France's Longchamp and the U.K.'s Burberry are now selling goods
on the popular messaging app
By Kathy Chu
HONG KONG -- China's Tencent Holdings Ltd. is using its vast
social-media network to attract luxury-fashion brands to its WeChat
app, potentially opening a new frontier in online retail.
France's Longchamp and the U.K.'s Burberry Group PLC have begun
selling handbags and clothes on WeChat, China's most popular
messaging app. LVMH Moët Hennessy Louis Vuitton SE's Givenchy and
Dior brands are testing demand for their goods through flash sales
on the platform.
The move signals a challenge to Alibaba Group Holding Ltd., the
dominant player in e-commerce in China, where online transactions
are expected to reach 6 trillion yuan ($870 billion) this year,
according to consulting firm Bain & Co. Alibaba's sites
processed more than $547 billion in transactions in fiscal 2017,
which analysts say is more than eBay Inc. and Amazon.com Inc.
combined.
While luxury sales on WeChat are in their infancy, Tencent's
courting of high-end fashion brands is part of a widening battle
between China's internet companies. Alibaba, Tencent and search
engine Baidu Inc. are venturing beyond their traditional business
lines into payments, social media and e-commerce.
"Customers have responded very well" to Longchamp's limited
handbag sales on WeChat, said Jean Cassegrain, chief executive of
the luxury brand, which is considering expanding its product lineup
on the app. "One way or the other, [WeChat] will significantly
contribute to our sales."
Upscale brands are rethinking their digital strategies amid a
tough environment for luxury sales. Global sales of personal luxury
goods were flat in 2016, at EUR239 billion ($267 billion), while
global spending on luxury by Chinese consumers fell for the first
time last year, according to Bain. Even so, luxury brands are
seeing a pickup in mainland China as brands lower prices there and
Beijing encourages consumption at home.
In the U.S., a small number of luxury labels have tested sales
on social media including chat apps. But Tencent in China is making
inroads with luxury brands by taking advantage of the massive
online ecosystem it has built around WeChat, whose more than 900
million users book movie tickets, hail rides, order laundry pickup
and pay for utilities without leaving the app. This year, Tencent
also made it easier to launch multimedia advertising and set up
shops on WeChat, making its platform more appealing to luxury
brands.
WeChat is "increasingly playing an important role in the
commercial world," said Tencent President Martin Lau this
month.
The online sales are also fueling WeChat's mobile wallet, WeChat
Pay, against market leader Alipay, launched by Alibaba's Ant
Financial in 2009. Only WeChat Pay can be used on Tencent's
platform. As recently as 2014, Alipay commanded nearly 80% of
China's mobile payments market, but its share slipped to 54% by the
first quarter of this year. Tencent's payment system, including
WeChat Pay, had 40% in the first quarter, according to research
firm Analysys.
Alibaba has been trying to get luxury brands online for years.
Last year, Alibaba joined with Mei.com -- which received a $100
million investment from Alibaba in 2015 -- to offer flash sales
from labels that might not have their own shops on Alibaba's
site.
The e-commerce giant is also relying on big data to clean up
counterfeit goods listed on its platform. Alibaba is the "world's
leading fighter on counterfeits," founder Jack Ma said last
year.
In the past year, Alibaba has reduced the number of third-party
product listings of goods made by the top 10 luxury fashion brands
by an average of 73%, according to L2 Inc., a digital consulting
firm. Still, an average of 49,000 total product listings remained
as of April on Alibaba's Taobao site, a bazaar-like platform of
small businesses and sellers.
Affordable brands such as watchmaker Tag Heuer, jeweler Pandora
and cosmetics companies have opened on Tmall, Alibaba's platform
for mostly large brands. But most luxury fashion brands remain wary
of open platforms such as Alibaba and rival JD.com because they
fear losing their aura of exclusivity, according to Danielle
Bailey, head of research in Asia Pacific for L2. Burberry is an
exception, opening a store on Tmall in 2014.
Xia Ding, president of JD Fashion, said the e-commerce platform
understands luxury brands' desire for exclusivity and plans to
unveil measures this year to address these concerns.
Counterfeit listings are also a growing problem for social-media
sites such as WeChat.
Mr. Cassegrain, Longchamp's CEO, said, though, that WeChat's
appeal is that it isn't an open platform where luxury goods can be
sold along with everyday products. Users must follow Longchamp's
account or scan a QR code to be taken into the brand's site.
We want to "convert our presence in social media into sales"
through channels such as WeChat, Prada Chief Executive Patrizio
Bertelli said in April.
But until more luxury brands open stores on WeChat rather than
offering one-time sales, "it's difficult to say whether these
online experiments are effective," Ms. Bailey said.
Burberry, along with watch and jewelry brands Cie. Financière
Richemont SA's Cartier and IWC Schaffhausen, are among the few that
have opened full stores on WeChat.
Cartier advertises on WeChat's news feed and sells on the
platform because "China is one of the most digitalized markets in
the world today, and Cartier has to adapt to it," said Renaud
Litre, chief executive of Cartier China.
"For the luxury industry, it's important to not fool ourselves,"
said Pablo Mauron, managing director in China for Digital Luxury
Group. "People want to touch the product. I'm still doubtful that
someone that doesn't have a relationship with a brand will buy a
$20,000 watch on WeChat."
--Dan Strumpf contributed to this article.
Write to Kathy Chu at kathy.chu@wsj.com
(END) Dow Jones Newswires
May 30, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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