Swiss luxury group Richemont struck a global strategic partnership with China’s e-commerce giant Alibaba (阿里巴巴) on October 26 to bring retail offerings of the world’s leading online luxury retailer YOOX Net-a-Porter Group (YNAP) to Chinese customers, news aggregator Jiemian.com (界面) reported. YNAP is owned by Richemont.
As part of the joint venture (JV), YNAP launched Net-a-Porter and Mr Porter multi-brand on Alibaba’s Tmall Luxury Pavilion (天猫奢侈品频道), an online luxury marketplace for China’s high-end consumers.
Both YNAP and Alibaba would benefit from the partnership, the source said. YNAP could get access to Alibaba’s 600 million-plus users, technology, infrastructure, marketing, payments and logistics.
“Alibaba has become the preferred online destination in China, with world-class teams in technology, logistics and marketing. Our digital offering in China is in its infancy and we believe that partnering with Alibaba will enable us to become a significant and sustainable online player in this market,” said Johann Rupert, the chairman of Richemont.
In return, YNAP might bring more brands onto Alibaba’s sites, stepping up Alibaba’s expansion into the luxury sector.
“Chinese consumers are expected to account for nearly half of the global luxury market by 2025, and through this partnership, Alibaba and YNAP will be even better positioned to capture this compelling market opportunity,” said Daniel Zhang, the chief executive of Alibaba.
China’s luxury e-commerce market is controlled by three biggest players - Alibaba, JD.com (京东) and Tencent (腾讯).
In June 2017, Alibaba’s major rival, JD.com, invested USD 397 million in Farfetch, a London-based online platform operator for luxury goods and boutiques. The 10-year-old fashion enterprise currently has more than 3,200 global brands, including 375 luxury labels and 614 boutiques.
The investment allowed JD.com to tap into Farfetch’s retail chain, and more importantly, connected it to Farfetch’s other shareholders, including François-Henri Pinault (the chairman and CEO of Kering Group), Condé Nast Group (the owner of the leading fashion magazine Vogue) and the Chanel Group.
After the funding, several brands of Kering, such as Balenciaga, Saint Laurent, Alexander Mcqueen and Pomellato, settled in Toplife, JD.com’s luxury e-commerce platform targeting Chinese buyers with one-day deliveries and services.
This has fueled the establishment of Richemont-Alibaba alliance. Shortly after JD.com’s investment in Farfetch, a source revealed on anonymous condition that Alibaba intended to team up with YNAP to compete with JD.com.
Richemont’s partnership with Alibaba marks the intensifying turf war.
To win over as many luxury brands as possible both JD.com and Alibaba are ramping up efforts to create a more high-end experience for them, reported Jing Daily (精日传媒), a digital publication on luxury trends in China. Unlike Alibaba and JD.com, Tencent built a social e-commerce marketplace by setting up pop-up stores in its social media app WeChat (微信). With over one billion monthly active users (MAU), the China’s most popular social media platform has become one of the optimum places for luxury brands to sell their goods in mainland China.
In 2016, French luxury brand Cartier unveiled a WeChat storefront. Moreover, British luxury fashion house Burberry Group is only available on four social media platforms globally - WeChat in China, Instagram in USA, and Line and Kakao in Korea.
The luxury brands cooperate with WeChat for traffic and access of user data to offer more personalized services.
The sales and consumption of luxury brands in China represent a lucrative and relatively untapped opportunity in the marketplace. Sales of luxury goods in the country between 2016 and 2017 skyrocketed by around 20% to RMB 142 billion (USD 22.07 billion), according to BCG’s statistics. In addition, as the biggest spenders on luxury products in the world, Chinese consumers made up a sizable 32% of the €262 billion (USD 297 billion) spent in the global market last year, and the percentage is expected to reach 40% by 2024. Capitalizing on the trend, both Western luxury brands and China’s domestic players came together to explore future opportunity in the profitable industry.