Alibaba’s e-commerce marketplace Tmall is duking it out with retailer JD.com to win over luxury brands that have recently turned attention to China’s booming domestic market. But they’re not the only two in competition.
Vip.com, a flash-sale site and online retailer that’s the third largest e-commerce site in China, has pulled in 200 premium and luxury brands, including Sergio Rossi, Guess, Diesel, Armani, Versace and, most recently, Marc Jacobs, which joined at the end of October this year to sell its latest fall collection to online Chinese customers for the first time. All premium to luxury fashion brands sell on the site’s luxury platform VipLux , which was established in 2008. More than half of those brands, according to the company, joined in the past two years, as the Asia region has shown the most promise of growth for high-end brands.
“Developing a solid level of expertise in luxury products is a winning formula for VipLux,” said Arthur Hong, co-founder of Vip.com, at the time of the announcement of the Marc Jacobs partnership. “The cooperation between VipLux and Marc Jacobs is a testament to VipLux’s expertise in understanding the spirit of a specific brand and matching that with market growth.”
As luxury brands continue to ramp up their presence online in China, they’re faced with a few decisions. First, they must decide whether or not they want to open their own branded site, where they can control branding and pricing, or work with an outside retail partner, which already has an existing customer base and built-in logistics tailored to the region. There are multiple partners with different models to choose from: Tmall is a marketplace, JD.com is a retailer and Vip.com runs daily flash sales.
Vip.com, then, has become a partner for brands looking to clear inventory quickly — and avoid it ending up on the gray market — or make a quick impression on Chinese customers.
“China is one of the biggest markets for the fashion industry, especially when it comes to the online business. Every company wants to benefit from growing fashion e-commerce business,” said Yana Bushmeleva, the chief operating officer at Fashionbi, a fashion business intelligence firm based in Milan. “JD.com, Vip.com and Tmall have different business models, and each can be a smart partner based on how advanced a brand is in the region.”
VipLux takes data from its 300 million users to serve up brands to customers who are most likely, based on their past purchase behavior, to buy into a collection that’s only on sale for between four and 12 days. The site has a 100-percent guaranteed authenticity policy and high customer loyalty, since new collections sold at a discount are released on the site daily, from about 15 brands. It also gives brands selling on the VipLux platform the opportunity to tailor their product pages.
The flash-sale model, largely abandoned in North America, is fitting for brands looking to enter the Chinese market but aren’t ready to make a full investment by selling full-time on other marketplaces like JD.com or Tmall. Plus, Chinese customers, who have limited access to these brands online, are more likely to take the opportunity to shop via flash sale. Since the collections sell for a discounted price, brands typically sell previous collections that have already been on the market.
“The flash sale model has collapsed in North America. There’s just not enough supply of product to make it work on any type of scale,” said Steven Dennis, retail analyst at his firm SageBerry Consulting. “But in China, it’s a much different story. The model is a way to sell brands that aren’t typically available to those consumers, while quickly clearing out inventory.”
Some brands sell on VipLux as a way to expand upon their presence in China. Guess, which also sells on Tmall, uses the buzz around VipLux flash sales as a way to “elevate exposure,” according to CEO Victor Herrero, who spoke to the company’s China strategy on a recent earnings call for the third quarter financial 2018 earnings.
“We are building a very strong infrastructure [in China],” he said to investors. “This is a very important thing. We are successful at this moment in China because we are following several initiatives, and we’ve been very consistent on following those initiatives.”
As brands build up their presence in China, however, the appeal of a third-party partner like Vip.com could fade. Its VipLux hub isn’t as fleshed out as those of Tmall and JD.com, which offer concierge service and faster delivery. Plus, as the brands become more accustomed to the customer and the market, they won’t need to rely as heavily on third-party sellers.
“A brand-owned site protects them from issues like control over positioning, description, pricing and listings,” said Rob Nowell, marketing manager at the global analytics firm Brandview. “Brands that have such a strong brand image and want to maintain that are going to be wary of selling on platforms where there’s a lack of control.”