BEIJING — JD.com and LVMH-backed private equity fund L Catterton Asia are to invest $175 million into Secoo, the largest online platform for upscale products in China, the three companies said Monday.
The investment will allow Secoo, which listed on the Nasdaq last September, to strengthen its leading position in the rapidly growing Chinese luxury e-commerce market, the companies said — and they hinted at more global ambitions.
“Through this partnership, Secoo will be able to leverage L Catterton and JD’s operational expertise and vast resources to expand and deepen our market presence not only in China, but across the globe,” said Richard Li, chairman and chief executive officer of Secoo.
The company is the largest retailer in China of premium products online, with more than 300,000 stockkeeping units from more than 3,000 brands. Its high-end curation and customer set are something which much larger but more mass operators like JD.com and Alibaba-owned Tmall have also tried to emulate with platforms Toplife and Luxury Pavilion, respectively.
“We are thrilled to enter into a partnership with Secoo, the luxury e-commerce leader in China,” Ravi Thakran, chairman and managing partner of L Catterton Asia, said. “E-commerce continues to play an increasingly important role for consumers across all demographics, and as evidenced by our investment, we believe that Secoo is one of the strongest high-end platforms for the Chinese consumer. We look forward to working together with Richard and his outstanding team to take Secoo to the next level and continuously build out the platform for high-end consumers.”
The deal provides Secoo an opportunity to collaborate with existing L Catterton porfolio companies, although did not mention if those brands might also begin retailing on JD.com’s platforms as well. JD.com has been waging war with Alibaba over brand exclusivity, and has blamed what it says is its competitor’s pressure tactics for the drop-off of a number of fashion brands from the JD platform, which has hurt its top line.
The L Catterton portfolio houses a number of fashion brands such as Giuseppe Zanotti; Australian swimwear label Seafolly; Gentle Monster, the South Korean hipster eyewear house; sportswear brand 2XU, and Balinese-born jewelry line John Hardy, among others. Two weeks ago, Seafolly struck a deal to retail online in China with Tmall.
L Catterton’s pan-Asian reach through multiple lifestyle categories will also help Secoo in its goal to diversify from its roots selling premium fashion into categories as broad as food and travel.
Karen Chan, equity analyst at Jefferies is optimistic the partnership could result in a margin boost for Secoo. “We expect upside in FY19 margin on the back of enlarged direct brand collaboration and sales & marketing cost savings,” she said, while cautioning that the main risks for the company lie in execution risks as it expands into new product categories, intensifying market competition, and uncertainty in managing inventory cycle.
For JD.com, the new partnership with Secoo signals a reversal, or at least an embrace of an alternate strategy to selling luxury online.
In June, JD.com’s president of fashion Xia Ding told WWD that Secoo was not an ideal platform for full-priced products.
“You know, Secoo and other platforms is all discount,” Ding said. “You have an item there, you have the original price, you cross [gesturing in a slashing motion], and you have a sale price constantly, every moment. So if you talk to the brands they say that’s not my ecommerce.”