“There is really only one way to break into China's crowded retail market … You'll have to partner with Alibaba or Tencent,” Harvard Business Review’s James Root and Jonathan Cheng wrote of the plight of brands’ and retailers’ expansion into the most populous nation in East Asia. Such a partnership is critical, according to Root and Cheng, because “China’s two retailing powerhouses, online commerce pioneer Alibaba and social media-gaming pioneer Tencent, have systematically established a duopoly of record proportions.”
In other words, these retail giants have “changed the way people in China shop,” and now, they have almost exclusive control over the retail market. And it is an indisputably large market.
Tmall, Alibaba’s business-to-consumer retail platform sells everything from groceries and cleaning supplies (in its “Mart” section) to luxury apparel and accessories (by way of it’s a separate Tmall platform) to a more than 500 million users. On its Luxury Pavilion, a section of Tmall that offers up high fashion and luxury goods, customers routinely spend more than $159,000 per year.
Nearly half of those big-spenders were born after 1990, making millennials the core of this consumer base, according to Lili Chen, the general manager of the $40 billion Chinese giant’s Luxury Pavilion.
The invitation-only outpost for premium and luxury brands and their consumers launched in August 2017. As of this summer, Alibaba – which was launched by Jack Ma in the spring of 1999 and consistently wrestles with Amazon for the title of the world’s biggest e-commerce company – had inked deals with almost 70 brands. These include Tiffany & Co., Burberry, La Mer, LVMH-owned Givenchy and Rimowa, Versace, Moschino, and Maserati, which are all offering up their products by way of this exclusive arm of Alibaba’s Tmall platform as a way to tap into the mass of money that is China’s consumers.
But the newest addition to Alibaba’s business – a joint venture between the Luxury Pavilion and Net-a-Porter, the latter of which holds the title of the world’s largest online high fashion platform – may rightfully be considered the most momentous pairing yet. According to a statement from Alibaba and Net-a-Porter’s parent company Richemont last week, the joint venture will see the two launch a China-specific mobile app for the Net-a-Porter platform and its menswear site Mr. Porter, as well as “flagship stores on the Tmall Luxury Pavilion.”
But the newest addition – which comes by way of a joint venture between the Luxury Pavilion and Net-a-Porter, the latter of which holds the title of the world’s largest online high fashion platform – may be the most momentous yet.
“Everybody is excited about China and Chinese travelers, and this is obviously the best way to go,” Richemont Chairman Johann Rupert stated, emphasizing that Chinese consumers, whether shopping in China or while overseas, are an increasingly important customer base for the Swiss-based conglomerate and its YNAP business.
“Our digital offering in China is in its infancy and we believe that partnering with Alibaba will enable us to become a significant and sustainable online player in this market,” he said.
The partnership comes not all that long after Alibaba was chastised – by way of luxury-centric lawsuits and the U.S. Trade Representative (“USTR”)’s annual blacklist of bad actors in intellectual property, for the facilitation of the sale of counterfeit goods on its platforms. Its inclusion on the USTR’s list was a politically-driven move, and a direct and unfair result of tensions between the U.S. and China, the Chinese mega-giant has said.
However, while the nearly 20 year old Alibaba Group, which boasts operations ranging from e-commerce retail and logistics to payment processing and cloud computing, may not have the American government in its court, may not need it.
In addition to luring luxury brands with its platform and regional prowess in terms of its “resources and expertise in marketing, payments and technology infrastructure” (in the words of Richemont Chairman Johann Rupert), Alibaba is finding favor among individuals within the ranks at international trade/logistics firms, giant American consumer goods companies, and even some in Washington, many of which are increasingly viewing Alibaba to be doing more to weed out fakes from its platforms (thanks to a whole slew of anti-counterfeiting initiatives and numbers to back up its progress) than the Jeff Bezos-owned Amazon.
Thanks to its evolving reputation and its undeniable attractiveness to brands and even other retailers that want to access China’s powerful pool of formidable luxury shoppers, Alibaba very well might have something going for it that is potentially much more powerful than a slap on the wrist from the USTR.