NetEase's Luxury E-Commerce Site First Casualty Of 2012

“NetEase Premier” Touted “Global Brands,” “100 Percent Authentic Products,” “7 Day Return Policy” NetEase Premier was launched in January 2011 Less than one year after its much-hyped launch, "NetEase Premier," the luxury shopping platform created by the Chinese Internet portal NetEase (163.com), has ceased operations, making it the first casualty of the luxury e-commerce shakeout of 2012. Touting discounts of up to 80 percent on top brands like Hermes, Gucci and Louis Vuitton, NetEase Premier was NetEase's third foray into the world of e-commerce, following its NetEase mall, online travel business, and third-party online payment service, ePay (网易宝). However, the portal has a history of shutting down its online businesses far more quickly than its competitors, having ceased operations on its online travel site after only 80 days. As Jing Daily noted at the launch of NetEase Premier last year, the site incorporated many features that have now become commonplace among the dozens of e-commerce platforms both large and small that have crowded into the China market: According to NetEase, the “Premier” platform stocks watches, handbags, apparel, shoes and jewelry. Addressing concerns about counterfeiting, NetEase Premier provides certificates of authenticity with every purchase. In recent months, we’ve seen moves by competitors like Yoox to combat counterfeiting by inserting RFID chips into each item it sells in mainland China. Additionally, NetEase is heavily promoting its 24-hour customer service hotline, 7 day no-questions-asked returns, and national shipping service. Currently, NetEase Premier supports three payment methods: NetEase ePay, online bank transfer, and Yeepay (联通卡). Whether due primarily to insufficient inventory, customer service issues or poor profitability, clearly the shutdown of NetEase Premier was dogged by the much greater competition that has entered the e-commerce market in China. As we wrote last month, despite rosy projections on the future of China's e-commerce sector -- particularly its luxury segment -- there are simply too many sites out there competing for market share. In 2012, we expect a serious industry shakeout that should leave a handful of well-capitalized sites with ample inventory and ability to discount, as well as the perks expected by Chinese buyers: free shipping, fast checkout, easy returns, and authenticity guarantees to name a few. As we wrote in our annual wrap-up last week: In the year ahead, we expect to see many e-commerce platforms that have recently gotten into the luxury realm retreat back to their “bread-and-butter” low- to mid-range sales. At the same time, we expect to see domestic players like Taobao’s T-Mall and international players like Yoox, and its more niche sub-brand thecorner, consolidate their positions in the industry via better selection, authenticity guarantees, and online exclusives. While these industry “growing pains” may be tough for recent entrants to the luxury space, a shakeout will likely be ultimately good for Chinese consumers themselves, as market leaders are likely going to have to continue to increase service offerings...and stocking better inventory while still aggressively competing on price.

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NetEase's Luxury E-Commerce Site First Casualty Of 2012