In three short years, Tmall’s Luxury Pavilion has grown to feature nearly 200 brands, which includes industry standard-bearers as well as emerging designers. Balmain, Marc Jacobs, Alexander Wang, Ferragamo, Golden Goose, De Beers, and IWC Schaffhausen are some of the brands that have recently joined. For Chinese consumers, the Alibaba-operated platform is a buyer’s delight. Technology is enabling luxury brands to create high-end, personalized experiences creating an exclusive online environment to impress even the most discerning luxury consumer.
The Tmall Luxury Pavilion is organically designed to be a place of wonder and discovery for shoppers.
Here, Christina Fontana, Head of Fashion and Luxury for Tmall, U.S. and Europe, discusses the “secret sauce” that makes the Tmall Luxury Pavilion a unique and intimate space for brands to connect with Chinese consumers.
WWD Studios: How does the platform work? And how do you approach it as a brand?
Christina Fontana: Alibaba is first and foremost a technology company. We have built the infrastructure for commerce in China and have more than 800 million shoppers on our marketplaces. Our philosophy is to enable the brands who work with us to be successful. We are not a retailer ourselves. So everything we innovate is to help brands succeed.
We realized early on that luxury brands were going to need something very different from the other brand partners we work with. A luxury consumer isn’t just looking to buy a luxury product, she is looking for a luxury experience too. The Luxury Pavilion we created is just that – it’s an exclusive environment that gives brands a rich set of tools and resources to create an online world that reflects their brand and the feeling they want the consumers to have when they enter their store.
The way it works is that a brand will open a flagship store on the Luxury Pavilion. They control inventory, pricing, look and feel. They own the consumer relationship and the analytics. We help them find the right consumers, and use all the technology we have to create the experience they want their consumers to have.
WWD Studios: How would you describe the market in China?
C.F.: Chinese consumers are fueling the global luxury market right now. Chinese consumers accounted for 90% of the global market growth in 2019 and accounted for 35% of the value of personal luxury goods globally. In five years’ time, Chinese consumers are expected to account for nearly half of the global luxury markets.
One important thing to know is that these luxury shoppers come from beyond tier 1 or 2 cities. McKinsey estimates that less than half of the country’s affluent households are served by luxury brands’ physical stores. But this need not be a barrier. Chinese consumers are known for their willingness to buy anything – even luxury cars – online. And with Covid-19 travel restrictions, these consumers are shifting their spending inside China. It is more critical than ever for the brands to literally “meet the consumers where they are.”
It’s also important to know that China’s luxury consumers are much younger than their Western counterparts. Gen Z is a very powerful luxury cohort. They are tech-savvy. They live their lives on their smartphones. Traditional marketing isn’t nearly as effective here as working with top livestreamers. They are very brand aware, but not brand loyal. And personalization and customization is key.
WWD Studios: How has the pandemic changed the market in China? Is online key?
C.F.: China was the first country to be hit by Covid-19, but also the first to effectively control the outbreak and re-open its economy. China will likely be the only major economy to achieve positive GDP growth this year among all developed markets globally. According to a recent BCG report, China’s luxury sector has recovered faster than other markets, with sales of luxury goods expected to rebound and potentially end up even 10% higher than 2019 mark.
The pandemic also underscored the importance of being digital. A lot of the work we have been doing is helping our customers adapt to the new environment. And since the beginning of the year, we’ve launched quite a few luxury brands into the Luxury Pavilion. We used to launch about two brands a month. Now, we’re launching two brands a week. We are seeing an acceleration of brands embracing digital.
WWD Studios: How are luxury brands adapting to the new environment?
C.F.: It’s really inspiring to see how brands are getting very creative in this new environment. Michal Kors had plans to launch its new MK My Way campaign at physicals stores across China. When Covid-19 hit, we worked with them to design a digital pop-up experience which allows consumers everywhere in China to be able to participate in the customization campaign.
When the pandemic made Shanghai Fashion Week impossible to do as a physical event, we moved the shows onto our platforms. Diane von Furstenberg, for example, used it as an opportunity to also feature designs from her current collection and we did a “See Now, Buy Now” fashion show.
We also worked with stores to turn their in-store teams into virtual customer service staff and livestreamers to show online shoppers how the products look in-store and give them suggestions on how to style them. The pandemic unlocked some innovations that brands have continued even as the economy has opened up.
WWD Studios: What does the future hold?
C.F.: We are very focused on helping our luxury brand partners connect with China’s Generation Z shoppers. On our platform, around 80% of luxury consumers are 35 years old or younger, and the fastest-growing segment is even-younger shoppers between 18 and 25.
We are rolling out a series of content-marketing tools and interactive experiences to help brands sharpen their appeal to this generation – things like a shoppable, digital magazine; luxury-specific streaming service; augmented reality and 3D-enabled features; and “cloud pop-up shops” to name a few. We also just launched a new multi-tiered loyalty program to help luxury brands offer premium experience to their most valuable luxury consumers.
The future will be about continuing to attract the world’s greatest luxury brands and helping them become successful — from the traditional heritage luxury brands from Europe to the younger, emerging brands from the U.S. This is what will keep Chinese consumers excited about buying luxury on our platform.