As luxury brands enter China’s growing e-commerce market, the in-store experience is getting a digitally driven update.
With assists from technology partners, including Alibaba, JD.com and WeChat, luxury brands Ralph Lauren, Coach and Louis Vuitton are updating store experiences by linking online campaigns to in-store purchases, arming store employees with digital customer profiles and connecting store inventory to online purchases.
In the fall,3.1 Phillip Lim partnered with Chinese e-commerce marketplace JD.com to lay the groundwork for a forthcoming retail partnership that will be launched this spring. While 3.1 Phillip Lim ships to China via its online store, it doesn’t have a localized approach to serving China’s online customers, a demographic that’s becoming increasingly important to global luxury brands. By selling through JD.com, not only can a brand like 3.1 Phillip Lim get access to its broad customer base and data, but it can also use the company’s logistics network to fulfill orders through its store network, offering a more efficient experience.
“China has been a very important market for us since Day 1, and the industry there is changing rapidly,” said Wen Zhou, CEO of 3.1 Phillip Lim, which has five stores in China and plans to open a sixth this year. Thirty percent of the brand’s sales come from the Southeast Asia region. “We’ve been precious about growth in this region, though, because offline and online retail all has to be so well-managed, and grown as one connected retail network. It’s what the customer expects.”
As tech platforms like Alibaba, JD.com and WeChat are all recruiting luxury brands onto their platforms, those cross-channel perks are vital. According to a 2017 PwC report, 46 percent of Chinese customers shop in stores on a weekly or daily basis. That’s compared to 52 percent that shop at that same rate via mobile. But, 70 percent of those surveyed said that real time, personalized offers — that are delivered through mobile platforms — are the most important element of a positive in-store experience.
For JD.com’s fashion lead, Xia Ding, offline-online cohesion is a priority. A lot of the work comes down to logistics.
“We call it the ‘offline initiative.’ How do we integrate the two channels?” said Ding. “For these luxury brands, online inventory is wide, but not deep. The inventory lives in physical stores. So being able to see the connection between the two is essential.”
JD.com offers its luxury brand partners a one-hour delivery service, complete with a white-gloved concierge who brings luxury purchases to customers’ homes. To ensure this promise can be kept, JD.com’s logistics network pulls in-store inventory into the loop. If it makes the most sense to ship from the store, they can. The marketplace can also send a customer to pick up an order in a nearby store.
Alibaba’s “New Retail” initiative, launched in 2016, focuses on combining in-store and online logistics. So far, investments have taken place in the grocery and department store industries, but plans to extend capabilities to brand partners down the line can be expected, according to Sebastien Badault, the managing director of Alibaba France.
While most luxury expansion in China has been concentrated online to meet demand, a supportive store fleet can pay off. Ralph Lauren CEO and president Patrice Louvet told investors on an earnings call in November that the brand’s growth in the region would be focused on its partnerships with Tmall, JD.com and WeChat. But, to support sales, it would be opening a new fleet of Polo Ralph Lauren stores, as well.
“We’re opening doors in a way that makes sense,” said Louvet, during the call. “For this region, it’s been shown that well-managed stores can have explosive profitability.”
Ralph Lauren’s in-store strategy in China includes driving customers into stores through partnerships with WeChat, something that brands like Prada, Dior and Swarovski have also tried in the past. Brand campaigns on the social and messaging app can drive customers into stores with personalized offers and QR codes. The staff at luxury stores in China are also using WeChat to drive online purchases, by messaging information to high-value customers through the app, according to Jing Daily.
“Selling on WeChat is becoming more popular, but adoption is limited and luxury brands are still experimenting with it,” said Liz Flora, Asia-Pacific research lead at L2. “[Most brands] just use it for limited-edition sales, in order to drive store foot traffic.”