Virtual marketplaces give western brands the chance to tap vast new consumer bases without having to navigate the ‘Great Firewall of China’.
International expansion is a core focus for many retailers, and this year Asos and Arcadia have entered the challenging markets of China and India through online platforms Tmall and Jabong. These virtual marketplaces offer an opportunity for western brands to tap into the vast consumer bases of both countries.
Asos launched on Chinese online marketplace Tmall in April - the first time it has partnered with a third-party marketplace anywhere in the world - while Burberry also took the leap of faith in the same month, giving an indication of Tmall’s perceived importance in the Chinese retail landscape. But how exactly are online marketplaces enabling international expansion, and what should fashion retailers bear in mind when entering new markets in this way?
Marks & Spencer has had stores in China since 2008 and the country is one of its key growth markets. In line with its emphasis on having a multichannel offer where possible, the company partnered with Tmall last year and remains “very optimistic” for growth. Ricky Wilson, head of international online at M&S, says there are numerous barriers to entry for retailers looking to access the Chinese online sector, not least its technology base.: “From having all of their own social media networks to the ‘Great Firewall of China’ - meaning technology that works elsewhere in the world might not fit well with its technology infrastructure - China is very different.” He says Tmall offers a “whole ecosystem, from technology to partners” that helps brands overcome these differences.
According to market intelligence firm Euromonitor International, Tmall controlled more than 50% of the clothing and footwear internet retailing market in 2013, and as of last year had about 500 million registered users. The platform has unrivalled knowledge about the Chinese consumer, which is essential to brands entering the country.
“There is a very clearly understood way of laying out websites that is pretty unique to China,” says Wilson. Chinese consumers generally prefer bold colours and a contrasting design, as well as lots of information, photos and descriptions, as opposed to the cleaner, simpler style adopted by brands for a western audience.
Footwear retailer Clarks has used both Tmall and JD.com - China’s second largest business-to-consumer platform - to further its expansion in China. The company opened its first physical store there in 2004 and now has more than 500 shops across the country, but it wanted to make strides online.
“These platforms give Clarks easy access to tap into the vast Chinese ecommerce market,” says Andrew Rogers, senior vice president buying and merchandising for Asia Pacific at Clarks. Like Wilson, Rogers says retailers need to understand that Chinese consumers behave differently to UK audiences - for example, paying more attention to craftsmanship and heritage - while inherent trust is an important factor in decision-making. “Be prepared to be completely different from the best practices you learnt, and embrace the uniqueness of Chinese consumers’ shopping behaviours,” he adds.
He advises brands to take advantage of the services, shopping festivals and promotion events provided by ecommerce platforms. One of Tmall’s most popular events is a nationwide discounting campaign called ‘Single’s Day’, which runs on November 11 each year. Last year the total sales volume reached RNB 116m, or $19m (£11.3m), in the first minute of launching. Clarks achieved more than a million page views on the platform and what it describes as “impressive” sales results during the event, while M&S also experienced a huge uplift.
“We sold around 1,300 units of a particular jumper, selling out in the first couple of hours, so it has massive potential for us,” says Wilson. “There is nowhere else in the world we would ever consider selling 1,300 units of one item in one day.”
For the past year, Clarks has also been working with online platforms Myntra and Jabong to tap into the online audience in India, enabling it to reach beyond the geographical limitations of its 50 Indian shops to what Rogers describes as the country’s “tier-two and tier-three” towns and cities: “We’ve managed to tap the spending power of modern India that resides in these towns. These platforms have helped us gain awareness quickly across the country.” The marketplaces have also given Clarks access to valuable consumer insight on the Indian footwear sector.
Myntra was acquired by India’s largest etailer, Flipkart - set up by Sachin Bansal and Binny Bansal, two former Amazon employees - in May 2014. The two will continue to run as separate sites and both Myntra and Jabong are trying to attract more international brands. Koovs, an Indian fashion website set up by Lord Waheed Alli, the former chairman of Asos, is also growing, and all three platforms will be helped by the government’s recent loosening of restrictions on foreign direct investment (FDI). Ashma Kunde, apparel and footwear analyst at Euromonitor International, says international brands will be attracted by the ease of entry these marketplaces offer: “For a country like India, where the regulatory environment can make setting up a shop a cumbersome affair, launching through established ecommerce players like Myntra or Jabong provides an FDI-compliant route to market.”
This is something of which Jamie Lloyd, chief executive of premium brand Religion, is aware. The company is looking to work with several platforms in India. He believes the potential of the Indian market, combined with Religion’s “strong DNA”, offers a huge opportunity, and partnering with a platform will facilitate what can be a difficult process.
“India is a country that does business on a personal relationships basis,” he says, adding platforms such as Koovs and Myntra offer a way, albeit untested, that could help build trust.
Of course, there are challenges involved in working with online marketplaces. Brands are often unable to offer the same breadth of product as on their corporate site (M&S has about 1,200 lines on Tmall as opposed to 10,000 on its UK site) and, as Kunde points out, it can be difficult to control all aspects of customer interaction.
That said, M&S began working with third-party providers in China when it launched on Tmall, but has gradually brought roles such as its Tmall campaign management in-house.
In both China and India, bargain hunting is a key attraction of online, and Kunde says brands can feel pressured into discounting. It is an association that could prove risky for luxury brands like Burberry, although it has no plans to offer discounts.
The company covets the younger ‘millennial’ customer that makes up much of Tmall’s audience, and using the platform to access this age group in vast numbers is an attractive proposition - particularly as China is forecast to contribute 50% of global luxury market consumption by 2020, according to Asian independent brokerage and investment group CLSA.
Its presence on Tmall is also helping Burberry address the problem of counterfeit goods in China, as it ensures fakes don’t gain prominence on such a wide-reaching platform. Indeed, because Tmall stores are highly customisable - allowing retailers to offer live chats with product experts and user reviews - brands can build loyalty and encourage consumers to value authenticity. Burberry’s Tmall store had 3.5 million visitors in less than a month after its launch and retail metrics are comparable with its foremost online channel, Burberry.com.
As these platforms, British fashion brands have access to an important online test bed and a huge potential new audience.