Bargains Drive Chinese E-commerce

Chinese consumers are increasingly turning to mobile devices and more sophisticated payment methods when buying products via the Internet.

SHANGHAI — Bargain hunting remains a key driver for purchasing luxury goods online among Chinese consumers, who are increasingly turning to mobile devices and more sophisticated payment methods when buying products via the Internet, according to a study released Tuesday.

This story first appeared in the February 26, 2014 issue of WWD.  Subscribe Today.

The study, conducted by consultancy KPMG in partnership with Glamour Sales China, an e-commerce site specializing in discounted luxury products, and Mogujie, an e-commerce and social networking site similar to Pinterest, surveyed more than 10,000 Chinese consumers’ luxury consumption habits online. It found that while the majority of shoppers still look for discounted items on the Internet, more are willing to pay full price for limited-edition products unavailable in stores or for products from luxury brands that do not yet have retail locations nearby.

Convenience is also an important driver for luxury purchases online as well as growing trust in and loyalty to e-tailers that focus on customer service and the authenticity of products, the KPMG study said.

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The survey found that the average amount spent by respondents on their last purchase was 1,515 yuan, or $247 at current exchange. Nearly 20 percent said they had last purchased an item online for at least 2,000 yuan ($327). “We thought that was relatively high,” Nick Debnam, KPMG China Asia Pacific chairman for consumer markets, said. “It bodes well for the future of online shopping in China, and when you compare the total retail spend in China versus the West, China has been gaining ground and will likely shoot past [Western markets].”

More Chinese consumers are ordering luxury products from the overseas third-party or e-commerce sites of luxury brands, which, according to the study, have not yet fully embraced China’s e-tailing boom. This is largely out of concern for losing control of the brand and not being able to replicate the in-store experience in a meaningful way to consumers on the mainland.

The study advises luxury brands to embrace e-commerce in China and take advantage of consumers’ thirst for one-of-a-kind products or other items not available in local shopping malls. A presence online in China is also becoming crucial for marketing purposes, particularly to consumers traveling overseas to shop, as well as customer-relationship management and for identifying consumer spending patterns, the study said.

Smartphones are becoming a crucial channel for consumers to not only make purchases but also to share information about products they buy. Debnam noted that e-commerce in China remains an inherently social activity, with consumers obsessively sharing pricing information and photos of products and turning to celebrities and other online opinion leaders to keep up with the latest trends. Word-of-mouth remains the top source of information for product information and purchasing decisions followed by Sina Weibo, China’s version of Twitter, and WeChat, a mobile application similar to WhatsApp.

Sixty percent of those surveyed said they use their smartphones daily to purchase or research luxury goods. “It is therefore essential for online luxury brands to develop interfaces that work well for both desktops and smartphones,” the survey said. Anecdotally, Debnam said a luxury retailer in Dubai’s airport doubled sales after offering free wireless Internet in-store, which allowed Chinese consumers to check and share pricing online.

Another key finding is a dramatic shift in payment methods, with the majority of respondents making payments online versus cash on delivery, which dominated in the past. In China, 55 percent of Internet users have made a payment via a mobile device versus 19 percent in the U.S., the study said.

Luxury cosmetics are the most popular online purchase, followed by shoes, apparel and accessories, the study said.