Coach is the first luxury brand to open an e-commerce site on Taobao’s online mall, except for Lambourghini, which has notably sold 0 cars on Taobao!
With more than 140 million e-commerce users in China, China’s e-commerce market is predicted to be the world’s largest in four years.
Boston Consulting Group (BCG) calculates that every year for the foreseeable future another 30m Chinese will go online to shop for the first time. By 2015 they will each be spending $1,000 a year—about what Americans spend online now. BCG calculates that e-commerce could rise from 3.3% of China’s retail sales today to 7.4% by 2015—a jump that took a decade in America.
With such dramatic growth in the e-commerce sector, luxury brands are starting to take note and are beginning to test the waters with self-run e-commerce sites (Burberry, Benefit, Sephora), flash discount sites (there are more than 5,000 sites in China!) and online retailers (Yoox and others). However, the move by Coach marks the first move by a luxury brand to open a store on China’s largest e-commerce site, Taobao. From a sales perspective, it looks like a home run. From a branding perspective, the jury is still out, but let’ take a quick look at the pros and cons:
- Taobao’s traffic is immense. It would be not only cost prohibitive, but also impossible for a single brand to generate the same amount of traffic.
- Taobao consumers are avid online shoppers, so there is no need to change consumer behavior.
- Customers trust Taobao’s online payment function, making purchase frictionless.
- Taobao has robust marketing solutions inside its platform, making it possible to channel traffic to your brand store.
- Mass market brands such as Uniqlo, Jack Jones and others have been hugely successful in their branded Taobao stores
- Most luxury brands have stayed away from Taobao, so there is not a history of authentic luxury brands with stores on Taobao
- It remains to be seen whether Taobao users will be willing to pay full price for luxury items online
- Even with a customized brand site, the user experience and look and feel of a Taobao shop is somewhat limited
- There are large amounts of fakes and re-sellers of any luxury brand on Taobao
It does seem that one primary reason for Coach to open the Taobao shop was to reach an agreement with Taobao to crack down on Coach counterfeits — which is also a significant plus for Coach.
All in all a very interesting move that we will watch closely. There is no denying the power of Taobao’s platform. If harnessed correctly, it can be a major win for luxury brands and their e-commerce strategy.
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