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
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.”
Dominion holds LVMH in its Global Trends Luxury Fund.
If you would you like to receive the Newsfeeds daily, please click here to sign up now!Help us make this Newsfeed better by rating this article. 1 star = Poor and 5 stars = Excellent
- Click here to print this story: Print
The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.