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iResearch China Online Luxury Shopping Research 2011

iResearch China Online Luxury Shopping Research

Contents
I. RESEARCH BACKGROUND................................................................................................... 2 II. DEFINITIONS ........................................................................................................................... 3 III. METHODOLOGY ................................................................................................................... 5 . ABSTRACT ............................................................................................................................... 7 V. TEXT OF REPORT ................................................................................................................... 8 1. CHINAS ENVIRONMENT OF ONLINE LUXURY SHOPPING MARKET .................... 8 1.1. DEVELOPMENT OF LUXURY SHOPPING IN CHINA VS. BEYOND CHINA ..................................... 8 1.2 CHINAS ENVIRONMENT OF ONLINE LUXURY SHOPPING MARKET ............................................ 8 1.2.1. Political Environment: Adjustment of Tariff Probably Push up the Consumption of Luxury.............................................................................................................................................. 9 1.2.2 Economic Environment: Luxury Brands are Powering into China Market ...................... 9 2. INDUSTRY CHAIN OF CHINA ONLINE LUXURY SHOPPING .................................... 11 2.1 INDUSTRY CHAIN OF CHINA ONLINE LUXURY SHOPPING ......................................................... 11 2.2 SUPPLY CHAIN OF CHINA ONLINE LUXURY SHOPPING ............................................................. 13 3. MARKET SCALE OF CHINA ONLINE LUXURY SHOPPING MARKET .................... 15 4. DEVELOPMENT OF CHINA ONLINE LUXURY SHOPPING MARKET ..................... 17 4.1 TRENDS IN CHINA LUXURY ONLINE SHOPPING MARKET ......................................................... 17 LEGAL NOTICE .......................................................................................................................... 19

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iResearch China Online Luxury Shopping Research

I. Research Background
With rapid development of China economy, China middle class with a large share is emerging as a principal part of luxury consumers and Chinas demand for luxury is increasing, which is a driving force of luxury market development in China. Since 2010, luxury B2C industry has become the focus of capital market. According to statistics from ChinaVenture, investment for luxury shopping websites is relatively small before 2010; while in 2010; online luxury shopping welcomes an explosive growth, including 12 financing cases with 108 million US dollars, the amount of which exceeds the total amount of past few years. The first half of 2011 has seen 12 financing cases with 283 million US dollars, the highest level in the history. Driven by huge market potentials, many domestic luxury e-Commerce enterprises enter into this industry, for instance, VIPshop.com, Xiu.com, 5lux.com, Vipstore.com, Shangpin.com, ihaveu.com. 360buy released its independent luxury shopping site 360Top.com in November, YOKA released the shopping site Ymall.com and Qihoo released the luxury navigation site lux.360.cn. In addition to professional luxury shopping websites, traditional shopping platform, fashion media and internet giants all enter into this industry, which will bring some changes and challenges to the market. Currently, there is relatively less research on luxury shopping enterprises and the whole market, and the industry has huge market potentials. Through this report, iResearch aims to analyze the status quo of the online luxury shopping market and provide support and guidance for our customers. First chapter mainly introduces luxury shopping and online luxury shopping market in China. Chapter two analyzes the industry chain, supply chain and categorization of luxury shopping websites. Chapter three deals with the overall market of online luxury shopping in China and its market potentials from three perspectives, namely, market scale, market share and traffic ranking of typical luxury shopping websites. In chapter four, we carry out analysis on online luxury shopping enterprises. The last chapter deals with the trend of China online luxury shopping market, provides our suggestions on the development, and discusses the potential opportunities to enter this market.

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iResearch China Online Luxury Shopping Research

II. Definitions 1. Definition and classification of online shopping and composition of industry chain
Definition of online shopping

Online shopping refers to the process in which individual users (consumers) purchase products or services via internet from sellers. Throughout the whole process, as long as internet is involved in any of link (cash flow, logistics or information flow), it can be called online shopping. Classification of online shopping

Online shopping can be classified into different categories according to the subject and object in transaction, level of e-Commerce and types of upstream providers. Please refer to the chart below.

Classification of Online Shopping


Criteria Transaction mode Transaction subject Transaction object Electronic application
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Different Types B2C, C2C online retailer, traditional manufacture/brand manufacture, channel seller, individual seller physical objects, virtual goods, services fully-electronic, not fully-electronic
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Figure II-1 Classification of Online Shopping

Industry Chain of China Online Shopping

Figure II-1 Industry Chain of China Online Shopping

2. Definition and Classification of Luxury Online Shopping

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iResearch China Online Luxury Shopping Research

1) Luxury: Luxuries are defined as consumer goods that are not considered essential and associated with affluence, with features of uniqueness, scarcity and preciousness, also named unnecessities. Luxury goods are generally with a long history and cultural significance, exquisite craft and design and also a high price with expensive brand premium. Luxury is regarded as an emblem of consumers status, accomplishment and wealth, like the diamond ring of Cartier who once provided jewelries for Edward VII of the United Kingdom. For products which are produced and sold massively but still hold features of uniqueness, scarcity and preciousness in raw material, they are defined as pan-luxury only with part of luxury features such as loose diamonds.

Figure II-2 Typical Luxury Brands in China

2) Online Luxury Shopping Online Luxury Shopping refers to consumers behavior of buying luxuries from website operators through the Internet. As long as a consumer places an order online, the whole buying process will be regarded as online luxury shopping, no matter he or she finished the payment online or off-line.

3) Online Luxury Shopping User Online Luxury Shopping User refers to the internet user who purchased luxuries online at least once within the past six months. In this report, this term refers to internet users who purchased luxuries online from Jan 2010 to Sep 2011. 4) Luxury Shopping Website Luxury Shopping Website refers to the site which sells luxuries. Luxury shopping websites include all C2C and B2C websites. Among different B2C websites, independent B2C websites refer to shopping websites which sell luxuries only or have independent sales channels for luxuries(sales of luxuries accounts for over 30% of total sales), and are independently responsible for purchase, storage, and logistics. Independent B2C websites will be the focus of our research in this report.

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iResearch China Online Luxury Shopping Research

Figure II-2 Classification of Luxury Shopping Websites

Market scale of online luxury shopping refers to the total transaction size of online luxuries. Only the online transaction size of domestic luxury shopping websites is calculated, the transaction size of luxuries directly sold in China by foreign luxury shopping websites is excluded. Only B2C and C2C luxury online shopping models are included, 2B models are excluded. Only deals closed by access of the Internet are included. Face to face deals off-line are excluded in the trade volume of C2C online luxury shopping. Deals in other channel like in hypostatic stores or through telemarketing are excluded in B2C online luxury shopping. If a website sells both luxury goods and non-luxury goods, then non-luxury goods will not be included in its trading volume of luxury goods. For example, the trading volume of KELA does not contain that of jewels.

Categories covered in this research involve apparel, shoes, bags, watches, jewellery, beauty & fragrance, wine &liquor, accessories, stationary and home. Service, hotel, restaurant, automobile and villa are excluded. The brands involved in online luxury shopping are top luxury mainline brands (e.g. Hermes, Gucci, Louis Vuitton, Prada, MIUMIU) of international fame as well as their second-line brands (e.g. Victorias Secret, Swarovski). But new fashion brands are excluded.

III. Methodology
iResearch mainly conducts industry research through deep industrial interview and desktop

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iResearch China Online Luxury Shopping Research

research: Understand the general situation of relevant industries and obtain sales and marketing statistics through interviewing experts, manufacturers and channels of this industry deeply Desktop research, obtain statistics of industrial scale by comparing public information and referring to user investigation statistics

Analyze through iAdTracker online ad supervision system, iUserTracker online behavior continuity research system and iResearch e-commerce comprehensive data supervision product Ecommerce Plus.
Ways of iResearch obtaining some public information: Statistics and information from the government Relevant economic statistics Public information about this industry Annual report and quarterly report of enterprises Public views of senior experts of this industry

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iResearch China Online Luxury Shopping Research

. Abstract Chinas Environment of Online Luxury Shopping Market

The development of luxury shopping in China is subject to high tariffs and import duties. The reduction of tariffs is required by circumstances and the reduction will further promote the rapid growth of luxury shopping in China and the fast development of online luxury shopping market. Most of top luxury brands have already entered into Chinese market and planed development strategies in tier two and tier three cities, uplifting customer awareness and influencing their consuming habits. Due to the limitation of economic level, consuming capability, shopping places and local traffic conditions, most of cities do not have direct-sale store or agency. It also lays the foundation for the development of online luxury shopping market in recent years. Market Scale of China Online Luxury Shopping Market

Data from iResearch shows that the market scale of China online luxury shopping (including C2C and B2C) is 6.36 billion Yuan in 2010 and it is estimated to grow 68.8% to 10.73 billion Yuan in 2011. The proportion of online luxury shopping in overall online shopping remains at 1-2%. In 2010, the proportion is 1.38 while this number is estimated to reach 1.41% in 2011. The penetration rate of online luxury shopping in overall luxury shopping in China is 3.16% in 2010 and will come to 4.37 in 2011. It is estimated that in 2015, the penetration rate will arrive at 8.03%. Typical Online Luxury Shopping Enterprises in China

iResearch considers that the main edge of fashion shopping websites like VIPshop.com and Xiu.com lies in: (1) a wide range of products with relatively stable source of supply; (2) a large number of visits per day and monthly visits with a large group of targeted users; (3) sound delivery and logistics services with better user experience. However, those websites are not real luxury shopping websites and cannot provide good products and services for luxury shopping users. Compared with integrated shopping websites, vertical luxury shopping websites are more professional with better reputation among high-end fashion users. However, they lack stable source of supply in the industry and the user activation rate fluctuates greatly. Diversification will be the future trend of vertical luxury shopping sites. kela.cn and jufengshang.com are typical segmental luxury shopping websites in two subcategories: jewelry and watches of famous brands, but their speed of development is quite different. kela.cn has developed rapidly because the website brand is the product brand, so that it has greater pricing power. As for jufengshang.com, it specializes in luxury watches. As prices of its watches will be greatly influenced by tariffs and brand manufactures, it does not have obvious price advantage and the sales grow slowly. iResearch holds that, compared with integrated luxury shopping websites, segmental luxury shopping websites are more professional with better reputation, but the repeat purchase rate is relatively low. Advice on Development of China Online Luxury Shopping Market

Based on analysis of trend in online luxury shopping market, iResearch proposes the following advices: (1)Strengthen the cooperation with other sectors in the industry chain: integrate more community elements to create a fashion-luxury consumption circleand cooperate with integrated shopping websites and improve visits among luxury shopping users. (2) Improve website services: uplift consumer shopping experience; enhance network security; and elevate after-sales services.

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iResearch China Online Luxury Shopping Research

V. Text of Report 1. Chinas Environment of Online Luxury Shopping Market


1.1. Development of Luxury Shopping in China vs. Beyond China There are mainly four types of professional luxury shopping websites abroad: (1)Flash sales site---- Vente- Privee and Gilt. This type of sites is characterized by flash sales and relatively low discount. Most of sites are not open to all consumers; instead, they are invitation-only or member-only. (2) Integrated fashion shopping site----YOOX and Saks Fifth Avenue. It covers a wide range of products, from regular products to high-end fashion. There is no limitation on time and invitation, and the price is relatively acceptable. (3)General merchandise involved in luxury shopping----Amazon. In 2006, Amazon acquired Shopbop which specializes in selling products from fashion designers. After that, Amazon got more innovative elements in online marketing strategy and acquired BuyVip in 2010, a Spanish luxury shopping community. (4)Luxury online store ---- Net-a-Porter. It integrates fashion magazines with shopping website. By exclusive cooperation with many top designers, it provides a wide range of cutting-edge products leading the fashion trend. Currently, it is hard for the development of direct-sale shopping websites. For instance, eLUXURY, a direct shopping platform owned by LVMH. It was released in June 2000 but was closed in June 2009. The failure should be attributed to its unclear positioning which covers products in a wide price range. Therefore, it can be concluded that overseas luxury shopping websites of good performance all successfully match its brands and price with targeted users. Due to the rapid development and huge market potentials in China, many overseas famous luxury brands accelerate their pace entering into Chinese market, especially in tier one cities. Some of them even develop businesses in tier two and tier three cities. Meanwhile, they also take advantage of online channel to uplift market penetration. On November 26, 2010, Emporio Armani opened its first online store in China. It is the first e-Commerce website opened by international luxury brand in China and now is agent-operated by YOOK. Armani is responsible for product categorization, pricing, promotional communication, while YOOK provides online services covering management, technical, interface, customer service, delivery and marketing and gets a certain proportion of total sales. Up to now, this site runs well. 1.2 Chinas Environment of Online Luxury Shopping Market The domestic luxury market has been widely concerned by brand manufactures, capital market and users since 2010. iResearch carries out PEST analysis on online luxury shopping industry in China to present the overall development of this market. On one hand, the emergence of many overseas luxury brands in Chinese market, to some extent, cultivates consumer awareness and consumption habits. However, the majority of luxury brands have not entered into Chinese market, and tier two and tier three cities have less luxury brands compared with tier one cities. The development of online luxury shopping is still in its early stage with rapid growth for just about one year. On the other hand, the rising of domestic economy uplifts the consumption level and consumers confidence. In addition, consumers online shopping behaviors tend to be more rational and mature after 10-year development of online shopping in China. Users have demands for more high-end fashion and segmental products, and are willing to buy luxuries online; therefore, domestic market is suitable for the further development of online luxury shopping. In general, current market environment will promote the development of domestic online luxury shopping market. However, many other factors may place limits for its development, namely, high

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iResearch China Online Luxury Shopping Research

tariffs and consumption tax, and lack of relevant laws and regulations to protect the rights of consumers and operators. iResearch holds that it is of great importance for online luxury shopping enterprises to get a comprehensive understanding of the market environment.

1.2.1. Political Environment: Adjustment of Tariff Probably Push up the Consumption of Luxury On April 1st, 2006, China raised consumption tax rate for some goods. It will collect a 30% consumption tax on cosmetics, 10% on golf balls and golf clubs and 20% on watches of over 10,000 Yuan. The Ministry of Finance announced that from January 1st, 2007, consumption tax rate of golf balls and golf clubs and high-end watches was raised from 10% to 30%, and that of cosmetics was raised from 20% to 50%. China imposed high tariffs on luxuries such as jewelries, footwear and clothing, watches, cosmetics and alcohol on a 10%, 20%, 30% and even 50% basis. The consumption tax and import duties are relatively high in China. Products often come into the market three months later than US and Europe and a large number of products are not available in China. Under such circumstance, most of domestic consumers do not choose to buy luxuries in China. In addition, consumer spending on luxuries outside China is excluded in the import and export value released by government, increasing the net export value and putting upward pressure on RMB. It also has been excluded in the total retail sales of social consumer goods, affecting the effectiveness of consumption stimulation strategy. Therefore, with constant demand of domestic consumers on luxury shopping, how to enlarge domestic luxury consumption and promote the prosperity of domestic economy is an important issue. In the news conference held by Ministry of Commerce on June 15th, 2011, spokesman Yao Jian said that Relevant government departments have reached a consensus that China should further reduce import duties, as well as tariffs on some of high-end commodities when answering how to expand domestic sales of overseas luxuries. Ministry of Commerce holds that it is better to reduce tax rate and encourage consumption in China than impose high tax rate and let consumers purchase abroad. On the contrary, Ministry of Finance holds that selling in a high price is the marketing strategy of most of foreign luxury brands. Tax reduction cannot significantly lower the price. It seems that the so called consensus has not been reached by these two ministries. iResearch believes that in the long term, tariff reduction is imperative. It will also promote the rapid growth of domestic luxury consumption and online luxury shopping market. However, current development of this market is limited by high tariffs and import duties and the reduction is hard to be achieved in the short term, thus the luxury industry will still be constrained. 1.2.2 Economic Environment: Luxury Brands are Powering into China Market With rapid development of domestic economy, China middle class with a large share is emerging as a principal part of luxury consumers and Chinas demand for luxury is increasing. The rising of domestic economy uplifts the consumption level and consumers confidence. Overseas luxury manufactures see the huge market potentials in China and are powering into this market. As for the time when luxury brands entering the Chinese market, more brands come to China and gradually increase their investment. Since 1990, the following luxury brands and operators have already been introduced in China. In 1991, Ermenegildo Zegna entered the Chinese market; In 1993, Alfred Dunhill entered Shanghai; In 2000, Versace entered the Chinese market; In 2000, Vacheron Constantin came to China and opened its first store in Beijing In 2001, Tiffany opened its first store in China; In 2005, top luxury watch brand Patek Philippe entered Shanghai;

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iResearch China Online Luxury Shopping Research

In 2005, Valentino opened its first store in Beijing; In 2006, Rolex opened its first store in Beijing In 2 009, top luxury brand FRETTE from Italy entered Chinese market and became the first indoor decoration luxury brand in China. In 2010, YOOX, a famous online luxury shopping operator from Italy entered the Chinese market.

As for the shop distribution, at first most of luxury brands choose to open stores in five-star hotels in order to highlight the distinguished and luxurious quality. Later, they began to open stores in some shopping malls throughout the country. Louis Vuitton opened direct sale stores in nearly 30 cities in mainland China, including Harbin, Changchun, Fushun, Dalian, Hohhot, Beijing, Tianjin, Qingdao, Taiyuan, Zhengzhou, Xi'an, Chengdu, Chongqing, Wuhan, Kunming, Nanning, Changsha, Nanjing, Wuxi, Suzhou, Shanghai, Hangzhou, Ningbo, Wenzhou, Fuzhou, Guangzhou, Shenzhen, Sanya, etc. Armani opened stores in over 20 cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Chengdu, Qingdao, Xi'an, Chongqing, Tianjin, Nanjing, Dalian, Wuhan, Wenzhou, Suzhou, Wuxi, Kunming, Shenyang, Harbin, Changchun, Urumqi, etc. Burberryopened direct-sale stores in over 30 cities. Hermsstores are distributed in 13 cities in China, namely, Beijing, Shanghai, Guangzhou, Shenzhen, Harbin, Dalian, Qingdao, Wuxi, Nanjing, Hangzhou, Suzhou, Chengdu and Kunming. Ermenegildo Zegna has ente Chinese market for twenty years with more than 60 stores red throughout the country. Currently, most of top luxury brands have already entered into Chinese market and planed development strategy in tier two and tier three cities, uplifting customer awareness and influence their consuming habits. However, due to the limitation of economic level, consuming capability, shopping places and local traffic conditions, most of cities do not have direct-sale store or agency. It also provides opportunities for the development of online luxury shopping market in recent years.

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2. Industry Chain of China Online Luxury Shopping


2.1 Industry Chain of China Online Luxury Shopping (1) Luxury News and Navigation Websites Entrances of Luxury Shopping Websites Personal consumption of luxuries is strongly connected with trendy fashion field and movie stars, a vogue image is built up through the stars effects. Currently, a lot of integrated, fashion and female portals provide rich information on luxury, for example, yoka.com and pclady.com.cn. Besides, professional luxury portals and luxury channels of integrated portals such as chinaluxurs.com and luxury.msn.com.cn also provide luxury information for consumers. Navigation website is another important luxury information platform. Currently, Boogle.cn, as a integrated navigation website, offers vertical online luxury shopping navigation; Qihu 360 released luxury navigation websitelux.360.cn in October; Shishang123.net also offers luxury navigation. These navigation websites do not conduct online shopping but array hyperlinks on its page to luxury shopping websites which contributes to traffic of luxury shopping websites. (2) Luxury Shopping Websites----Main Participants in Luxury Online Shopping Currently, domestic luxury shopping websites are composed of integrated shopping websites (including C2C websites like taobao.com and paipai.com and B2C websites like tmall.com and 360buy.com), luxury shopping websites like vipshop.com, xiu.com, vipstore.com and shangpin.com, also segmental luxury shopping websites like zbird.com, kela.cn and jufengshang.com. Apart from them, some traditional enterprises, fashion media and portals respectively released luxury shopping websites or channels, like yintai.com released by Yintai Department Store, Ymall.com released by the fashion media YOKA.com and l.163.com released by NetEase. (3) CertificationInsurancePayment and Distribution of Online Luxury Shopping As luxuries are unique, scarce and precious, consumers tend to be more attentive, cautious and have higher demand on security of authentic original, quality luxury, which includes certification from many E-commerce certification authorities and the Consumer Rights and Interests Protection Agency. Apart from those, PICC and China Insurance cover insurance for luxury online shopping. Also, online payment and distribution are indispensable for online shopping. Payment channels cooperated with luxury shopping websites consists of China UnionPay, banks and third-party payment institutions (e.g. bill99.com and Alipay.com). For distribution, third-party distribution institutions include FedEx, UPS, SF-express, EMS, ZJS, STO, YTO, ZTO, HT-express and Yundaex. In sum, the industrial chain has already begun to take shape. Harmonious development of every link is contributed to the rapid growth of online luxury shopping market.

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Figure 2-1 Industry Chain of China Online Luxury Shopping

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iResearch China Online Luxury Shopping Research

2.2 Supply Chain of China Online Luxury Shopping

Figure 2-2 Supply Chain of China Online Luxury Shopping

iResearch makes corresponding analysis of the supply chain of luxury shopping websites according to the purchasing process and the flowing direction of products as follows: On the one hand, the distribution channels of brands can be classified into two different two types: (1) Type I: luxury brands with protective policy, like Louis Vuitton, Hermes and Chanel. These brands value the brand images and the control of price, so the only channel is regular chain store in China or overseas. As no proxy or authorization of these brands is allowed, the only purchasing channel of luxury shopping websites is to buy products from chain store. (2) Types II: luxury brands with authorization policy. These brands limited the extent of authority to sales agents or distributors. China luxury shopping websites secure the stable supply by obtain the authorization from proxy or distributors. On the other hand, the supply of China self-run luxury shopping websites includes several channels: (1) To obtain authorization from the brands, the proxy or the distributors and to purchase products.(2) To purchase ( even buy out) out-of-season luxury products by buyers in discount stores or outlets.(3) Direct purchase in release conference or holiday promotion conference like Christmas sale. (4) To buy products of new season in brand store but with little discount. The first two channels are the main purchasing channel of China luxury shopping websites supplying out-of-season products; the other two feed the need of new arrivals from consumers. But the profit comes from the regional price differences in all purchasing channels. Comparison of the first two main channels: (1) the authorization and buying model secures the stable supply, but disadvantage lies in the long time in delivering products since the ordering in China and purchasing abroad model; (2) Purchasing by buyers is more quick and flexible, but loose and unstable. Also, the number of the same products from each channel is less than 10, even outlets offers only around 20, therefore, the small number of products and the less coincidence require panic buying of China online luxury shoppers.

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3. Market Scale of China Online Luxury Shopping Market


The domestic market scale of online luxury shopping includes transaction size of both B2C and C2C shopping luxury websites. But the analysis on shares of luxury shopping website only includes shares of transaction amount of B2C luxury shopping websites. According to iResearch, the market scale of China luxury online shopping in 2010 (including C2C and B2C) is 6.36 billion Yuan, and the number in 2011 is estimated to be 10.73 billion Yuan with an annual growth of 68.8%. In the whole market scale of China online shopping, transaction size of online luxury shopping keeps percentage of 1%-2%: it accounts for 1.38% in 2010 and is estimated to be 1.41% in 2011. From the view of proportion of online luxury shopping transaction size in luxury shopping trade scale, the penetration rate in 2010 is 3.16% and is estimated to be 4.37% in 2011 and 8.03% in 2015. iResearch holds that, there will be a slower increase with a 30% growth rate after the jump in 2010 and 2011. There are two factors reasoning the slow growth: first, luxurys feature of scarcity determines fewer categories and smaller number of luxuries, which leads to slow rise in market scale; second, the number of luxury online shopper is relatively small, which also limits the total consuming transaction size. Transaction size of China online luxury shopping is estimated to hit 37.24 billion Yuan in 2015. It is mainly attributed to the following three factors: First, the domestic online luxury shopping focused on international top luxury brands, but a large number of luxury brands are not introduced into China yet. With the market cultivation of the luxury industry in years, a growing number of luxury brands will be introduced into China actively or passively, part of these luxury brands are more willing to sell through the current shopping websites, which contains a huge potential market; Second, the luxury categories sold in China are focused on small items such as apparels, bags, jewelry, diamonds, watches and other accessories. More luxury categories will be introduced into Chinas market in the future. Third, in small and medium-sized cities, there is relatively lower business level and it is inconvenient to set up brand stores. Online shopping is the best solution to meet the needs of massive local consumer groups to purchase luxury goods.

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Figure 3-1 Market Scale of China Online Luxury Shopping From 2010 to 2015

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4. Development of China Online Luxury Shopping Market


In recent years, China online luxury shopping market has experienced a rapid growth. However, both in terms of users and the whole market, at present domestic online luxury shopping market is still in its infancy. Online luxury shopping market will experience a process of development and perfection. As for online luxury shoppers, on usual practice, they will transform from conspicuous consumption to recognition of product quality to recognition of consumption culture of luxury goods. At the moment, in China the luxury market is still in the stage of conspicuous consumption and impulse consumption with a relatively large market demand. From the aspect of online luxury shopping market, most of domestic luxury shopping websites were created after 2008. At present, there are various kinds of online luxury shopping websites. However, luxury shopping websites are lack of supply sources and stable supplies. Therefore, online luxury shopping market is basically tight. With the help of online luxury shopping websites, consumers have direct access to all kinds of information about luxury goods. Meanwhile, consumers can place orders very conveniently. This kind of business mode has been very popular among consumers. Thus, online luxury shopping market also sees rapid development. 4.1 Trends in China Luxury Online Shopping Market More participants will be involved in China luxury online shopping market. The healthy development of luxury online shopping industry is indispensable of the improvement on luxury shopping websites service model and the innovation on the business model. Specifically, iResearch estimates three trends of China luxury online shopping industry: Trend I: Luxury online shopping websites with different market-targets develops in differentiation. The difference between vertical luxury shopping websites and general fashion shopping websites will intensify specifically on the price of per order. High-end luxury shopping websites will raise the price gradually and they will also experience a process from open to closed to consumers. Open is for cultivating users shopping habits, then Closed is for improving the service quality focused on high-end consuming groups. Fashion online shopping websites will integrate more local brands focused on the trendy consuming group. In addition, high-end consuming groups will cite more preference on personalized and customized luxuries. Trend II: Second-line and third-line luxury brands will increase; consumers have more choices in brands and categories. It is an evident reflection of the relationship between brands and luxury online shopping websites that brands are open for authorization or not, luxuries in China are outlet products or newly released fresh products. On one hand, they do not want to sell too many products to lower the level of the high-end, noble and mysterious brand image. As a result, top luxury brands will fade out of consumers sight of luxury online shopping. In contrast, a large number of second and third-line luxury brand overseas are expected to gradually enter the domestic luxury online shopping market, and become major suppliers of luxury shopping websites. In addition, from the decoration and accessories to home products, the user will enjoy more categories of luxuries. Trend III: Consumers tend to be more rational in buying luxuries. With the massive luxury brands settled in the domestic market, and the rapid development of luxury online shopping industry, consumers will be more rational to buy luxury goods. There are three changes expected to occur:

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First, consumers recognition toward luxury brands will be gradually increased, they will be no longer limited to top luxury brands such as Armani or Gucci; Second, consumers buying psychology is to be mature, they will no longer buy luxuries only to show-off, but gradually transfer to focus on the overall product experience and pursuit of life with high quality ; Third, personalized demand will increase as consumers are tend to use different brands of luxury goods in different high-end occasions.

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APPENDIX I

Contents of the Full Version

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iResearch China Online Luxury Shopping Research

I. Research Background II. Definitions III. Methodology IV. Abstract V. Text of Report 1. Chinas Environment of Online Luxury Shopping Market 1.1. Development of Luxury Shopping in China vs. Beyond China 1.2. Chinas Environment of Online Luxury Shopping Market 1.2.1. Political Environment: Adjustment of Tariff Probably Push up the Consumption of Luxury 1.2.2. Economic Environment: Luxury Brands are Powering into China Market 1.2.3. Social Environment: Online Luxury Shopping Market Shows the Trend of high-end and segmentation 1.2.4. Technology Environment: Reform in China Internet Will Drive Online Shopping Operators to Build Infrastructure 2. Industry Chain of China Online Luxury Shopping 2.1. Industry Chain of China Online Luxury Shopping 2.2. Supply Chain of China Online Luxury Shopping 2.3. Description of Online Luxury Shopping Websites 3. Market Scale of China Online Luxury Shopping Market 3.1. Market Scale of China Online Luxury Shopping Market 3.2. Share of China Online Luxury Shopping Market 3.3. China Online Luxury Shopping Website Rankings 4. Analysis of Online Luxury Shopping Enterprises 4.1. China Online Luxury Shopping Enterprises 4.2. Comparison of Typical Fashion Online Shopping Enterprises 4.2.1. Analysis on Typical Enterprises VIPshop.com 4.2.2. Analysis on Typical Enterprises Xiu.com 4.3. Analysis of Vertical Online Luxury Shopping Enterprises 4.3.1. Analysis on Typical Enterprises: 5lux.com 4.3.2. Analysis on Typical Enterprises: Vipstore.com 4.3.3. Analysis on Typical Enterprises: Shangpin.com 4.4. Analysis on Typical Vertical Online Luxury Shopping Websites 4.4.1. Analysis on Typical Enterprises: Kela.cn 4.4.2. Analysis on Typical Enterprises: jufengshang.com 5. Development of China Online Luxury Shopping Market 5.1. Trends in China Luxury Online Shopping Market 5.2. iResearchs Advice on Development of China Online Luxury Shopping Market 5.3. Potential Chance to Enter China Online Luxury Shopping Market VI. Legal Notice

Copyright iResearch Inc. 2011

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iResearch China Online Luxury Shopping Research

Appendix II:

Figures and Tables of the Full Version

Figure II-1 Industry Chain of China Online Shopping Figure II-2 Typical Luxury Brands in China Figure 1-1 2008-2014 Market Scale of China Online Shopping Users Figure 1-2 2008-2014 Number of China Online Shopping Users Figure 2-1 Industry Chain of China Online Luxury Shopping Figure 2-2 Supply Chain of China Online Luxury Shopping Figure 3-1 Market Scale of China Online Luxury Shopping From 2010 to 2015 Figure 3-2 Market Share of China Luxury Online Shopping Operators in 2011 Figure 3-3 Market Scale of China Major Vertical Luxury Online Shopping Operators in 2011 Figure 3-4 iUserTracker-Number of Unique Visitors Per Day of China Typical Luxury Shopping Websites from Jan. to Aug. in 2011 Figure 3-5 iUserTracker- Number of Monthly visits of China Typical Luxury Shopping Websites from Jan. to Aug. in 2011 Figure 4-1 Typical Independent Luxury Shopping Websites in China Table II-1 Classification of Online Shopping Table II-2 Classification of Luxury Shopping Websites Table 2-1 Classification of China Luxury Websites & Companies Table 4-1 Information about Main Independent Luxury Shopping Websites Table 4-2 Comparison between VIPshop.com and Xiu.com Table 4-3 Comparison between 5lux.com, Vipstore.com, and Shangpin.com Table 4-4 Comparison between Kela.com and Jufengshang.com

Copyright iResearch Inc. 2011

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