Many top global luxury brands have spent more than a century painstakingly building up their high-end images, and are terrified that embracing e-commerce could take it all away. In the China market, Burberry took the exact opposite approach this week by becoming one of the first ever foreign luxury fashion labels to open a store on Alibaba’s Tmall—a site better known for selling purses that cost 150 yuan (around US$20) rather than 15,000 ($2,400).
While this move may seem like the digital equivalent of selling luxury at a store like Wal-Mart, it makes a lot more sense if you look at several specific factors that make the China luxury market highly unique compared to those in more mature economies.
This “highly unusual step,” according to The Wall Street Journal, “reflects a shared commitment to offering Chinese consumers the best in luxury experiences across all of Alibaba Group’s platforms,” said a statement by the brand.
Burberry is wading into mostly uncharted territory with the new shop, and many analysts are wary of its chances for success. Apart from a one-month Coach flagship that launched (and was abruptly shut down) in 2011, Burberry is the first top international luxury clothing and accessories brand to launch a shop on the site. While many foreign cosmetics companies such as Clinique and Clarins are on Tmall, even these comparatively mass-market brands have been skittish about committing to it: LVMH-owned Benefit Cosmetics closed its Tmall shop in 2012 in fear of hurting its upscale positioning. Analyst Shaun Rein told The Wall Street Journal that the move could cause Burberry to “lose its luster,” while Yujun Qiu, an analyst at Planet Retail, said that “luxury brands rely on exclusivity, so I don’t see why they would lower themselves and have a store on Tmall.”
However, the decision isn’t as crazy as it seems for several reasons. First, China’s high costs of imported luxury products thanks to tariffs mean that the country has a thriving “gray market” of daigou products (luxury products smuggled into the country) and very convincing counterfeits, both of which are readily available online. These items are mainly available on Alibaba’s C2C site Taobao, and B2C Tmall also has a number of off-brand imitations of luxury items for extremely low prices.
At 22,000 yuan for a coat, Burberry’s items on its Tmall shop may not come cheaper than “alternative” products, but the brand’s legitimate presence could help to guide buyers who can afford the real thing away from sketchier and less reliable options.
Furthermore, the move gives Burberry yet another platform on which to embrace its digital-heavy China strategy, which includes an intense focus on both e-commerce and social media. Chinese consumers shop online on both desktops and on mobile devices at much higher rates than those from other countries. Burberry’s new Tmall store embraces this trend, and will be accessible over mobile and tablet devices in addition to desktop. Luxury isn’t excluded from China’s e-commerce boom: a study by consulting firm KPMG published in February found that consumers are showing more confidence in luxury shopping online. Furthermore, they’re buying the goods for many reasons not associated with price, such as convenience and finding brands of foreign origin.
Burberry isn’t completely ignoring its high-end image with the new shop. The design is highly stylized to match the format of its e-commerce site, and prices are far from cheap. While many expensive brands may shudder at the idea of their products being displayed on the same site that offers garish imitations, Burberry is clearly banking on outshining its copycats on their own turf.