While retailers are increasingly bullish on brick-and-mortar expansion across the Asia-Pacific region, in mainland China, digital channels such as Alibaba Group’s Tmall Luxury Pavilion continue to engage Chinese consumers online with success.
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In 2023, over 80 million consumers in luxury goods engaged in various behaviors such as browsing, bookmarking, and adding items to their carts on the app, according to Tmall, which has established itself as a premier online destination for luxury retail in China. Total membership of Tmall Luxury Pavilion’s brand flagship stores witnessed a 60 percent increase in 2023 compared to the previous year, and the platform is poised for continued growth throughout 2024.
Retail in Asia speaks with Janet Wang, Tmall Luxury Pavilion general manager, on her insights on the Chinese consumer landscape and the platform’s latest developments.
Retail in Asia: Can you share with us some of your observations on the Chinese consumer landscape, particularly when it comes to luxury consumption?
Janet Wang: The habit of Chinese consumers purchasing luxury goods online has been established. Eighty-five percent of luxury goods consumers in China are influenced by content on Chinese digital platforms in their purchasing decisions. In 2023, the influence level of integrated e-commerce platforms, represented by Tmall Luxury Pavilion, on consumer decisions has further increased by 7 percent.
In recent years, VIC (Very Important Customer) consumers have shown greater resilience. There is a large number of digitally-savvy ‘new VIC’ consumers. Compared to average consumers, they have greater purchasing power, higher loyalty, are less likely to churn, and engage in online behaviors like return visits, favoriting, and adding to cart more frequently, with a higher probability of repeat purchases.
In 2022, VIC consumers who made more than three purchases on Tmall Luxury Pavilion contributed to over half of its sales; in 2023, this group of consumers with high purchasing power continues to grow in number, frequency of purchase, and average order value, with a further year-on-year increase of 30 percent in total transaction volume.
Lastly, consumer demands are becoming more diverse and complex. Luxury online consumption is maturing and deepening, with demands becoming increasingly vertical and personalised. Online browsing and the time spent gathering decision-making information are more fragmented, with a greater emphasis on experiential consumption. Brands need to create more sophisticated and precise content that resonates with consumers and offer a digital consumption experience that spans online and offline channels to better capture attention and favor.
Retail in Asia: Tmall Luxury Pavilion recently launched multiple luxury jewellery brands. Please can you tell us about the latest developments on the platform?
Wang: LVMH’s Tiffany, Chaumet, Hublot, and other brands including Bulgari, Fred, Tag Heuer, and Zenith have successively set up shop on Tmall Luxury Pavilion, bringing all of LVMH’s core jewellery and watch brands to the platform.
Since 2018, Tmall Luxury has accelerated its partnership with Kering Group and Richemont Group, attracting numerous jewelry and watch brands to establish their presence. It’s fair to say that we have established the richest online hard luxury retail ecosystem in China.
In April, the Italian luxury shoe brand Casadei and the high-end lighting brand Flos joined Tmall Luxury Pavilion. Over the past few years, many influential niche high-end brands have chosen Tmall to launch their first stores in China, which, in a sense, represents a strong endorsement of the Tmall platform by international luxury brands.
During the recent Fashion Week, brands such as Burberry, Balenciaga, Bottega Veneta, and Valentino live-streamed their shows from London, Milan, and Paris on Tmall. For some brands during Fashion Week, the number of followers and members in their Tmall stores increased by more than tenfold compared to average days.
During the Watches and Wonders Geneva, 13 brands on Tmall Luxury Pavilion launched more than 70 new products from the Geneva exhibition, with 50 of them having their first launch online in April, including Tmall exclusives and first releases. Unlike previous years, which were mostly pre-orders, this April, about 30 of the latest watches will be available for immediate purchase, offering real-time buying straight from Geneva. Brands such as Van Cleef & Arpels, Zenith, Chopard, and Montblanc launched live streams in their Tmall flagship stores to showcase their newest watches.
Retail in Asia: How has the platform’s digital luxury experience evolved?
Wang: Over the past few years, Tmall Luxury Pavilion has progressively developed a complete digital experience that spans the pre-purchase, during-purchase, and post-purchase journey for consumers.
Through increasingly sophisticated digital technologies such as live broadcasting, 3D, and AR, it has become possible for consumers to preview and even virtually try on items online. Consumers can learn about product details through one-on-one video consultant services. For logistics and delivery, they can choose scheduled delivery. There are also various gifting services available such as voice gift cards, 3D gift cards, and personalised engraving options, among others.
After purchase, a digital after-sale service makes it easy for consumers to submit requests for luxury product cleaning and repairs with just a click. VIP consumers of brands can also use sn exclusive communication channel to access the latest information directly from the brands.
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Retail in Asia: With China’s e-commerce infrastructure growing increasingly competitive, what are some activations from The Luxury Pavilion that enable you to retain your market share and boost confidence for your brands?
Wang: We believe that digital transformation and upgrading are essential for the long-term value of luxury brands, enabling them to identify new opportunities faster and more nimbly, helping brands to navigate economic cycles and achieve sustained growth.
Beyond its inherent e-commerce sales function, Tmall Luxury Pavilion has become a medium that enables precise dialogue with consumers across multiple touch points.
In this year, we will further upgrade the platform’s universal tools, we guide the interest demographics to convert into fans of the brand stores through numerous touchpoints, and then transform into member who engage deeply. This convenience allows luxury brands to open up more VIC-exclusive events, brand exhibitions, in-depth experiences, and other offline activities for reservation to Tmall store members, solidifying a greater number of loyal ‘new VIC’ consumers and strengthening deep connections with them.