Luxury apparel brands set up shop on Tmall as demand falls in mainland China
Global players are tapping the mainland online retail market as demand for luxury goods looks set to decline for the first time in 10 years
Luxury apparel brands are launching online stores on Tmall amid falling demand on the mainland as the country's luxury consumption is expected to decline this year for the first time in a decade, says Fung Business Intelligence Centre.
The research arm of garment and consumer goods supply chain giant Fung Group said in a report on China's apparel market released yesterday that luxury apparel had seen a significant drop in sales in China, although the country remained one of the most important markets for global luxury retailers.
Global luxury players have adopted a number of strategies in China to cope with the declining demand, according to the report, including tapping the online retail market.
Burberry launched its online store on e-commerce powerhouse Alibaba's business-to-consumer platform Tmall in April, the first time an international luxury brand entered the third-party online shopping platform in China. Calvin Klein followed suit and launched its Tmall store in August.
Hugo Boss bought back a 40 per cent stake in its Chinese mainland and Macau joint venture from franchise partner Rainbow Group. At the same time it also opened an online store on Tmall for its more affordable line Boss Orange.
On the other hand, Max Mara ramped up its presence in China by opening its largest Asian store in Beijing and is planning to open 25 to 35 new stores in China every year.
The mainland's luxury sales growth started to slow in the fourth quarter of 2011 and is expected to decline 2 per cent year on year to reach €15 million (HK$143 million) this year, which would be the first decline in more than a decade, according to estimates by consulting firm Bain & Company.
"Given the tighter anti-extravagance measures, Chinese consumers are now more prudent when spending on premium luxury apparel," said the Fung Business Intelligence Centre report. "The skyrocketing prices of some premium luxury brands have prompted consumers to turn to alternative affordable luxury apparel and designer clothes at relatively cheaper prices."
Burberry already had its official website in simplified Chinese where consumers could purchase online with Alipay or UnionPay.
But it still opened a store on Tmall, which had a market share of 73.4 per cent in the business-to-consumer apparel market in China in the third quarter of this year.
In other cases of international brands opening online stores on Tmall, British fast fashion brand Topshop decided to completely rely on e-commerce to tap the China market without setting up a physical store in the country.
Cross-border e-commerce was a grey area in China for tax reasons before a number of pilot zones were given the go-ahead to allow for the business.
While online retailing has been the fastest growing retail channel for apparel in China, excess inventory remains a concern for many online retailers, said the report.
To cope with this, some online retailers have also set up new websites to offer deeper discounts to clear inventories, or they have launched pre-order services for better inventory management.
