Josh Gartner (JD.com): "Chinese luxury consumers are increasingly adventurous style-wise"
After forging closer links at the start of the summer with UK luxury e-tailer Farfetch, Chinese e-commerce giant JD.com has recently launched its own luxury website, Toplife. As the world's third-largest internet corporation after Amazon and Google, JD.com aims to become the premier partner for foreign brands targeting the Chinese market. Josh Gartner, the group's VP of International Corporate Affairs, talked with FashionNetwork about the challenges faced by e-commerce players as they fight for supremacy on the Chinese online luxury e-tail market (the full interview appears on FashionNetwork Premium).
FashionNetwork: What are the main elements of your luxury goods strategy?
Josh Gartner: We are selling several luxury brands, from Europe, the USA and China too. It is one of our fastest-growing segments, and we have a high-profile strategy for luxury goods. While we already sell such items on JD.com, we have also launched a dedicated website, Toplife, now at the start of its expansion phase. We launched Toplife because we know our luxury labels. They prefer to be marketed through dedicated luxury websites rather than more generalist ones. A major brand does not wish to appear alongside baby or food products, for example. So, we stay consistent with the positioning of [luxury] brands, because we want the purchasing experience to be as 'luxe' as the one in-store, so different from other experiences. Besides, all the products featured on Toplife are purchased directly from the brands themselves.
FNW: Is this a way of reassuring labels, especially about counterfeiting?
JG: On JD.com, fakes aren't a major issue because we buy directly from brands. Ours is a retail, rather than a marketplace model. We are a kind of direct marketplace, where products are verified by the e-commerce site itself. And as it happens, the majority of products are bought directly by us. As for the marketplace part of the business, we keep the number of vendors at a level we are able to monitor. Rather than having 10 million vendors on our marketplace, which would make any sort of genuine control impossible, we are proceeding in stages, and we have now reached the 150,000-vendor threshold.
FNW: Why did you establish a closer connection with Farfetch? What role will it play?
JG: Our partnership with Farfetch began in June. We have a very high opinion of them, because we are aware of how devoted they are to high quality, and they are keen to offer a superior customer experience. Many brands trust them. We actually see our own strategy reflected in Farfetch: a lot of brands join us because we are dedicated to making sure that products are authentic, and we offer a quality service to our clients. In the field of luxury e-tail, these elements make a real difference. It all hinges on respecting the values which designers breathe into their creations. As you well know, some e-commerce players don’t respect these values, so we are happy to have found a partner such as Farfetch which shares our outlook.
FNW: Foreign labels often struggle to understand the world of Chinese retail, especially the online channel. Why?
JG: Luxury brands are faced with two major problems in terms of e-tail in China. The first is that several labels, and this was still clearly perceptible two years ago, aren't yet totally at ease with the idea of selling fashion or luxury goods on the web. The second problem is the huge difference between Chinese consumers and those from other countries. Their patterns of behaviour are poles apart. Also, e-commerce plays a very special role on the Chinese market. For example, 18% of retail activity in China is online, compared to 10% in France or 12% in the USA. It follows that if you are a luxury brand, and even if you aren't comfortable with e-tail, you cannot shy away from online sales. Hence our work with Toplife, an effort to make brands feel more comfortable.
FNW: Chinese consumers are changing, and are increasingly turning to local luxury labels. Is there still room for Western luxury brands in China?
JG: Traditionally, in fashion, major luxury labels have always been the most popular in China. Among them, the big foreign names are still the most appealing. But Chinese consumers are becoming increasingly sophisticated and engaged. They no longer covet that one foreign handbag all of their peers already have. A large number of niche luxury labels are able to exploit this attitude, some of them foreign, some Chinese. Besides, Chinese consumers, and especially fashionistas, are increasingly adventurous style-wise, compared to what you see in Europe or America. They take more risks, they are less conservative, and this makes them turn to smaller brands.
FNW: The battle for China's luxury e-tail is being waged in the aftermath of a spate of store closures by major foreign brands. What does this say about the Chinese market?
JG: Luxury brick-and-mortar stores can fulfil two functions in China. They play a role in brand advertising, and they allow labels to offer an experience, since many customers are still keen to view and try before buying, especially in the luxury sector. Yet I believe that, for a luxury label, operating thirty stores in China is not a viable strategy. Instead, having a few stores in key locations, supported by an omni-channel strategy, is viable indeed. As for trying out [items], we are planning to introduce a system featuring the delivery of several sizes of the same item, so that customers can keep the one that fits, as we aim to replicate the physical store experience.
FNW: Do you think that, on China's online luxury market, JD.com will be able to overtake Alibaba?
JG: For me there's no question, it's only a matter of time. Our customer base consists of consumers seeking quality products, and our approach is to offer a superior shopping experience, and all of this is very appealing for labels. We started out later than others in fashion and luxury, but we are now on an upward trajectory which will take us to the market's number one spot.
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