Xia Ding, the president of JD.com’s $10 billion fashion business, is feeling the pressure. With a team of 1,000 people under her leadership, Ding was brought on in February of this year to lead the charge of recruiting more Western luxury fashion brands to the Chinese e-commerce platform, which reports 240 million monthly active users and a growth rate of 46 percent year over year. In 2016, revenues reached a total of $37.5 billion. Its fashion business, according to Ding, is the fastest growing category for the company.
“We’re working on promoting ourselves as a fashion destination. We’re getting more reception,” she said. “Consumers in China are shopping online — they got accustomed to making big purchases online much faster than the rest of the world — and luxury brands need to start thinking more about how to take advantage.”
On Monday, Ding attended the 3.1 Phillip Lim show, which JD.com sponsored. The show and sponsorship represented the first step in an ongoing partnership between the brand — which has a large following in China, but only two retail stores there — and the platform. Right now, the partnership is purely based on editorial content and campaigns to build more brand awareness and visibility in China, with a potential e-commerce partnership coming down the line.
“The ultimate goal is to get the product into the hands of JD.com clients. Their capabilities — reaching millions of clients with next-day delivery in all of the largest cities in China — is something I’m not able to even comprehend,” said Wen Zhou, the CEO of 3.1 Phillip Lim. “However, we’re less focused on selling product as the first step. The first step is for the clients to be aware of us: We’re here, and we need to introduce the brand’s presence.”
Right now, only 5 percent of 3.1 Phillip Lim’s sales are made online. But the Asian market is one of the company’s biggest, accounting for 30 percent of overall sales. Zhou said Chinese customers are resourceful when it came to getting their hands on products, and many of those purchases are made abroad. While the 3.1 Phillip Lim website does ship globally, there’s a long lead time and high markups involved in getting orders into China.
JD.com is ready to make the assist. With a full shipping and delivery business, the company is able to offer white-glove concierge service to all of its luxury shoppers. It’s also partly owned by Tencent, one of China’s main social media platforms, where it facilitates integrated campaigns that can be shopped on the platform.
“In China, we have a large market. Chinese consumers are getting more wealthy, and they’re educated about brands. They’re spoiled on delivery and returns,” said Ding. “But it’s a very complicated market.”
In China, it’s turning into an e-commerce arms’ race between the country’s biggest platforms, JD.com and its competitor, Alibaba, to win over luxury brands as the partner to help them enter the market. As more Chinese consumers make luxury purchases at home, thanks to a narrowing price discrepancies (for example, the same pair of Nike sneakers that costs $70 on Zappos costs the equivalent of $90 on JD.com) and a crackdown on the local grey market, these platforms are taking steps to eliminate counterfeiters and offer higher-touch customer service experiences.
JD.com, under Ding, made headway in the space earlier this year when it inked a deal with global luxury marketplace Farfetch. After investing $300 million in the company, JD.com now handles payments, shipping and delivery for Farfetch with a 100-person team in China, as well as assists with targeted marketing campaigns. In return, Farfetch connects JD.com to the brands and boutiques sold on the marketplace. 3.1 Phillip Lim isn’t the only brand JD.com is courting; a partnership with Alexander McQueen is coming up this fall, and it’s worked with brands like SK-II in the past.
“Luxury brands are coming around to the idea that they have to have an e-commerce presence in China,” said Yiling Pan, associate editor of Jing Daily, a publication and consulting firm covering the luxury industry in China. “JD.com, along with Alibaba, are the definition of online shopping in China. It’s a competition.”
Part of Ding’s work is legitimizing the platform for luxury partners. To assuage concerns of counterfeiting, the site follows a zero-tolerance policy that includes random searches for counterfeits, as well as a blacklisting policy for first-offense sellers. But there’s more involved to the JD.com’s courtship of designers than a firm crackdown on knockoffs: The company has worked with designers to sell exclusive collaborations, handling pre-orders and marketing, which lets designers test the market without investing in opening full-blown e-commerce sales.
For 3.1 Phillip Lim, expanding e-commerce in China is a matter of timing, and the brand hasn’t ruled out opening its own e-commerce operations. Privately held, it has to consider factors including the costs of building out a team in China. It currently employs a team of 120 in its New York headquarters.
“There’s a huge growth opportunity, but we haven’t opened the market extensively yet, as we haven’t figured out the best way to go forward,” said Zhou. “We’ve been quite precious with this region, because we want to do it right. JD is such a powerful platform, and there’s a huge interest in this market. The timing feels right.”