From Top Provenance of Fakes to One of the Biggest Markets for Luxury Brands

A 2016 OECD Report, “Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact” puts the value of imported fake goods worldwide at USD 461 billion in 2013, compared with total imports in world trade of USD 17.9 trillion. Up to 5% of goods imported into the European Union are fakes. Most originate in middle income or emerging countries, with China the top producer.  The OECD Report also noted that “emerging economies tend to have the infrastructure for large-scale trade but often suffer from governance gaps and may lack the institutions and enforcement capacity to effectively tackle counterfeiting. While China is the top provenance of fake goods, its most innovative companies also fall victim to counterfeiters.”

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In a recent article by DIGIDAY, “The state of luxury e-commerce in China, I read with great interest that China has the potential to become the biggest market for luxury brands:

“Saint Laurent is the first brand to go live on Farfetch’s JD.com-powered platform in China, with online inventory sourced from local Saint Laurent stores in Shanghai, Beijing and Hong Kong. It’s the latest luxury brand to develop an e-commerce presence in China: In July, Louis Vuitton and Gucci opened directly operated online stores. Last week, Alibaba’s Tmall launched a luxury-specific platform for high-end brands like Burberry and Hugo Boss that’s restricted to high-spenders.

The regional migration marks a shift in strategy for luxury brands that historically haven’t sold products online in China. The global luxury market has slowed to a projected annual 2 to 4 percent through 2020, though, leading them to turn their attention to China, where the Chinese e-commerce industry is worth a staggering $785 billion. The counterfeit and gray markets (where goods bought abroad are resold online for a profit) are rampant on Alibaba and JD.com, which makes them a turnoff for luxury brands. But breaking into the local market without selling on one of these marketplaces poses a logistical challenge to outsiders.

For luxury brands looking for growth, however, the question of launching e-commerce in China is one of how, not if.

Too big to ignore
The luxury spending power of China’s wealthiest customers is critical for brands, and those shoppers are starting to prefer that brands come to them.

In the past, a vast majority of purchases were made abroad: While Chinese shoppers account for one-third of all luxury goods purchases, only 7 percent of those purchases are made at home, according to Bain & Co.’s global luxury market report for 2017. Typically, those purchases are made on trips or through daigou, a commerce channel where personal shoppers buy goods abroad and then bring them back to clients, avoiding China’s 30 to 40 percent markups on luxury goods.

Now, with recent crackdowns in China on the diagou market to limit unauthorized sales and increase domestic purchases, Chinese luxury customers are spending more in China on luxury goods than they have in the past, a trend Bain & Co. expects will increase.”

I agree with DIGIDAY’s assessment in their article, the Chinese market for luxury brands is “too big to ignore”.

Read full DIGIDAY “The state of luxury e-commerce in China article @

https://digiday.com/marketing/state-luxury-e-commerce-china/

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