SHANGHAI — In the wake of securing partnerships with Salvatore Ferragamo and eBay, Xiu.com is working to convince more international brands that collaborating with a domestic e-commerce player has more advantages than entering China’s booming online shopping sector via foreign e-tailers.
Xiu, founded in 2008, sells products ranging from luxury goods and cosmetics to fast-fashion and designer labels. Last year, the Shenzhen-based site inked a deal with Ferragamo to launch the Italian luxury brand’s official online store on its platform. Xiu also unveiled a major partnership with eBay for the launch of eBay Style, a fashion site for Chinese consumers that has more than 5,000 brands.
Xiu now is launching an English-language microsite that will provide company information and partnership material for international brands that might be interested in collaborating with the e-tailer.
“Xiu definitely has better brand awareness in the market” compared with foreign e-commerce players, Celine Yang, vice president of strategy for the online Chinese fashion retailer, claimed. “We have a strong local operations team, and we are an online fashion marketplace carrying a lot of brands of different levels to serve customers better. We localize global fashion and ensure everything we sell is matching Chinese consumer preferences.”
While Xiu (pronounced “show”), which roughly translates into “show your beauty,” offers full-priced products, many of the items sold on the platform are discounted. “We believe the combination of full-price products and discounted goods is the best combination,” Yang said. “Chinese consumers will pay full price for new styles and new collections, but a lot of middle class consumers don’t have a high disposable income, so they prefer to buy discounted goods.
“Some global players just deliver only luxury brands,” she added. “This business cannot be scaled enough.”
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Xiu has three million registered users, a million of whom are active, according to the company. On average, customers spend $90 an order. Yang said most of Xiu’s customers live in first-tier cities, but that there is a noticeable increase of purchases from second- and third-tier cities.
McKinsey & Co., which projects online sales will be between $420 billion and $650 billion in China by 2020, noted in a study this year on China’s e-commerce industry that there is pent-up demand for merchandise in lower-tier cities where physical retail stores do not yet exist. The study said that while consumers in lower-tier cities tend to make less money, they spend as much online as consumers in more prosperous urban areas.
According to Yang, combining luxury with fast-fashion and premium brands has proved to be a strategy that works because Chinese consumers increasingly prefer to mix luxury products, particularly accessories like handbags and sunglasses, with apparel that is cheaper. “You can’t expect them to buy everything from luxury brands. For apparel, they prefer to buy fast fashion, so we need to make our offer in that combination,” she said.
Ferragamo, eBay and other brands that have inked exclusive partnerships with Xiu have their own stores on the company’s site. Otherwise Xiu is like an online department store where consumers can search for items by brand name or by product category.
Chinese consumers are comfortable buying luxury goods online in the price range of 3,000 yuan ($490) to 10,000 yuan ($1,600). Sunglasses, handbags and watches are the most popular purchases, Yang said.
She said that Xiu sells more than $6 million worth of Gucci products annually, “which is definitely number one in China.” She said the portal also holds the number-one position nationwide for other luxury brands and many American fast-fashion brands.
One mistake that international e-commerce companies are making in the China market is that they are not localizing their sites enough, the executive said. There is still too much English, and it is hard for Chinese consumers to figure out how to order products. She also said that while brand recognition may be high globally for players like Net-a-porter and Yoox, which have launched e-commerce sites in China, it does not mean that Chinese shoppers are familiar with them.
Neiman Marcus, which launched e-commerce operations in China last year, “quickly discovered that its brand recognition in the U.S. did not translate to China,” according to a June 2013 luxury e-commerce study from Observer Solutions, a market research company focusing on China.
“Neiman Marcus selected its product offering without any significant experience designing products to the specific tastes of Chinese consumers,” the study said. “Yet even if consumers were interested in the products, without brand recognition or exclusive products, Neiman Marcus faced an uphill battle charging full price for its products online.”
Xiu’s growth in China has not come without snags. Some in the e-commerce industry have said the site has questionable practices for procuring products and that the authenticity of products is not guaranteed. Last fall, Chinese media reported the Xiu had been selling fake luxury products via its store on Tmall.com, an online shopping portal operated by Chinese internet giant Alibaba. The revelation forced Xiu to close its store on Tmall.
“We have always said all of our products are 100 percent authentic,” Yang said. “The stories in the media were inaccurate. We check all of the authorization documents from all of the distributors and brand companies to make sure they are authentic.”
Nearly 50 percent of Chinese consumers worry that luxury products sold online are not authentic, the Observer Solutions report said.
Yang said Xiu’s supply chain is “a little bit complicated.” Some products are sourced directly from brands while others come from “distributors and overseas e-commerce partners.”
“We find the products with the best quality to provide to Chinese consumers,” she said, adding that the top-three selling brands are Gucci, Burberry and Coach.
There may be reluctance from luxury players to partner with Xiu because the site is not exclusively selling luxury products, Yang said. One factor that secured the Ferragamo partnership was a realization that the sheer number of online shoppers visiting the site would generate more sales, said Yang.
The executive declined to provide sales figures for Xiu.com or its partners.
“I understand a lot of luxury brands and premium brands care so much about their brand image,” she said. “But luxury and premium brands also care about sales. If you only develop some fancy Web site, you can’t expect a lot of sales or traffic. We can present their brand image in exactly the way we want and also provide a lot of traffic and sales in the long term.”