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SHANGHAI — Two years after entering the China market, Yoox Group is making its biggest play yet in the Mainland’s exploding e-commerce sector with the launch of a Chinese version of the company’s flagship multibrand online store Yoox.com.
This story first appeared in the October 8, 2012 issue of WWD. Subscribe Today.
The Chinese site, which is under the domain name Yoox.cn, will go live today and, similar to Yoox.com, will feature capsule collections as well as end-of-season clothing and accessories from top designers worldwide. The site will also feature special voice recognition technology enabling consumers to search for specific color schemes by telling the site preferred color choices in Chinese.
Milan-based Yoox Group entered China in 2010 with the launch of emporioarmani.cn. The company has since launched nine other monobrand e-commerce sites on the Mainland for labels including Marni, Bally, Moncler and Alexander Wang. It has established an office and logistics infrastructure in Shanghai, and in 2011, launched a Chinese version of Thecorner.com, an online luxury boutique.
Yoox is the latest of a host of foreign retailers to unveil plans to bolster their e-commerce presence in China. Ferragamo recently revealed a partnership with Xiu.com, a domestic online fashion retailer that sells brands ranging from Prada to Abercrombie & Fitch. Xiu.com will be Ferragamo’s official online distribution partner.
Macy’s, Neiman Marcus and Zara have also said in recent months they would make moves into e-retail on the Mainland. In a statement sent to WWD, Gucci said it is planning to launch an online store soon in China.
All this activity is aimed at tapping into the Chinese luxury market which, while slowing, is still outpacing growth in other regions. E-commerce is booming in China, where online shopping is expected to reach $360 billion in sales volume by 2015, according to a Boston Consulting Group study.
In May, Yoox founder and chief executive officer Federico Marchetti told WWD that China is expected to be one of the company’s top three markets within the next four to five years. According to Yoox’s financial report for the first half of 2012, Europe, North America and Japan remained the company’s top markets, with 3.5 percent of revenues coming from other countries. The group said Asia Pacific, including China and Hong Kong, grew nearly 200 percent for the first half of this year compared to the same period in 2011.
Despite the growth and future potential of e-commerce in China, observers say there are challenges for the industry, particularly for luxury brands. The main one is that Chinese consumers generally look for discounts when buying products online in order to avoid the nation’s exorbitant taxes on those products. Consumers often turn to sites like Taobao, the country’s largest consumer-to-consumer platform, to buy gray-market luxury goods.
Marchetti disagreed, saying that Yoox’s experience so far in China indicates that consumers are willing to spend more online, especially with e-tailers that guarantee authentic products and provide “best-in-class service.”
“Perceptions rarely tell the whole story,” he said. “We are keen to turn the theory upside down, and in fact entered China with a full-price strategy two years ago. Chinese customers are increasingly attentive to quality beyond the product itself, in particular to service.”
Yoox’s existing China e-commerce sites offer shoppers a special “butler service” where a courier waits for shoppers to test products when they are delivered. If the product does not fit, it can be returned on-the-spot free of charge.
“We believe localization is one of the keys to success in the China market,” Marchetti said. “As such, Yoox.cn is localized in terms of language, customer service, assortment and local collaborations with relevant opinion formers to provide the Chinese customer the best shopping experience out there.”
Even with new platforms, such as Yoox.cn, launching in China, analysts say many brands, particularly luxury players, are struggling to find online retail partners that convey the appropriate image and positioning in the market. Some observers, for example, have questioned whether Xiu.com is an appropriate platform for Ferragamo given the site features products from brands ranging from luxury players to more mass market ones.
A spokeswoman for Ferragamo said that the message the brand wants to get out to consumers about its products on Xiu.com is that they “are authentic.” She declined to elaborate on why Ferragamo selected Xiu.com as its official online distribution partner.
“A lot of brands are having a slightly opportunistic side to them, especially with e-commerce in China,” said an industry insider who spoke on the condition of anonymity, citing concerns of jeopardizing a business relationship. “Sometimes they don’t think this through properly. It is very important to think about the brand proposition and which community they are going to reach out to.”
“Controlling the experience, managing pricing strategy, especially when relying on a third party, and in some cases, fostering very exclusive and personalized images continues to be difficult and even impossible for some brands who prefer to stay out [of e-commerce],” said Yuval Atsmon, a Shanghai-based partner at McKinsey & Co.
“With a general slowdown in luxury consumption growth and with smaller brands benefitting from more consumer knowledge and the continued quest for novelty, I think that brands are probably more cautious and those that go online prefer to do somewhat controlled experiments that help them feel the water rather than just dive in,” he said.
Overall, analysts say that while China’s e-commerce sector is still rapidly expanding, it is also showing signs of maturity. According to Dong Lu, the founder of La Miu, an e-commerce site focusing on lingerie, there is “more rational” capital investment flowing into the sector, which is witnessing some consolidation due to bankruptcies and acquisitions.
“People have learned from the past failures, so the next wave with survivors will understand the basics of business and will create value for investors and for consumers,” he said. “The more problematic companies are disappearing from the market. The companies that went through this bubble burst are actually much stronger.”