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Insights China

Three Questions for David Shi Cheng Zhao, CEO of Shangpin

frog sat down with Shangpin’s CEO during Mercedes-Benz Fashion Week in New York to talk about the company’s strategy to woo rising numbers of potential luxury buyers in China.

Shangpin is a luxury e-commerce Web site headquartered in Beijing that targets wealthy, fashion-conscious Chinese consumers. In 2010, it received $10 million in Series B funding by Morning Side Ventures, and in July 2011, Chenwei Capital invested $50 million in Series C funding. The site has been profiled in publications ranging from Fortune.com to Women’s Wear Daily. And its timing couldn’t be better as the Chinese luxury e-commerce market is predicted to grow. In May 2012, Chinese news source Jing Daily reported that this market would grow from $2.4 billion in sales in 2011 to beyond $3.2 billion in 2012, citing reports from Barclays Capital and Chinese online retail site Taobao.

What sets the Chinese luxury shopper apart from luxury consumers in other parts of the world?

Generally, luxury shoppers around the world are pursuing the same high quality goods, but the difference between Chinese luxury consumers and those in more developed luxury markets is their maturity. In China, the recognition of fashion icons is in its early stages. Wealthy Chinese consumers may not know what the brand of a fashion house known throughout Europe, Japan, and the United States stands for. They also might not know what is trendy in the rest of the world. In China, you have to remember that people were still wearing the Mao suit in the 1980s. Today’s adults are the first generation open to fashion brands. They recognize those with very well known logos, which they perceive of as “good value.” But beyond the world’s most recognizable logos, they might not be aware of many other high-quality brands.

Does this mean there is a big window of opportunity for less-recognized luxury brands to gain attention in China in coming years, or are they at a disadvantage when compared to those with very visible logos?

There is definitely an opportunity to coach future luxury consumers in China, who will be excited to see how they might be able to express themselves via fashion. In a way, it might parallel social change that is taking place with younger generations. The brands that will gain buyers are those that will be able to communicate the value that they represent for the money that their products cost. There is also a lot of potential for new luxury customers in second- and third-tier cities across China. These areas have seen economic growth in the last few years. The trick is understanding how each of these cities might be at different stages of awareness of luxury brands. Some may only now have populations of potential luxury buyers who are just discovering some of the fashion houses with the world’s most recognized logos.

Shangpin has a fascinating model, which initially was to market to the top clients of three banks, China Construction Bank, China Minsheng Banking Corporation (China’s first privately held, and not state-owned bank), and Hua Xia Bank. But what is Shangpin’s latest strategy in terms of courting new luxury buyers in China?

We’re focusing on the concept of “styling” on every page of our Web site. We add value to selling luxury clothes and accessories by offering tutorials on how to put together a beautiful outfit. It’s a service that other ecommerce platforms don’t yet have in China. It’s educational; it coaches buyers. We also have fashion-trained customer service representatives who are local: they know the local market and culture, but can also help customers very directly with coaching them on their fashion decisions. These service details, we believe, will set us apart.

We are also very active in showing that the products that we sell are of the highest quality and value, and are authentic. As you know, there are rampant counterfeit goods in China. There are also a lot of discounters. We sell full-price products online, and need to build trust. But we also have a core group of initial buyers from our bank customers, who have the means to afford luxury items and the personal and professional networks to spread the word of our services.

We believe that it’s not enough for U.S., European, or other established luxury brands to just open a brick and mortar store in China and expect Chinese consumers to come in and buy. It’s very important to educate them on how and what to buy, and how to live with and enjoy the value of their investments in luxury.

frog

frog is a global design and strategy firm. We transform businesses at scale by creating systems of brand, product and service that deliver a distinctly better experience. We strive to touch hearts and move markets. Our passion is to transform ideas into realities. We partner with clients to anticipate the future, evolve organizations and advance the human experience.

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