From consumer packaged goods to beauty and activewear to auto, global brands have flocked to China’s largest B2C e-commerce platform Tmall. But one sector has been slower than others to open up shop on the Alibaba-owned e-tailer: luxury. Only 24% of luxury brands in L2’s Alibaba report had official Tmall shops as of June 2017.
In response, Alibaba has pursued multiple initiatives to make the platform more enticing for high-end brands. It launched Luxury Pavilion platform in August 2017, livestreamed a fashion show ahead of Singles’ Day focused on premium and luxury brands available on the platform, and bought Chinese mall operator Intime. Tmall also sponsored a Tmall China Day for New York Fashion Week in February, where it held runway shows featuring Chinese designers throughout the day. As it courts luxury brands, the e-tailer is facing off against rival JD.com, which bought a stake in Farfetch last June and introduced its own luxury platform called Toplife as well as a white-glove delivery service.
In order to learn more about Tmall’s luxury initiatives, we sat down with President of Tmall Fashion & Luxury Jessica Liu to discuss its latest developments, including the Luxury Pavilion, AI personalization, and omnichannel.
What do you see for the future of the Luxury Pavilion?
The Luxury Pavilion is a virtual app within the Tmall app for targeted consumers; not all consumers see it. The brands are also selected; it’s only focused on luxury brands. The visual management is very important for luxury brands, including, for example, the images and layout of the flagship store front page, the layout of the detail page, and the view of the search results page. We also have a lot of recommendation pages. We are upgrading the visuals.
In the future, we will be launching new luxury brands monthly. Recently, you could see Marni and Stella McCartney. We create a lot of marketing campaigns dedicated to luxury brands. For example, we created the Pavilion Day, which is similar to the Super Brand Day for the mass brands. We use all the resources for one brand to cooperate with them to do the branding.
We also have our membership plan for the Luxury Pavilion, called the Pavilion Cloud. We did the first campaign with Burberry for an online-offline integrated experience. We offered the Luxury Pavilion members a chance to go to the Burberry store in Shanghai to experience their VIP activities and services in their physical store. We did a targeting campaign online to invite the relevant customers.
Do you plan for luxury brands to use the Luxury Pavilion exclusively instead of an official Tmall store?
We offer several tools for the brands to cooperate with us. Most of the mass brands opened a permanent flagship store, but we have different tools for luxury brands. For example, one is a brand hub. If they do not want to set up a flagship store in Tmall, but they want to set up a content account in Tmall to communicate to consumers their brand story, their newly released products, or even their physical store information, they are welcome on our platform. Their brand hub is like an Instagram account.
Another tool that we have is a pop-up store in Tmall that we call Tmall Space. We have done two cases: one was with Loewe; the other was Stella McCartney. Loewe gave us an exclusive handbag for Valentine’s Day. It was really successful; this year they plan to do another Tmall Space for another product. With this way, more consumers know the brand throughout the platform.
Whether they have the flagship store or brand hub or Tmall Space, they are all set up in Tmall first. Then, if the brand meets our requirements for the Luxury Pavilion, we will automatically add them to it.
As Tmall invests in AI-driven data and personalization, how has this impacted fashion sales on the platform?
Actually we are a platform, so we share all the data with our partner brands. We are not a platform that purchases merchandise and then resells it to the consumer. Last year, we added a data bank that allows brands to access who is interested in the brand and can purchase the products. From awareness, to purchase, to interest, to loyalty, we share all the information with the brands. They know exactly how many consumers have searched their brand but hadn’t bought anything, and why they hadn’t bought, and they also know the conversion rate from interest to purchase. The brand can know exactly what they should do to raise the conversion rate; we tell them the reasons. For example, maybe it’s because the content was not so good: they just read the content but it didn’t let them decide whether to buy or not. We also have big data on supply and demand, so the brands can know the exact trends the consumers are searching for and make some big changes in their merchandising.
Among fashion brands on Tmall, which ones have been most successful and why?
There are a lot of brands with very successful physical stores that can also can be very successful on Tmall like Nike, Uniqlo, or Zara. But we also can see that there are a lot of brands that do not even have a physical store. For example, Ms Min is a designer brand. When she set up her brand, she did not set up a physical store first. She just set up a Taobao and Tmall shop. The buyers found that it’s a really good brand; now Ms Min has its own separate boutiques. It took less time for her to become successful than other designer brands. From day one, she could get the data and the consumers’ feedback immediately after the product launch and change the products accordingly. If she had a physical store, it could have taken months to get the feedback from the consumer and from the market.
How impactful were Tmall’s VR and AR features during Singles’ Day and what do you see for the future of these technologies with regard to fashion brands?
There are a lot of Chinese consumers, especially on Tmall, that are very young. Sixty percent of the consumers are under 30 years old, and younger consumers really started with mobile. They want to have fun when they’re purchasing something, so AR or VR is a way for them to communicate and have fun with brands.
You can see that if a brand wants to attract younger consumers, they not only have to have products to meet their needs, but the ways of selling should be changed accordingly. A younger consumer likes livestream shows, so a lot of KOL brands are very successful because they livestream. Younger consumers like games, and a lot of brands created games during Double 11 to attract the younger consumer. The consumer’s average time spent on our platform is 25 minutes a day, so they want to have fun.
Are consumers starting out on Tmall to search for products or do they go to search engines like Baidu first?
Consumers do not go to other platforms to search for something when they want to buy. We are actually the number one purchasing search engine in China. Consumers not only search in our platform, but they also find new products because we have very good machine learning to find the consumer’s potential demands. Our front page has a lot of channels to expose new recommended products. The traffic of recommendation is now the same as the traffic of search. It’s all personalized.
What are the benefits for Alibaba in its cooperation with brick-and-mortar stores like Intime on omnichannel initiatives?
Since Intime is part of Alibaba now, we can have tests to set up a showcase to let other physical stores see what New Retail is and how to see good results. It helps them to get traffic, know the customer profile, and target the consumers who already left their physical store.