Press releases

Luxury brands to tap into the e-commerce revolution

Published: 8 December 2017

Deloitte China partnered with and Tencent as chief analysts to conduct a survey on the latest development trend of China's luxury e-commerce industry. Based on the comprehensive data analysis, they have identified various challenges faced by the industry and suggested corresponding solutions and strategies for transformation in a whitepaper published today, titled China Luxury E-commerce Whitepaper, the objective of which is to help the industry explore new growth opportunities and achieve sustainable development. 

In 2016, 90 percent of the total e-commerce sales was generated from offline channels in the global luxury market. Although traditional sales channels remain dominant in the luxury goods sector, the lack of growth has become obvious with only 2 percent of increase year-on-year. Despite the fact that luxury goods sales via online channels is still relatively low, the growth in online channels has been prominent. In 2016, online sales in the global luxury market represented 9 percent of the total, which marks an increase by 12 percent. Benefiting from the rapid growth of e-commerce in the Chinese market, online sales in China's luxury goods sector has also demonstrated strong growth, ranking second in global sales volume after the US market. Following the emergence of new generation consumers and the acceleration of omni-channel development in luxury brands, the penetration of online channels in the luxury market will gradually increase, while the online sales ratio is expected to reach 13 percent by 2021.

Zhang Tianbing, Deloitte China Consumer Products and Retail Sectors Leader, commented, "Digitalization in China market is unique. Mobile data usage, third-party mobile payment and logistics have been growing rapidly over the past few years. China has the highest online sales ratio in the global market.  Continuous deepening of digitalization has brought significant impacts to the retail sector in various areas. Nearly 60 percent of sales in China's retail market is under the influence of digitalization. In light of this, more luxury brand players have also realized it is essential to develop digital sales channels in the China market."

In addition, it appears that more luxury goods consumers in China are coming from the younger demographic brackets. It is estimated that by 2025, half of the social wealth would be owned by millennials and Gen Z, groups which represent the new consumer generation that will become a major group of consumers in luxury market within the next decade. According to Deloitte's research paper Global Power of Luxury Goods 2017, 42 percent of luxury goods purchases via online channels were made by millennials. At the same time, the emergence of digital media has become essential for the new generation of Chinese consumers in the discovery of luxury goods. In search of fashion trend information, millienials obtain 70 percent of ifnroatmion from digital channels and 20 percent from traditional media. It is indicative of the importance of digital media as the information source for the new generation of consumers in China.

Therefore, luxury brands will face the major challenge of having to address the needs and consumption behaviors of new generation consumers in the future. It has thus become more important for businesses to establish omni-channel sales strategies.

Following the shift of consumer power to younger generations and the continuous development of commercial digitalization, it has become crucial for luxury brands to tap into the e-commerce revolution. Zhang said, "Although traditional sales channels remain the main method of luxury goods distribution, geographical constraints and adjustments to physical stores imply that more businesses will have to develop their capabilities in e-commerce in order to explore new customers and expand their existing sales network. They can reach out to more consumers through more diverse and innovative means to connect and interact with them, as well as to discover new growth opportunities."

In the past few years, many players in the luxury market have started to develop capabilities in e-commerce. There has yet to be a recognized successful case, however. The whitepaper suggests that such luxury businesses are facing challenges from 3 aspects: how to select the right e-commerce platform/portfolio, how to create a unique e-commerce experience, and how to develop end-to-end omin-channel solutions.

Deloitte suggests that in order to attract younger generation Internet consumers, expand geographical sales network and reap the benefits from omni-channel strategies, luxury brands will not only require an e-commerce department, but also new visions, solutions and talents. They have to develop a revolutionary omni-channel sales model that builds on top of their traditional competitive edges. As for consumers, it does not matter whether they buy online or offline; what do they really want is a seamless customer experience in closed-loop omni-channel supply chains.

(English version)
Did you find this useful?