Translated by
Nicola Mira
Published
Mar 1, 2020
Reading time
7 minutes
Download
Download the article
Print
Text size

Alibaba strikes balance between luxury and budget fashion

Translated by
Nicola Mira
Published
Mar 1, 2020

In 2017, Chinese e-commerce giant Alibaba launched Luxury Pavilion, an online platform designed to help leading Western luxury labels make headway in the Chinese market. Luxury Pavilion’s product range was and still is the polar opposite of the colossal offering of low-cost essentials available on Alibaba’s AliExpress site. Sébastien Badault, general manager of Alibaba France and the e-commerce giant’s international director for luxury and fashion, spoke with FashionNetwork.com about the two sites’ different approaches. He also discussed the differences between Alibaba and Amazon, The French government’s lambasting of the world’s e-commerce giants, and the impact the coronavirus epidemic is having on business.


Sebastien Badault - MG/FNW


Three and a half years after the launch, Luxury Pavilion currently features a range of 150 brands, headed by top names like Louis Vuitton, Dior, Cartier, Prada and Hermès, and with the recent addition of Chanel and Saint Laurent, through L'Oréal, in the cosmetics and perfume categories. Cartier was the first to benefit from the site’s recent upgrade, introducing a new set of page functionalities essential for the site’s business: “In China, online flagships need constant updates, they cannot be static as they are [in Europe], with a refresh once a week,” said Badault, interviewed at the Parisian headquarters of Alibaba, overlooking the roof of the Paris Stock Exchange building and with Facebook among its next-door neighbours. “Brand pages need to feature a constant flow of novelties, with video clips, live feeds, interviews and a variety of product events. All of these have a direct impact on engagement rates,” he said.

While brands on Luxury Pavilion need to be constantly active, it took Alibaba considerable effort to attract them in the first place. Western labels, in order to accept to trade with a Chinese e-commerce site once regularly criticised for the counterfeit products it sold, would absolutely not be content with existing marketplaces. Alibaba therefore provided a separate, wholly customisable website, able to embrace each label’s world of products and creativity. Burberry, Hugo Boss, Givenchy and Guerlain were among the first to take this route. According to Alibaba, the first concern of the labels which gradually joined the ranks of Luxury Pavilion remained the same: rather than seeking to generate a huge sales volume, they wanted to be sure that these sales wouldn’t tarnish their luxury image with the Chinese clientèle.

A luxury clientèle which was quick on the uptake: in just one year, Luxury Pavilion reached 100,000 users. It is worth noting that one third of the world’s luxury consumers are Chinese, and their expenditure is expected to double by 2025, reaching €162 billion, according to McKinsey & Co. A growth potential that labels don’t want to miss out on. “There is a snowball effect: when a label belonging to a major group performs well with us, the group's other labels gradually join too,” said Badault, who thinks that Luxury Pavilion offers brands a solution to the thorny problem of China’s metropolitan abundance. “There are only 15 cities whose population is over one million in Europe, and the same number in the USA. In China, there are 160. There are luxury consumers in all of these cities, of course. But brands cannot afford to open flagships in all the second and third-tier cities [in China]. More than just a sales channel, we provide a resource to stay connected with these consumers,” he added.

Big difference in strategy and product range



Alibaba has taken on the mission of helping Western luxury labels enter the Chinese market, but it also wants to open the doors of the West to Chinese brands. This second objective has undergone something of a strategic shift. “We are beginning to promote brand-dedicated pages on AliExpress, so why not do so for Chinese fashion brands in future, though this isn’t for the time being our core business,” said Badault. Alibaba has actually decided to seek the help of Western brands for the international deployment of AliExpress. The strategy is to leverage the interest that could be generated in AliExpress by the presence of household names like Mango, Benetton or Tendam, and also to aim for a better cultural fit between the products featured on AliExpress and local consumers’ needs. It is a minor revolution for the website, which, as the company told FashionNetwork.com, has historically been more of a product driver, rather than a brand driver.


In September 2019, Alibaba sponsored shows by Chinese designers at the New York, Paris and Milan Fashion Weeks - Alibaba



The extent and depth of the product range featured on AliExpress is indeed stunning. Like Amazon, Alibaba doesn’t publish its fashion sales data, but the category is one of its best-sellers, alongside high-tech gadgets and decoration products. The product range consists chiefly of apparel essentials, the main consumer demographic being very young Westerners, said Badault. “They are mostly unbranded products, made by producers that for a very long time have been original brand manufacturers for leading labels, and which eventually launched their own white labels. This means that it's possible to find the same product quality offered by major labels, despite the fact that China-manufactured products are still criticised for their quality,” he added.

The notion of putting product selection before brand selection is also one of the differences between Alibaba and Amazon. The parallel is actually regarded as amusing at Alibaba, at a time when Amazon is working on an equivalent to Luxury Pavilion, independent of the core marketplace. For Alibaba, Amazon is a retailer, while the Chinese group, from its inception, decided to wear the service provider hat. “Even our marketplace’s logistics network is a marketplace itself,” said Badault. “At Amazon, your consignment is handled exclusively by an Amazon employee. Whereas for us, everything is handled via third-party providers, an essential requirement for linking together a territory as large as China’s. Logistics infrastructure isn’t our main asset. It’s instead the real-time data we gather on product and category performance, which we can put at the disposal of brands,” he added.

Monitoring VAT compliance and best practices



In Europe and the USA, web giants regularly have to face a barrage of fiscal and commercial flak. Amazon has recently been subject to greater scrutiny than its Chinese counterpart, but the latter has nevertheless also been targeted, albeit not explicitly, by the French Inspectorate General for Finance, regarding the circumvention of VAT rules by third-party vendors. An issue that is now the subject of preventive legislation in the country. “We have a dedicated tax-rules team which follows these matters closely, and we comply with local legislation,” said Badault. “This is part of a broader shift: for a long time, AliExpress was run directly from China, with automated translations of product-related content that were often hit-and-miss, and no adaptation to local expectations in terms of information. This meant that for a long time we were something of a UFO. But we’re determined to become good students now,” he added.

In March 2019, both Alibaba and Amazon stood out for not being among the signatories of the e-commerce companies’ code of conduct charter. “I attended the meetings on this issue at the [French Ministry of the Economy] from the outset. The problem is that the issues the charter relates to don’t really affect us, since it covers the relationship between French vendors and buyers. There are few French vendors on our site. Of course, the situation might change, and we are already assessing this possibility. First of all, this means explaining our Chinese colleagues the why and how of policies they don’t see adopted elsewhere,” said Badault.

Alibaba and the coronavirus outbreak



The start of this year has been quite peculiar for Alibaba, with the coronavirus outbreak plunging China into an anxiety-filled standstill. As thousands of Chinese holiday-makers were stuck where they spent the New Year festivities, the entire logistics sector ground nearly to a halt. On the opposite side of the world, European nurses told stories of how they had to reassure people who were worried they might be contaminated by their freshly delivered AliExpress package. According to Badault however, the e-tail sector hasn’t been the worst hit by the coronavirus-induced business slump.


Alibaba is also active in the second-hand fashion market with its Xianyu website - Xianyu



“There has clearly been an impact on payments made by Chinese tourists on Alipay, [Alibaba’s mobile payment app]. And this was felt more keenly because it coincided with the peak for the Chinese New Year, and a large number of tourists couldn't travel [to Europe],” said Badault, noting that the current outbreak reminds Alibaba of the situation that existed when the group was founded. “Taobao took its first steps during the SARS outbreak in 2003, as a way to enable business to carry on as usual. And this makes it even more impressive to see how the tools we now have to deal with this kind of crisis have evolved in 20 years,” he said.

History tends to repeat itself and, in order to help Chinese companies continue trading during the coronavirus outbreak, on February 15 Alibaba introduced a blockchain solution that combines Alipay, logistics app Eleme and remote-working tool Dingding. A “contactless auction” tool will also make it possible to carry out commercial negotiations, at a time when the majority of Chinese companies are urging their employees to work remotely. A way for Alibaba to become a little more entrenched as one of the Chinese economy’s mainstays.

Copyright © 2024 FashionNetwork.com All rights reserved.