Three years ago, Tmall launched its Luxury Pavilion, and today, 66 percent of global luxury brands are on the platform. But finding a partner can be much more difficult for smaller luxury brands in China.
Brands in China have to go through influencers, but since most smaller brands cannot afford to pay big China influencers, they must activate overseas first to garner name recognition.
The fastest way to succeed in China is to get an investor. But that requires growth. Then if you already have a position in the market and sales, you are a desirable partner.
Manish Arora was one of the most colorful luxury brands to show at Paris Fashion Week, yet it filed for bankruptcy last July. Despite its visionary pieces, which are handcrafted in Delhi, the brand’s recent struggle to compete and losses from the pandemic undermined the namesake designer’s success.
The brand became the first Indian house to make it overseas, eventually dressing celebrities and getting into major department stores like Lane Crawford in Hong Kong, where it sold more than it did in Paris. In 2016, Arora received a Legion of Honor in France.
China has been ignored in the story of the brand’s collapse, yet sources close to the shuttered label say it delivered Arora’s final blow. Having the wrong local partners failed them at a time when business in Europe had all but collapsed.
In 2018, the brand announced it was opening three new stores in China — the same year they opened a flagship store in Paris. There, Arora worked with Hong-Kong-based luxury hosters Intrend, which could not be reached for comment.
“Arora is a sad and cautionary tale about getting your China partners right and investing in that partnership,” says Tom Griffiths, the commercial director at Verb China, a leading digital marketing agency. “Brands have to roll up their sleeves and get involved in China. But it is an incredible opportunity for luxury. You just have to create relevancy.”
Chinese consumers will account for 50 percent of luxury sales by 2025, according to a recent report by Bain & Company. So the country has become increasingly relevant to luxury fashion, especially since the pandemic began. And while consumers there are hungry for niche designers, connecting this appetite to smaller luxury brands is complicated.
“People don’t want to buy the same designer handbags again and again,” says Elspeth Cheung, Global BrandZ Valuation Director, Kantar, a data company with expertise in China. Griffiths agrees, adding that “a lot of smaller brands do not realize how big they are in China, where there is an enormous audience for niche brands.”
Alibaba’s Tmall platform has already met the bigger luxury players halfway. Three years ago, Tmall launched its Luxury Pavilion. And now, according to the company, 66 percent of global luxury brands are on board. But, for smaller luxury brands, partnering can be much more difficult in China.
Sebastien Badault, the general manager, France, and the international director of fashion & Luxury at Alibaba, was responsible for the launch of the company’s Luxury Pavilion. He says that a Tmall initiative in Paris for smaller brands did not come to fruition, following talks with FHCM, the French fashion and couture federation.
“There was an idea of launching an umbrella store to showcase smaller brands on Tmall,” says Badault, stating that Tmall’s ethos has always been to help smaller companies. [But] if you are a sub-brand in an umbrella store, it is hard to shine.”
Luxury players such as Chloe, Cartier, Lanvin, Balenciaga, and Burberry Beauty joined Tmall in droves this year after the pandemic fueled an accelerated digital focus. But some smaller labels have joined, too, including Zadig & Voltaire, the shoe designer Pierre Hardy, and Ines de la Fressange.
Since March, 50 more luxury brands have joined the pavilion, according to Paris-based Nicolas Cano, the head of business development for Tmall Luxury, France, bringing the total to 200. Some are making as much as 80 percent of their overall revenue on the platform, Cano discloses. But not everyone is China-ready. “If you are Vuitton or Chanel, it is a no-brainer,” says Badault. “It would be hard for them not to make it in China. But if you are a lesser-known brand, can it work?”
First and foremost, any company wanting to work in China should be prepared to make a big investment. But the next step is to find the right local partner.
Chloe Reuter of Reuter Communications, a luxury intelligence agency based in Shanghai, notes that there are other outlets for small brands besides Alibaba. “You have got this incredibly complex social media landscape here that represents more of an opportunity for these smaller labels,” she states.
Partnerships like Heytea and Rihanna’s beauty label, Fenty Beauty, or the San Francisco-based fashion brand Everlane’s collaboration with Seesaw Coffee and Ele.me (China’s answer to Deliveroo) are some examples of brands that made great strides on China’s social media, she adds.
Ron Wardle, head of Yooma, a luxury platform for launching premium CBD products in China, shares some points from his launch playbook. “We create product demand overseas first, and then launch in China because there is already a streamlined image,” he says. “We worked with Lab to Beauty for a year-and-a-half where we went through the Global Pitch Fest at Tmall and used overseas KOLs to post about [the brand]. We did content writing for Weibo and Bilibili. We went on Tmall’s own incubator store, got cross-border partners, and worked on brand activations and digital touchpoints.”
Wardle also explains that you have to go through influencers in China, but since most smaller brands cannot afford to pay big China influencers, they must activate overseas first. Brands “have to work it,” he says. “Some brands are not nimble enough. But they have the brand and heritage behind them, and consumers want cool hard-to-find brands.” He recommends using overseas activation agencies like VIP.com and Avenue51.
“Until recently, in China, you had to have a co-venture,” opines Griffiths. “But without the right partner on both ends, it is a nightmare.” As such, ninety percent of his job is sitting between partners to help facilitate communication. “Manish Arora looks like they were bullish in the Chinese market,” he explains. “They were going for it. If they had the wrong partner, well, that happens a lot.”
Testing the waters first
Griffiths goes on to warn companies that they should begin slowly in China. “I would normally advise clients to work together for a year first,” he says. “If they do not have the capital to start with, and are relying on a partner to provide overheads, that can be complicated. I would try and caution away from that.”
“But,” he adds, “the quickest way [to succeed in China] is to get an investor and go for it. Grow a little bit first and then form a relationship with an in-market partner. If you already have a position in the market and sales, you are already a desirable partner. And some really good shopping malls are good at showing smaller brands.”
Sadly, smaller brands can struggle in China because they need a fast return on investment. So, Griffiths says, “finding your audience and getting that revenue back quickly is important. The market is not set up for that, but it can be done by going in stages.”
Cheung points out the successful strategy of Tripollar, a brand that built a global authority in beauty home devices before entering China. “I would say the biggest mistake made by foreign luxury brands is neglecting to emphasize their heritage and Western roots loudly enough,” she says.
Lab to Beauty, the CBD brand mentioned earlier, was the first to launch in the luxury CBD market in the US in 2018. Partners include Saks Fifth Avenue, Revolve, Fontainebleau Miami Beach, and select luxury independents. CEO Katherine Ragusa says that pain points in China include low brand awareness from Chinese consumers, the newness of the CBD category, and a glut of existing beauty and personal care brands.
Lab to Beauty has chosen to sell through several cross-border platforms like Tmall Global, Kaola, and the Beyond App while relying on Yooma’s know-how to expand into China. “We have been working with many US-based Chinese KOLs to help with unboxing videos, brand awareness, product introductions, and more via their Western and Chinese social channels,” says Ragusa. “We will continue to utilize this strategy and include additional China-based KOLs as we expand.”
Ragusa knows that China is not an instant fix but expects the brand’s focus there to pay off. “In these early days, we will look at China as a step-by-step approach and expect that it will contribute a large percentage of sales shortly.”