China’s e-commerce model eclipses Western efforts YNAP, Farfetch

The state of luxury multi-brand e-commerce in the West is a shambles. February 2024 saw Farfetch narrowly escape bankruptcy through a sale to South Korean giant Coupang in a pre-pack administration deal; by March, MatchesFashion had announced its shuttering. All the while, Richemont’s loss-making retailer Yoox-Net-A-Porter (YNAP) continues to search for a buyer. Meanwhile, in China, the largest global e-commerce platforms in terms of revenue — JD.com, Tmall, Taobao, and Luxury Pavilion — are thriving marketplaces for high-end brands. Over the past year, 56 percent of the mainland’s online luxury shoppers used JD.com for their purchases. E-tailer Tmall commands the largest market share in China, responsible for some 51 percent of all transactions on B2C platforms — consumers spend an average of seven minutes a day on the platform. These impressive statistics are the stuff of dreams for Western e-commerce players. A combination of decreased consumer loyalty, lack of brand support, unexciting customer journeys, and lack of personalized experiences have led to its demise. Also, there are too many Western retailers offering very similar services, just in different fonts. Personal shopping, styling services But young blood may shake things up. A plethora of start-ups is entering retail, offering elevated personalization for luxury shoppers, such as stylists and personal shoppers. “People with busier lifestyles benefit from having their own stylists. But I don’t know if there is much of a demand for it other than for the super wealthy,” celebrity stylist Amy Holden-Brown says. Catering to the upper-echelons of luxury consumers, 2024 alone has seen Vêtir and The Floorr launch. Both are apps for celebrity VIPs and high-net-worth individuals (HNWIs) who already utilize personal shoppers and stylists. Senior Advisor in Luxury/Retail at Smith Square Partners, Claire Kent says that Vêtir’s success will boil down to three key factors: “Execution: making the platform intuitive and user-friendly; persuading brand sales associates and stylists to use it; and finally, the financial economics — whether the commissions and license fees from the technology are sufficient to make the business economically viable.” Similar ventures have included Threads, founded in 2019, which is a luxury chat-based shopping platform for 24/7 advice and styling. There’s also the invitation-only app ISO Luxury by Julia Carrick OBE, founder of the Financial Times’ How To Spend It magazine, which ran for around a year after launching in 2019, offering members exclusive access to brands and sought-after items with the aim of driving footfall to stores. All of the aforementioned ventures cater to VICs, leaving the mainstream public out in the cold. Direct-to-consumer Though personalized experiences are important, for wider appeal, the role of D2C that Tmall has thrived on is something that businesses in the West can learn from. Though joining fees are high, whether on Tmall Global or Luxury Pavillion, the platform offers brands autonomy and visibility with the opportunity to open and operate their own flagship stores. Launched by Alibaba in 2017, Luxury Pavilion is an invite-only service, now stocking over 180 luxury brands like Chanel, Valentino, Burberry, and Bottega Veneta. Having worked in the industry for over three decades, Kent agrees that brands need this level of freedom: “Luxury multi-brand stores served a purpose in the early days before the luxury sector had embraced e-commerce. But in the same way that luxury companies took back distribution from department stores, I see the same thing happening to luxury multi-brand e-commerce retailers.” Brands want direct interaction with their consumers, as shown by the success of auction house Phillips’ Dropshop service. Launched in summer 2023, the direct-from-artist sales platform is the first to partner directly with artists who are creating works specifically for it. If luxury e-commerce could follow a similar structure, perhaps it would benefit from the same level of enhanced customer loyalty and exclusivity. “Sixty-percent of all Dropshop buyers have been new to Phillips, and we have seen buying activity in 20 countries across four continents,” Phillips’ Director of Retail, E-commerce Christine Miele tells Jing Daily. “The appeal of Dropshop for artists is multifaceted; it’s a game-changer in the auction world, as it redefines the dynamics between primary and secondary markets, offering artists a new avenue to showcase and sell their works immediately.” Creating a more seamless interaction between brands and their consumers, in the same way that Phillips is doing for the art market, could be the future for online luxury commerce. Just as Tmall allows businesses to sell their goods directly to consumers, “more and more business models will develop across industries that give people access to creators in a way that previously didn’t exist,” adds Miele. Though personal shopping and styling apps are on the rise, these do not cater to the wider needs within the luxury industry, such as more casual shoppers, or those who shop luxury less frequently. Personalized experiences are at the core of today’s retail industry, but evidently, the way in which these services are being curated is failing to hit the mark — as demonstrated by the number of start-ups that have not lasted, such as men’s styling platform Thread (2019-2022), Carrick’s elusive ISO Luxury, or AI-powered styling app Blend, which has not posted anything to the public since September last year. The conundrum for e-commerce in the West cannot be quickly resolved, but the autonomy of brands in telling their own stories, and thus garnering their own communities, should be at the forefront. Various personal shopping and styling apps might cater to HNWIs, but selling to the mass of other luxury consumers requires a larger, more accessible platform that allows space for brand expression.

Sectors

Insights

Company

China’s e-commerce model eclipses Western efforts YNAP, Farfetch