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Luxury brands set up e-commerce platforms in China


06-24-2015 15:07 BJT

Swiss luxury group Richemont has invited two of its rivals -- LVMH and Kering Group --  to build an e-commerce platform to sell luxurious goods. The high-profile move is intended to give the luxury brands control of their own internet space. The news comes as more and more luxury brands are entering the Chinese e-commerce market. 

There's no denying that luxury brands are not doing as well as they have in the past. 

Gucci's global sales were down 7.9 percent in the first quarter this year. Prada's sales revenue slipped one percent in 2014, and JP Morgan lowered its profit expectation for the company by 5% for 2015. Luxury brands are doing everything they can to sell more including frequent sales promotions, and speeding entry to the e-commerce world.

Accessory and foot-ware maker Tod's Group is one of them.

"Our plan is to start to enter the China market by the end of this year. It means by the end of this year all Chinese customers can enjoy the online platform with at least three of our brands in China. We would like to have a wider reach of consumers, probably younger. And also because we would like to trace them, because you can track all your consumers online. And it's probably the most efficient way to fight counterfeits or parallel import products," said Edoardo Tocco, the Regional Director of Tod's(Shanghai) Co.

Other luxury brands are also beginning to chase profits online. For example, three months ago Chanel lowered its prices in China by 20 percent and raised prices by the same amount. Many view that a preparation for the company's global e-commerce system to be introduced by the end of this year, which will require unified worldwide pricing.

One analyst says that with these approaches, luxury brands are trying to attract younger consumers online.

"Even if they don't have the e-commerce facilities, you can still have a lot of information on the brand, on the heritage, on the products, on the latest collections, on the cooperate website. A lot of brands are now engaging younger consumers, on average, 30% of the marketing budget of the luxury brands is now online," said Bruno Lannes, partner of Bane&Company China.

"So yes, for sure, to engage with consumers and particulary Chinese consumers and younger consumers, definitely you need to have a digital strategy and a digital marketing."

Customers on the Shanghai streets welcome the idea of buying luxury goods online. Many have the same idea as the brands themselves -- preventing the sale of online fakes.

An analyst from research company McKinsey says that about six percent of all luxury sales now occur online, and that this should increase to 18 percent in ten years time.

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