When we think of luxury, we relate it to loads of money. When we ponder over the potentials of China e-commerce, we consider it is a like a vast gold mine. Nevertheless when we add the two together, the result at the right hand side of this equation does not neccesarily sum up to more positive profits, sometimes even bloody loss.

Recently rumor of the downfall of an online luxury platform (l.sina.com) powered by Sina(China’s most prestigious internet company) caught my attention again. First reaction was “Not again, hope it is fine...aren't we having enough bad news these days”?

Just to name few:

  • In December last year, one luxury platform (l.163.com) launched by Netease (another leading Chinese internet company) was shut down after less than one year operation.
  • VIPshop.com, a flash sale luxury B2C, managed to get listed in New York stock in March this year; its share performance has been pathetic so far and net loss hit USD 8.6 million in the first quarter, up 28% on the USD 6.7 million recorded in the same period last year.
  • It is said Vipstore.com, another discount luxury B2C, currently has gone through massive layoff even though the company just received an equity investment $15 million from Macy’s in May this year.
  • Xiu.com, used to be specialized in luxury e-retailing, now transformed into a fashion general merchandise, was said to fail its third round financing due to its poor performance, though the CEO denied such gossip. What might be certain is this company should be in restructuring process right now.

As for the rest of the players, most of them should be tottering with their tattered financial status, although the exact figures remain mythical. To make matter worse, some luxury brands simply claimed that they have absolutely no direct authorization or cooperation with those B2C platforms in China; what you purchased from those online channels would just be knock-off. Ouch!

Maybe time to re-examine our “luxury + China e-commerce=?” equation, but this time, we need to add coefficients alpha for luxury and beta for China e-commcerce, and the new equation is  modified into “α luxury + β China e-commerce=?

α: represents rampant counterfeit and piracy issues without stringent and comprehensive legal enforcement in this land, which would severely diminish consumers’ confidence

β: current China e-commerce is filled with frustrated investors, price war instigators & imitators, which already dragged those B2C luxury players into the discount competition as well. Even if we leave out unique online purchase experience or fantastic after sale service at this moment, isn’t too much discount defies the original concept of luxury?

Now we see why the equation sum might be negative by multiplying the impact from alpha and beta. So maybe luxury brands need to take on this tough e-retailing job by themselves, but again they probably have great troubles to balance the offline and online channel conflicts.  

I do not know. I just hope there can be a winner in this sector of business. I just hope B2C luxury is not just a mirage in China.

By Cécilia Wu
English & Chinese Editorial Manager