Can Louis Vuitton break the Chinese ecommerce market alone?
China’s expanding ecommerce market represents a huge opportunity for western brands with a foothold in the region. But can even the biggest and most popular of them succeed there without powerful local partners like Alibaba and JD.com? Louis Vuitton is about to find out.
LVMH’s share price has risen by 22% so far this year
SOURCE: Yahoo Finance
The luxury giant, which generates more than a quarter of its annual revenue from Asia, is the latest in a line of luxury titans seeking to cut out the Chinese middleman and woo consumers in the country directly. LVMH’s online catalogue will feature leather goods, shoes, watches and jewelry, and follows a path set out by Gucci and Coach, who shut up shop with Alibaba’s TMall in an attempt to go it alone last year.
In the next four years, China is set to overtake the U.S. as the world’s largest luxury market. It is already the world’s largest retail market, and its largest ecommerce market. According to Euromonitor International, online sales now make up a fifth of all retail spending in the country, driven by the popularity of smartphones, swiftly evolving consumer habits, and the challenges that are posed by China’s still-urbanizing landscape.
Despite these compelling statistics, online sales of luxury goods in the country are still not up to par with other sectors. Ecommerce sales make up less than 10% of all luxury goods sales in China, according to Euromonitor, because many iconic brands have been reluctant to take their business into cyberspace. Alibaba and JD.com have both tried to sway the luxury world’s big players, but to no avail. By and large, companies like LVMH and Chanel are worried about knockoff products appearing, and the dent to exclusivity that ecommerce implies.
The value in going it alone is that companies like LVMH will have tighter control over how their goods are sold. This immediately neuters the potential risks of ecommerce: goods can be sold in limited numbers directly from the companies themselves, guaranteeing authenticity and maintaining exclusivity. The downside? They’re now in competition with Alibaba and JD.com.
Dominion holds LVMH in its Global Trends Luxury Fund.
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