics and that the percentage of e-retailing in overall retail
Fashion websites channels has hit the global highest level. On the whole, at present 57% retail
Brand websites
Fashion magazines
Social media business in China’s retail market have been affected by digitalization, and in
Celebrities this kind of trend, the digital ability of retail business will become the defining
Weibo/blog
Weibo/blog
factor to determine if a company will successfully develop or not.
Fashion magazines
Although the offline channel still serves as the major sales channels of
Fashion websites Friends/families
Celebrities China luxury market, luxury e-commerce has started to develop steadily owing
Others
Social media
to the constant development of digitalization status of retail industry in recent
years. Influenced by China’s unique digital environment, more and more luxury
brands start to realize the importance of developing digital channels in China
Source: Deloitte luxury report bling it on
market.
21 22CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.3 Driving Factors of Luxury E-commerce
Figure 19 China’s Unique Digital Environment Figure 20 Interaction with Digital Carriers in Different Consumption States
Purchase stage
15.5%
Mobile Internet Market Scale
Unit: RMB 100 million RMB 27
TRILLION
Year-on-year growth
38.2%
2017
95%
percentage of e-retailing
in overall retail channels 12977.6
14124.1 14823.3 14989.3 Q2
10844.7
Generating
demand Browsing/searching Selecting/verifying Purchasing Returns/service
Highest worldwide 2016
(global average of 8.6%) Q2 Third-party mobile
53% of consumers
2016 2016 2016 2016 2017 payment use search engine
55% of consumers search and 50% of consumers get 50% of consumers get 48% of consumers hope
Source: UN
Q1 Q2 Q3 Q4 Q1
Transaction scale study through third-party
website for product
product recommendation
from friends and families
product recommendation
from friends and families
to make requests of
returns and refund
38% of consumers comparison via social media via social media through smart phones,
get product desk top computers or
information via social 54% of consumers tend to 49% of consumers read 49% of consumers read portable computers
10X
media browse its official website product comments online product comments online
Half of consumers’ time before going to offline stores
57% of the retail sales are Logistics demand 41% of consumers
took up by major Internet
under digital influence of e-commerce
36% of consumers get purchase online and
company products feedback via social websites choose home delivery and
picking up in stores
48% 2016
42% Offline Only Digital Influence
12% 8% Alibaba 13
The number of
30 % packages delivered
17% 18% Baidu
% Source: Deloitte Cross Digital Divide
19% 16% Tencent 57
2006
%
PC Mobile E-retailing
1 Billion 30 Billion
In such kind of digital environment, luxury brands have carried out various
trials of online sales. According to L2 report, till May 2017, only 9% of fashion
Source: Deloitte China Digitalization, Enfodesk and iResearch brands have not opened online sales channel, 57% decrease compared to
last year. The number of luxury brands running direct sale e-commerce and
WeChat e-commerce has increased significantly from 2014 to 2017. As of May
A survey conducted by Deloitte about consumer behavior has manifest- 2017, 40% of fashion brands and 38% luxury watch & jewellery brands have
ed that 85% of consumer requests are influenced by digital carriers to varying developed direct sale e-commerce, increasing by 20% and 24% respectively
degrees. Before purchase taking place, many factors could affect consumers’ compared to that of 2014; at the same time, luxury brands are also attempting
purchase behaviors like website information, social media and user to use WeChat, an one-to-one ecological system, to sell some small-lot
comments; after purchasing, about half of consumers hope to get continual products, and in fact, 6% of fashion brands and 14% of watch & jewellery
after-sale service through online channels. In can be concluded that digitaliza- brands are now operating WeChat shops.
tion has penetrated into every aspect of consumer requests, and that
omni-channel has become one of the important enterprise development
paths.
23 24CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.3 Driving Factors of Luxury E-commerce
Figure 21 Online Channel Usage of Luxury Fashion Brands
Seen from the current development status, despite that luxury brands
have carried out all kinds of online sales attempts, the Internet influence has
not yet transformed into the actual increase of product sales. Therefore, luxury
brands need to adopt more diverse and innovative methods to build connec-
tion with consumers, and hopefully, luxury e-commerce will welcome new
round of development opportunities.
直营品牌网站
Direct sales brand websites 电商平台
E-commerce
电商平台 platform 微信店铺
WeChat Shops Figure 23 Social Media Usage
Source: L2
Figure 22 Online Channel Usage of Luxury Watch & Jewellery
直营品牌网站
Direct sales brand websites 电商平台platform
E-commerce 微信店铺
WeChat Shops
Source: L2
直营品牌网站 电商平台 微信店铺
In the field of marketing, luxury brands begin to use more and more digital Direct sales brand websites E-commerce platform WeChat Shops
channels and methods. Wechat and Weibo have become the social media
mostly applied when luxury brands carry out digital marketing. The L2
research has shown that in 2017, almost all the brands studied have conduct-
ed marketing via WeChat and Weibo. At the same time, luxury brands are now
starting to focus on more popular short videos and stream media platform. Source: L2
25 26CHINA LUXURY
CHAPTER 1 E-COMMERCE WHITEBOOK
1.3 Driving Factors of Luxury E-commerce
Because of geography limitations and store adjustment, some luxury
brands tend to choose e-commerce channel to get to more consumers.
According to Secoo’s business data, in the fiscal year of 2016, Secoo provid-
ed products and service for 300 thousand consumers covering 379 cities and
helped luxury brands to access more consumers in different regions. In terms
of the total number of consumers from different cities, the top 30 are still first
and major second-tier cities that have access to traditional luxury sales
channel, but those from other 349 cities account for nearly 38%. Therefore, for
those luxury brands that want to realize more sales increase, the purchase
power in places apart from first and second-tier cities is also of great
03
Thanks to e-commerce channels, importance.
luxury brands are now accessible
for more consumers. Figure 24 Percentage of Total Consumers in Different Cities
Although traditional sales channel still serves as the major channel for
luxury sales, the development of luxury e-commerce has also provided an Top 30 cities with
large number of consumers
opportunity for many luxury brands especially some niche brands to connect
and interact with more consumers. In terms of store development and Other 349 cities
extension, luxury brands are always relatively careful, and they tend to open
and run their stores in first-tier and some important second-tier cities, which
results in a lack of effective method to build connection with consumers who
are not covered. Meanwhile, luxury brands are making adjustments to existing
stores to better improve their value and reduce costs. The investigation result
of Bernstein, an investment research firm, has shown that from July 2016 to
July 2017, 36 luxury brands have closed 62 offline stores.
Source: Secoo
27 2802
CHINA LUXURY
E-COMMERCE WHITEBOOK
CHAPTER 2
Chapter Two Portrait and Preferences
of Luxury Network Consumers
As luxury e-commerce development tendency gradually
becomes explicit, more and more luxury brands have started to
consider entering or have entered the trend of electronic develop-
ment. However, who on earth are core luxury consumers on the
Internet? Why do they choose online purchase? What are their
consumption preferences? Numerous branded enterprises desire to
figure out the answers to these questions when formulating e-com-
merce strategies.
29 30CHINA LUXURY
CHAPTER 2 E-COMMERCE WHITEBOOK
2.1 Introduction To Data Sources
Introduction to Data Sources
Real Luxury Consumption Data
Over the past 9 years, accumulating on Secoo website, app and from its
international off-line experience centers in Beijing, Shanghai, Qingdao,
Chengdu, Hong Kong, Milan and Malaysia, Secoo has 15 million registered
users, which is the largest and most powerful luxury consumer data in the
industry.
Data Diversity
Apart from traditional luxury products like bags and watches, Secoo
expands its categories to cover all the luxury lifestyle products and experienc-
es, such as luxury cars, private jets, artworks and luxury hotels. There is span In Depth Docking of Secoo and Tencent
and relevance between diverse categories. In order to gain an accurate understanding of Secoo’s 15 million
users’ Internet behavior except from Secoo app, Secoo collaborates
Advanced Data Management Technology with Tencent, which has the most users on the Internet in China, by
Secoo manages consumer behavior data the moment the users open docking Secoo users’ IDFA to Tencent database. Thus It makes
the app to when they finish the payment. The data management system consumer path be clear at a glance.
includes data collection, data analysis, data warehouse, non-structured data
management, distributed computing, stream computing, as well as user Abundant Cross-platform Data
profiling and machine learning. 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 32CHINA LUXURY
CHAPTER 2 E-COMMERCE WHITEBOOK
2.1 Introduction To Data Sources
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 in October,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 WHITEBOOK
2.2 Portrait Of Luxury E-commerce Core Consumers
Age: Post-90s main force being already 27 years old
The millennia generation has become luxury consumption main force in
China, and younger consumers are joining them. Even though their total
amount of wealth is much smaller than their parents’, they have more dispos-
able income and are more willing to spend money. They are no longer
concentrated in core cities, but distributed in various key cities and their
surroundings on the broad land of China. They mainly pay attention to cars,
education, sports and finance in daily life, and are particularly fond of sports
and outbound travels. They are concerned of immigration/overseas studies
and education.
Graph 1 Age composition of luxury network consumers
Age composition of luxury consumer groups
The millennia generation has become luxury consumption main
force in China, and younger consumers are joining them. Even 100% 100% 100%
4% 5% 4% 1 17 1-17 years old
though their total amount of wealth is much smaller than their
13% 15% 15% 18 24 18-24 years old
parents’, they have more disposable income and are more willing to
spend money. They are no longer concentrated in core cities, but
distributed in various key cities and their surroundings on the broad 28%
28% 29% 25 30 25-30 years old
land of China. They mainly pay attention to cars, education, sports
and finance in daily life, and are particularly fond of sports and
outbound travels. They are concerned of immigration/overseas 22%
21% 21% 31 35 31-35 years old
studies and education.
TGI index: Unless specially stated, TGI index herein refers to the 16% 15% 15% 36 40 36-40 years old
ratio of target groups’ corresponding behaviors and Tencent market
41-50 years old
users’ and reflects the difference between target groups’ 15% 14% 14% 41 50
Above 51 years old
51
performance regarding a certain behavior characteristic and overall 2% 2% 2%
201510-201609 201610-201709 201510-201709
level. Generally, when TGI exceeds 100, we consider that target
groups’ characteristics are notable. The higher the value, the stronger
Source: secoo.com, Tencent Social Ads
the target groups’ characteristics are.
35 36CHINA LUXURY
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2.2 Portrait Of Luxury E-commerce Core Consumers
Graph 3 Comparison of purchase behaviors per city level
City levels luxury consumer groups
Other Cities 54% 36%
Core cities 45% 27%
Key Cities 44% 26%
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 Social Ads
Graph 2 Luxury network consumers’ city levels
Comparison of purchase behaviors per city level
Region: Frequent and numerous purchases
in non-core regions Beijing City 10.7%
Judging from the number of consumers, core cities and key cities still 22%
Guangdong Province 9.0%
occupy nearly 50%. In particular, the number of luxury purchasers in core Other Cities
Core cities
Sichuan Province 8.8%
cities has a percentage much higher than the average level compared with 52%
Key Cities
Shanghai City
total urban population. Judging from province, Sichuan has extraordinary
8.5%
26%
performance. In terms of purchasing power, purchase in core cities tends to Jiangsu Province 7.8%
be stable and rational, while medium and small-sized cities in non-core
Zhejiang Province 5.8%
regions demonstrate strong momentum. Judging from purchase frequency
and repurchasing rate, top 20 cities are all non-core/key cities, whose average Core cities: Beijing, Shanghai, Guangzhou
annual consumption frequency exceeds core cities by 40%, and whose Key cities: Shenzhen, Chengdu, Wuhan, Dalian, Shenyang, Tianjin, Hangzhou, Ningbo, Nanjing, Chongqing, Changsha, Wuxi, Qingdao, Suzhou
percentage of re-purchasers and three-time-and-above consumers among Source: secoo.com, Tencent Social Ads
total purchasers outperforms core and key cities.
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CHAPTER 2 E-COMMERCE WHITEBOOK
2.2 Portrait Of Luxury E-commerce Core Consumers
Graph 5 Education background composition of luxury network consumers
Education background composition of luxury consumer groups
Doctor,1%
Postgraduate 6%
Junior high school
and below, 22%
Identity: highly educated, men, married
Luxury consumer groups are mainly highly educated people, of whom Senior high school ,10%
67% have a bachelor’s degree, slightly increasing over the last year. Judging
Undergraduate,60%
from gender, men occupy 51%, slightly higher than women, and this has
something to do with highly educated men’s numerous high-end business Junior high school
and below
needs. Luxury consumers feature married groups and mother & infant groups.
Senior high school Junior high school Undergraduate Postgraduate Doctor
and below
Gender composition
of luxury network consumers Source: secoo.com, Tencent Social Ads
Graph 6 Marital status of luxury network consumers
TGI-115
Marriage status of luxury users
Single groups
51% 49%
Married groups
Infants and mothers
Graph 4 Gender composition of luxury network consumers
Source: secoo.com, Tencent Social Ads Source: secoo.com, Tencent Social Ads
39 40CHINA LUXURY
CHAPTER 2 E-COMMERCE WHITEBOOK
2.2 Portrait Of Luxury E-commerce Core Consumers
Hobbies: extreme sports, tourism immigration,
overseas education
Luxury consumer groups pay much attention to overseas studies and
education information and are highly interested in health sports, finance and
cars. Compared with previous years, attention to travel and education remains
high, and based on the data of this year, enthusiasm for extreme sports, Graph 8 Equipment brands used
51% of the luxury consumer by luxury network consumers
immigration and overseas studies has run particularly high. Over 60% of the
groups use high-end mobile Preference for equipment brands
luxury consumer groups use high-end mobile phone brands, and a half of
phone brands, and one third of
them are fans of Apple. Luxury consumers have downloaded APPs concern- Huawei
them are fans of Apple. Huawei
ing health, communication, office and financial management in their mobile 16%
mobile phone, a domestic brand, Apple
phones, and use online tickets, constellation and food APPs more in WeChat. 37%
ranks the second place. Others
They prefer cultural articles and antique as well as blues, Latin and jazz 49%
genres. Luxury consumers’ pursuit of life quality can thus be seen.
Luxury consumer groups are more interested in education, sports,
finance and cars. In terms of sports, compared with previous years, minority
Apple Others Huawei
extreme sports and aquatic sports have increased over 50% compared with
gym bodybuilding. They pay special attention to immigration/overseas studies Source: secoo.com, Tencent Social Ads
and language education programs.
There are more APPs concerning travel, health, communication, office
Graph 7 Business interest preference of luxury network consumers
and wealth management in the mobile phones of luxury consumers. The
highly popular online games and mobile phone games are not yet the apple in
Cars
Education
their eyes.
Finance Sports
Graph 9 Mobile phone APP interests of luxury network consumers
Games
Job hunting and recruitment
Animation and novels
Business interest preference
Travel
of luxury network consumers
Health
Preference for Office
Communication Wealth management
mobile phone APPs
Tools
Sports Business service Education Online games
Aquatic sports Immigration |overseas studies Language training
Role play
Extreme sports Marketing PR
Running and cycling
Ball games
Sports equipment
Bodybuilding
Source: secoo.com, Tencent Social Ads
Source: secoo.com, Tencent Social Ads
41 42CHINA LUXURY
CHAPTER 2 E-COMMERCE WHITEBOOK
2.2 Portrait Of Luxury E-commerce Core Consumers
Luxury consumers particularly prefer online ticket, constellation and food
service as far as WeChat APPs are concerned.
Graph 10 WeChat APP preference of luxury network consumers
Preference for WeChat APPs
In terms of leisure and entertainment, luxury consumers pay more
attention to cultural articles, antique, TV plays and cultural art compared with
common people. Last year, they demonstrated reduced enthusiasm for
Food
comedy and variety shows and increased enthusiasm for TV plays and
cultural art. In terms of music, they prefer classic European and American
Constellation
tracks from the 1970s to the 1990s, and are particularly keen on blues, Latin
and Jazz genres.
Online tickets
Graph 12 Entertainment and leisure preference of luxury network consumers
Leisure and entertainment (TGI index)
Source: secoo.com, Tencent Social Ads
Leisure and entertainment Track era Music genre
Cultural articles
Luxury consumers prefer to travel in Europe and Asia. UAE, Italy, France and antique
248 1970s 188
Blues 199
and Germany are their main tourist destinations. TV play 157
1980s 147
Culture and art 156 Latin
Graph 11 Outbound travel preference of luxury network consumers 178
1990s 128
Animation 147
Preference for outbound travels
Books and magazines 146 2005-2009 109 Jazz 159
KTV 144
2000-2004 110
Country 159
Movie 126
2010-2014 105
Entertainment and gossips 115
World music 144
constellation & jokes 2015 101
100
Variety show
UAE Italy France Germany Singapore Japan Portugal
Source: secoo.com, Tencent Social Ads Source: secoo.com, Tencent Social Ads
43 44CHINA LUXURY
CHAPTER 2 E-COMMERCE WHITEBOOK
2.3 Luxury Network Consumption Motivation
Graph 14 Luxury purchase modes
Luxury purchase modes How would you like to purchase your favorite luxuries?
(Sample size =240, sample size average age: 20-30 years old)
Purchase online, Others
take delivery from offline outlets
11.3%
0.4%
Out of the purposes of pleasing themselves, following the trends set by
their favorite fashion icons, and dressing up on party and memorial-day
occasions, the millennia generation has brilliantly stepped on the stage of Purchase online, delivery home/company 24.3%
luxury consumption. Besides quality, their biggest reason for purchasing
64.0%
luxuries is to “be nice to themselves”. Compared with their parents, this
generation is more self-centered and perceives luxuries horizontally rather Offline physical stores
than looking up to them. They care about how luxuries can better serve them
so as to lead a wonderful life.
Graph 13 Luxury purchase motivation Source: Deloitte luxury report Bling it on
Graph 15 Luxury online purchase reasons
Luxury brands / enterprises I want to be nice to myself 17.8%
have higher moral standards
Luxury purchase motivation What do you value the most when you choose
Luxuries have high quality 17.8%
What is the main reason for to purchase luxuries online? (Single choice)
why you purchase luxuries?
(Sample size = 240, sample I desire the latest version 15.6%
8932 people answering
size average age: 20-30 years
old)
It makes me feel cool 14.9%
Coverage in my region:10.12%
It makes me look good 11.6%
Luxury has a long duration 9.7% Flexible time:17.24% Various categories:36.89%
I want to amaze my
friends/family members/colleagues 5.4%
Influenced by celebrities 4.4%
Luxury brands / enterprises
2.7%
have higher moral standards
Convenient order placement:35.75%
Source: Deloitte luxury report Bling it on
Source: secoo.com
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CHAPTER 2 E-COMMERCE WHITEBOOK
2.3 Luxury Network Consumption Motivation
Graph 16 Future tendency of luxury online purchase
No, because:
Will you increase online consumption
(including times and amount) in the future?
8932 people answering
Yes:
Source: secoo.com
Hence, the young generation is more accustomed to pursuing the latest
trends online. Under roughly 35% circumstances, they will choose to Graph 17 Reasons for purchasing luxuries in physical stores
purchase luxuries online nowadays, and nearly everybody will increase online
purchase times or amount in the future. Why not? Online shopping features Motivation for consumption
in physical stores I can touch/feel products
abundant categories, convenience, flexible time and coverage of regions
25.0%
What is the main reason for
without physical stores. The majority of these consumers will still go to why you like to purchase I can try on/use products 21.3%
physical stores to purchase, but interestingly, they go to physical stores not to luxuries in physical stores?
(Sample size = 240, sample It is easier to compare
enjoy shopping experience but mainly to actually touch and feel products. On size average age: 20-30 products/styles
15.9%
years old)
most occasions, consumers have done relevant work online before going to Browsing is more convenient 14.0%
offline outlets. They are there merely to gain what cannot be achieved online.
In other words, for consumers, online and offline channels are not opposite Suggestions/help by professional salesclerks 14.0%
but rather two links for them to realize the complete shopping process. On the Richer products/more sufficient stock compared with online channels 7.8%
other hand, it also reflects that physical stores of luxury brands are not
Enjoy shopping experiences
attractive enough for young people. In an effort to seize this consumer group, 2.0%
brands are supposed to consider how to create perfect shopping experience
integrating online and offline. Source: Deloitte luxury report Bling it on
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CHAPTER 2 E-COMMERCE WHITEBOOK
2.4 Luxury Consumption Preference
Graph 18 Luxury customization demands
Customized demands Are you willing to pay extra fees for customized luxuries?(Sample
size = 240, sample size average age: 20-30 years old)
No
20.9%
The minority represents the masses
40.6% Absolutely
As trendy culture is gradually subdivided, more and more consumers
begin to follow minority brands. For one thing, professionalization of fashion
trends is reflected; for another, consumers’ unique individualized demands are
met. For example, as Hip-Hop culture gradually emerges from underground to
aboveground, more and more young people have come to know the trendy
brand of Supreme and become fans thereof. Their pursuit of personalized 38.5%
Maybe
products will promote prosperous development of minority brands in more
vertical sectors. Moreover, personalized custom-made products live up to
most luxury consumers’expectations, even though extra expenses should be
paid. Source: Deloitte luxury report Bling it on
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2.4 Luxury Consumption Preference
Graph 19 Luxury purchase decision-making factors
Which factor do you care the most when making decisions on luxury consumption?(Single choice)
8932 people answering
Price 26.04%
Consumption experiences 11.31%
Professional KOLs
The young-generation consumers consider comprehensive factors when
making decisions. For them, that products merely being unique is hardly Style 35.17% Quality 27.49%
satisfactory. Instead, value maximization is a long-term pursuit, and a compre-
hensive matching of style, quality, price and shopping are important deciding
factors of purchase. In terms of decision-making influence, as advocators of Source: secoo.com
fashion trends, branded enterprise have absolute decision-making influence.
Graph 20 Luxury purchase decision-making influencers
Particularly in China, most consumers will search information released by
brands’ official websites or flagship stores. Secondly, interpretation of luxury Decision-making influencers Which of the followings has the greatest influence on your luxury purchase decision-mak-
ing?(Sample size = 240, sample size average age: 20-30 years old)
trends by celebrities and KOLs has also powerfully driven consumers’
purchasing desire.
Friends you admire
19.2%
What is worth mentioning, along with the development of minority trends,
influence of stars and celebrities on luxuries in the past has been reduced to Branded enterprises
4.4%, while KOLs’ influence has substantially increased. KOLs have been 44.8%
subdivided as well, and KOLs highly professional in a certain field have
emerged, e.g., talents specializing in Hip-Hop culture, cocktail culture and
history. These people or groups may not be that famous and could even be Your favorite celebrities/influencers 36.0%
unknown to anybody outside the circle. However, by virtue of their profound
professional knowledge and accurate control of trends, they have gained
attention from and recognition by more and more young people who advocate
Source: Deloitte luxury report Bling it on
minority culture.
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CHAPTER 2 E-COMMERCE WHITEBOOK
2.4 Luxury Consumption Preference
Graph 22 Luxury characteristics concerned
Characteristics of luxuries Compared with common commodities, what are the main characteristics of luxuries that attract
Multi-brand loyalty you? (Sample size = 240, sample size average age: 20-30 years old)
Generally speaking, this consumer group is loyal to brands. Nearly 60% 31.4%
High-quality products
of them will constantly purchase a few brands, and about 35% of them will 26.4%
Unique products
select from many brands. Chinese market is becoming increasingly mature, 10.9%
Stories behind
and consumers will have more and more brand choices. For brands, challeng- 8.8%
6.7%
es are increasing, and it is an unchanged long-term topic as to how to improve Precious tradition/reputation
Celebrity endorsement
consumers’ loyalty. Excellent quality and unique products are main reasons for 6.3%
I can relate to
consumers to constantly advocate a brand. On the other hand, this generation 4.2%
Interesting
of young people pays more attention to social responsibility, and brands’ 2.5%
Inspiring
social sustainability and moral standards are also factors valued by consum- 1.7%
ers. Consumption of luxuries is not limited to exquisite products but also Popular in Friends Circle
embodiment of consumers’ personality and pursuit. Brands need to create
sustainable life concepts and good images of feeding back to the society, Source: Deloitte luxury report Bling it on
thus developing long-term connection with consumers.
Graph 23 Attention to sustainability
Graph 21 Luxury brand loyalty
Attention to sustainability Are you concerned about a brand’s sustainability and moral standard before purchasing
Brand loyalty Which of the descriptions is the most correct when you purchase luxuries? (Sample size = 240, sample size products? (Sample size = 240, sample size average age: 20-30 years old)
average age: 20-30 years old)
Never
I only consider one brand I like Rarely
I merely buy what I like, 8.0%
6.7% 0.4%
regardless of brands
6.7%
I mainly consider a few
51.9% favorite brands Always 38.5% 53.1% Sometimes
I will consider many brands I like 34.7%
Source: Deloitte luxury report Bling it on Source: Deloitte luxury report Bling it on
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CHAPTER 3
Chapter Three Challenges to and
Reflections on Luxury E-commerce
Along with the continuous advancement of consumers becom-
ing younger and younger as well as business digitization, luxury
brands appealing to e-commerce has become the tendency. Before
2016, digital marketing of brands had been thoroughly carried out,
and there had been many remarkable luxury digital marketing cases.
However, only a few brands had tried digital sale, i.e. e-commerce,
and they did not go deep. Since 2016, more and more luxury brands
have started to explore luxury e-commerce, trying to connect digital
marketing and sales, so as to form a closed loop with higher conver-
sion rate, and notably improve transformation depth and width.
However, making a general survey of the e-commerce process
of numerous luxury brands, there is not yet any recognized success-
ful case. Most luxury brands are at the attempting and exploring
stage. We have observed that after jumping out of traditional advan-
tageous sectors, luxury brands face enormous challenges far
exceeding their expectations. Challenges confronting luxury brands
mainly fall into the following three aspects:
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Challenges confronting luxury brands
mainly fall into the following three aspects:
Challenge III: e-commerce is not “another new channel”; a reform
in omni-channel business model is urgent
Challenge I: selecting a suitable commercial platform Along with the upgrade in consumer demands and continual develop-
ment of retail technologies, retail modes in the world, especially in China, have
Compared with the routinized offline channels, online channels are a started to gradually develop from traditional channel-based purchase mode to
brand-new field for luxury brands. Moreover, e-commerce development in scenario-based purchase mode. Consumers no longer distinctly differentiate
Chinese market has long since led European and American market. Therefore, online and offline channels. What they need are convenient, smooth and
multinational companies can copy limited experience from foreign markets. individualized shopping experiences, i.e. “seeing whatever they think about,
How should a brand choose from integrated e-commerce platforms, vertical and getting whatever they see”. Hence, for luxury enterprises, e-commerce is
e-commerce platforms, social platforms and brand self-built websites? How not simply adding an “e-commerce channel department” to the original
about the operation difficulty and input-output ratio of different platforms and channels but involves the entire digital marketing, sale and offline linkage. It
modes? How to cooperate with brand offline channels and maintain the price needs a reform in omni-channel business model. Luxury enterprises need to
system between different channels? Is the platform image consistent with consider how to get rid of separated channel-based business model and
luxury brands? How to eliminate fake commodities? Does an enterprise need internal management, and cultivate truly customer-centered omni-channel
to consider different modes or even composite modes in different periods and high-end experience as well as supporting efficient operation schemes.
under different circumstances? These are all urgent problems to be solved by
luxury enterprises.
Challenge II: creating unique e-commerce experience
Luxuries pay attention to customer experience, and particularly pursue
perfection in details. Consumption paths and key influence points of online
luxuries are notably different from those of offline outlets. Perfection in terms of
consumption experience has new extension under the drive of digital wave.
Besides products online presentation manner, it is all the more embodied in
the transmission and interaction of customized information based on consum-
er in-depth analysis. Luxury e-commerce requires more than perfect visual
impressions. Compared with accurate marketing of mass consumer products,
it needs to focus on customized exclusive service, which conforms to Internet
aborigines’ self-centered digital experience.
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3.1 Challenge I: Selecting a Suitable Business Model
Graph 1 Interpreting modes of luxuries getting involved in e-commerce market
Mode introduction
e-commerce Self-built website Social platform Mode introduction
platform
Entering large integrated Entering vertical e-commerce Entering social platforms Establishing the official website
platforms, setting up platforms and cooperation in that manage users through of the brand domain name
direct-sale stores variety of ways brand names and output a
variety of services.
Advantages
Quickly establishment on Be able to quickly develop Huge active users in the The ability to maintain high
the mature platform based customized solutions by mainstream social platforms consistency and flexibility of
on its template working with professionals brand image
in the luxury business Be able to achieve a variety
Relatively low investment industry of functions, including Be able to achieve a variety
with direct access to online sales, marketing, of functions, including
ready-made templates Relatively low investment, customer relationship online sales, marketing,
with access to various management etc.. customer relationship
Be able to benefit from the resources high-end image management etc..
technical and resource of the platform Simple mode construction
advantages of the platform, of WeChat public account Full control of content and
In the unique Chinese digital context, network retail has become a with the help of more digital Directly facing the luxury and micro-stores and platform
means users and potential users to relatively low threshold.
significant part of retail market. Given the continual high growth rate, network achieve higher conversion Ownership of all resources,
rate, and the user boasting including user data, etc.
retail has penetrated deeper and deeper year after year. Meanwhile, digital a higher acceptance of the
full price products.
marketing has become an important mode and means for branded enterpris-
es for marketing and user operation in China. Regarding the core issue of how Precautions
should branded enterprises make online layout combining their own • Customer experience and content are limited by the platform itself
conditions, this Report summarizes representative models in Chinese market. • Rising platform costs
• The public platform may have an impact on the brand image
Different models have their respective characteristics, and luxury brands are • The platform users are mostly price sensitive users in need of discounts and promotions
supposed to make systematic layout based on their own strategic directions, • The counterfeit problem of other sellers on the platform
• Starting relatively late, it takes a certain amount of time to accumulate user resources and word of mouth, and forms a benign
brand needs and brand characteristics. business model
• The profession degree of each vertical platform is uneven, and the brand needs to be indignant.
• The role of social platform is more of customer operation than e-commerce
• In order to better serve consumers , WeChat can serve as a diversion tool rather than a final solution.
• Requiring large-scale investment in the early period and ongoing investment in the later period with high investment risk
• High demands for multifaceted resource mobilization and integration, and higher demands for internal management and operation
• There is a need to continuously nurture users and accumulate traffic
Source: Deloitte Analysis
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