China’s second largest e-commerce giant is no longer content with its massive portfolios of luxury goods on its platform. The next move for JD.com? It wants to tackle the after-sales services for big spenders — with the setup of a brick-and-mortar presence.
On July 21, the first shop opened its doors at Sanlitun district in Beijing. At a downtown location known for its diverse shopping, dining and entertaining offerings, the store offers anything from cleaning, repairing, maintenance, recycling and trading services for high-end products such as leather goods, jewelries, clothes, watches and clocks.
With rapidly rising incomes, more and more Chinese consumers are willing to splurge on luxury goods — and they do not shy away from flaunting their wealth. According to data from global consultancy McKinsey, about 23.9 million Chinese consumers made luxury purchases in 2018, at nearly $112 billion, representing one-third of the global total. That compares to just about $50 billion in 2012. McKinsey predicts the spending will soar to around $180 billion in 2025, accounting for 40% of the world’s total.
While the demand for luxury goods increases, the business model of the after-sales service market is not well-established. Most luxury brands still lack a network of devoted service centers, despite seeing their stores sprout all across China. Customers therefore have difficulties in getting their handbags or shoes repaired. Most of them have to turn to third-party vendors instead, but the latter do not have systematic operating procedures or skilled technicians, therefore hampering the quality of repairs.
And this is exactly a void in the market that e-commerce giants like JD.com hope to fill, market observers say.
Tie-up with Farfetch
JD.com extended its tentacles into the luxury market in June 2017, after having invested nearly $400 million to become one of the largest stakeholders at Farfetch, a leading e-commerce portal for the fashion industry. Headquartered in London, Farfetch partners with over 1,000 luxury boutiques and brands worldwide, serving customers from over 190 countries.
Later the same year, JD.com launched its own luxury e-commerce portal, Toplife, which provides high-end domestic and foreign luxury brands with digital storefronts to directly reach out to Chinese customers. By the end of 2018, Toplife boasted a portfolio of more than 100 brands.
But its ambitions hit a snag. In February, JD.com sold Toplife to Farfetch for USD 50 million (RMB 345 million), reportedly due to lackluster sales. Both Toplife’s website and app had been shut down in July and users are being redirected to Farfetch’s platform.
Despite the headwinds, JD.com did not give up on its grand plan to tap the multi-billion-dollar luxury goods market, and it’s now stepping into the after-sales services. Market watchers said the e-commerce giant aims to build an ecosystem that covers the entire life cycle of luxury goods. Users can buy luxury goods on its website, place an order on the app for maintenance and repair services, or sell their undesired purchases on its secondhand trading platform, called Paipai.
The new 1,300-square-feet store, JD Luxury Service, in Beijing includes a display area of secondhand suitcases and bags, as well as a maintenance and repairing section. The store employs six technicians, who can offer inspection and cleaning services while repairing and maintenance will be completed in a separate factory. Users can either place an order directly in store or online via JD.com’s mobile app.
Competition is inevitable. Secoo, one of China’s largest luxury-focused e-commerce sites, claims to own the country’s biggest authentication and maintenance center. It said it has more than 100 skilled technicians from Europe, Japan and the U.S. Also, Alibaba, JD.com’s bigger hometown rival, touts its own high-end brands site, Luxury Pavilion, on Tmall.
JD.com plans to open a dozen more luxury goods service stores in the second half of 2019, a source familiar with the development told 36Kr. These stores will be operated directly by the company and it will consider franchising model going forward.
The original article was written by Cao Qian from 36Kr, the parent company of KrASIA.
Editor: Jason Tan
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