LVMH embraces Chinese pure-play luxury e-tailer Secoo
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LVMH embraces Chinese pure-play luxury e-tailer Secoo

You might not have heard of Secoo. In an Ecommerce landscape dominated by Alibaba and JD.com, the relatively new online retail player is easy to miss. Nonetheless, it’s managed to carve out a lucrative niche for itself with a unique promise: all the luxury goods on Secoo really are luxury goods. In China, a market which has long been swamped with knock-offs and where the appetite for real luxury is huge, that’s a compelling proposition. And the world’s biggest luxury group, LVMH, has taken notice.

LVMH’s share price has risen by 21% so far this year

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Source: Yahoo Finance

LVMH (through its private equity arm, L. Catterton) is plowing as much as $175 million into Secoo – an Ecommerce platform which already features many of the bigger company’s 70 most prestigious luxury brands. The luxury conglomerate will bring more than just money to the table, however. A spokesperson for Secoo told Chinese publication Jing Daily:

“Simply put, L Catterton portfolio companies will have a closer relationship with Secoo, Secoo will gain authorization from LVMH’s brands. LVMH will utilize its rich experiences in the luxury industry, human resources and brands to help Secoo better develop.”

Secoo has also gained interest from competitors at home. JD.com, a giant in the Chinese online retail space, has a stake in the company, despite having its own luxury Ecommerce platform. As Secoo focuses primarily on discounted goods, it gives JD exposure to another segment of the market.

Perhaps the biggest question over the investment is how it will shake up the online luxury market in China. Luca Solca, head of luxury goods at Exane BNP Paribus, said:

“It seems that the market is preparing for a consolidated multi-brand digital luxury retail scenario. One can think of a few high profile deals, such as Richemont recently taking over Yoox Net-A-Porter Group; JD securing a strategic investment in Farfetch, and now L Catterton investing in Secoo. I presume the expectation behind this is that digital distribution will be less fragmented than physical distribution – which can create a competitive advantage for those players in a position to control the few winning platforms. It is early days to anticipate how all this will play out in the end, but it is a fascinating strategic development.”

Disclosure
Dominion holds LVMH in its Global Trends Luxury Fund.


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