One can draw fish with bait, or alternatively, wade closer to where they swim – the Richemont Group has elected to do the latter, taking decisive steps to capture a commanding slice of the world’s most valuable online retail market: China. Earlier in the year, Richemont completed its takeover of YNAP, the world’s largest online retailer of luxury goods which includes online retailers Net-A-Porter and Mr Porter. Then it announced in October that it was taking a majority stake (51%) in a joint venture with China’s Alibaba Group, to establish Net-A-Porter and Mr Porter in the Chinese online retail market.
The Alibaba Group is China’s largest online commerce company, with online platforms such as Taobao and Tmall. It boasts some 552 million users a year (nearly twice as many as Amazon), and commands around 60 percent of China’s e-commerce market. E-retail in China grew 32 percent to clock more than $1 trillion in sales in 2017, making it the largest online retail market by far, with USA ranked No.2 at $455 billion in sales. Under the partnership, mobile apps for Net-A-Porter and Mr Porter will be developed for consumers in China, while at the same time, Net-A-Porter and Mr Porter online stores will also be launched on Alibaba’s Tmall Luxury Pavilion, with Alibaba providing such support as technology infrastructure, marketing, payments and logistics.
Johann Rupert, chairman of Richemont, said: “Chinese customers at home and abroad are an increasingly important customer base for Richemont and for the broader luxury industry. Our digital offering in China is in its infancy and we believe that partnering with Alibaba will enable us to become a significant and sustainable online player in this market.” The Asia Pacific region (excluding Japan) is Richemont’s most important market, accounting for 40 percent of the Group’s sales. Europe accounted for 27 percent, followed by the USA at 16 percent.
Daniel Zhang, CEO of Alibaba Group, said: “This multi-faceted partnership will bring Chinese consumers unprecedented access to the world’s leading luxury brands. Chinese consumers are expected to account for nearly half of the global luxury market by 2025, and through this partnership, Alibaba and YNAP will be even better positioned to capture this compelling market opportunity.”
For the financial year ended March 2018, Richemont Group reported a profit of $1.4 billion, a growth of 1 percent from the previous year. Available results for LVMH and Swatch Group showed 18 percent and 27 percent growth in profits, respectively. With Richemont’s investments, it’d be most interesting to see the extent to which strategic placements in the digital sphere can reap gains on the market while growing it. No one will be standing still. But already, the Chinese consumer has taken to swiping his phone for everything from paper towels to furniture. A luxury watch follows, most naturally.