China’s online shopping mall,, has evolved its business model to include digital versions of shops-in-shop called “e-flagships.”

This story first appeared in the November 19, 2013 issue of WWD. Subscribe Today.

Lanvin is the first brand hosted on the Shangpin platform, with men’s and women’s apparel, accessories and footwear offerings. Next up is La Perla, according to M. Claire Chung, Shangpin’s vice president for global business development.

All e-flagships are independently run by the brands, although Shangpin, with its experience in the Chinese online marketplace, will help with social and digital marketing on the site.

The company still has its traditional full-price, online shopping mall section, where it buys product for the site in the same way that a department store merchandises its brick-and-mortar stores. Shangpin also operates its original flash-sale site, which has evolved into a commerce-info section to educate consumers on the full-price offerings for luxury brands at its sister operation.

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David Zhao, founder and chief executive officer of Shangpin, said, “Our innovation allows for brands to benefit from our high-end traffic and marketing synergies of all our brand partners. The brand can maintain their own independent branded stores that are separated from the brands in our own multibranded retail area.”

Shangpin has access to China’s affluent population because Zhao, working with China’s banks, marketed the site as a premium membership benefit for their high-end credit card customers.

“The Chinese online consumers are different from their Western counterparts. Monobrands do not work well in China. Chinese consumers grew up on shopping sites like Tmall, which has many brands. That’s why they prefer the multibrand platform,” Chung said.

While the tier-two cities are starting to see brick-and-mortar development as the infrastructure in those locations is built out, Chung said the real growth for many brands online is in the tiers three and four cities. She added that Shangpin is already delivering to 400 cities throughout China.

There’s also a difference in how consumers shop in the newly growing cities, compared with their first-tier group, which now has a fairly developed retail store presence.

“There are two phenomenons. The average basket is lower in tier three, about 1,500 yuan [$244.56 at current exchange], versus 2,000 yuan [$326.08] in tiers one and two at the full-price site. But the tier-three-and-four cities have a very brand-loyal customer base. We see large purchases coming from those cities and less from tiers one and two as they have more options,” Chung said. She added that a consumer in a tier-four city once bought the entire Sergio Rossi collection that was available on the site, explaining that when consumers see a brand they like that’s not available to them in town, they tend to buy a lot of what’s available.

At the flash-sale site, the average basket is 1,000 yuan, or $163.04, across all tier cities. Shangpin has three million users on its full-price site, and five million on its flash-sale site.

As for return rates, Chung said for the tier-three-and-four cities where much of the shopping is online, it’s about 10 percent for apparel and 4 percent for accessories. She noted that Shangpin provides detailed product information, including sizing and product specs, which cuts down on returns due to errors in ordering the wrong size.

While tier one is focused primarily on luxury brands, tiers two and three are seeing “big growth in those interested in designer and contemporary brands. The tier-four cities are interested in both fast fashion and then luxury,” Chung said.

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