Luxury Electric Providers Do Not Burn Money? Would You?

Perhaps it is eyeing China's increasingly prosperous consumption demand for luxury goods. More and more luxury brands begin to enter China and compete in e-commerce.

From the German menswear luxury Hugo Boss, it is expected to open an e-commerce platform this autumn, and the opening of high-end brand Alexander Wang high-end shopping website stationed in China in the near future will indicate that luxury e-business is becoming the next step for luxury goods suppliers after the traditional sales channels.

But with the intensification of competition, the survival pressure of luxury electric providers is also increasing rapidly.

Luxury electric business "brutal growth"

As early as in 2009, since the luxury electric business website YOOX opened a Chinese shopping platform for Italy's famous brand Emporio Armani in China, the e-commerce of the major brands was as plagued as plague.

E-commerce websites such as Fifth Avenue, vip.com, glamour, and Jiapin are mushrooming, so the industry calls 2011 the "first year" of China's luxury e-business.

Even, some experts predict that the Chinese luxury market in 2012, "its size is expected to exceed Japan's largest luxury trade and consumption center in the world".

With the frequent emergence of luxury goods e-commerce, the scale of luxury goods is rising steadily.

According to data released by Analysys International, China's luxury online shopping scale in the first quarter of 2011 was 2 billion 900 million yuan and 34 in the second quarter.

500 million yuan, an increase of 19%.

The growth rate in the third and fourth quarters will reach 20 respectively.

3% and 32.

5%, the annual turnover will exceed 16 billion yuan.

"Luxury goods in China"

It is at a stage of barbaric growth.

Industry experts believe.

The reason is, "most Chinese consumers are now showing off luxury products.

Psychology.

Shen Dongjun, vice president of China Jewelry Association and CEO, said that the good economy has brought many rich people to buy luxury goods in order to prove their status, which to a large extent stimulated the prosperity and prosperity of the luxury market.

The surging luxury websites also face the test of "the remaining ones are king".

Unable to bear the "heavy" of low price

Despite the rapid development of luxury electric business, it still can not overcome the difficulties faced by China's e-commerce providers in China.

"China's electricity supplier has not yet found a good profit model, which seems to have gone astray too much emphasis on price."

Shen Dong Jun said.

Electricity providers need to use price as guidance to attract price sensitive consumers.

According to the survey of Chinese consumer behavior in 2011~2012, in the 1035 valid questionnaires recovered, 60% of the respondents said they could accept a luxury consumption budget of less than 30000 yuan.

But in fact, more people are positioning the price of luxury electric providers for thousands of dollars.

"Online shopping luxury goods, mainly because of the discount of e-commerce sites, sometimes only a few thousand dollars can buy the luxury of the market price."

Mr. Zhang, who is keen to buy luxury goods online, says.

However, the result of the adoption of price reduction to stimulate consumption is nothing more than a commercial law once again.

According to data, vip.com, which had been fired up for listing, had a net revenue of $2 million 800 thousand, $32 million 580 thousand and 2 in 2009~2011 years and three years.

2 billion 700 million dollars, behind this group of data is vip.com's net loss of 138 over the same period.

07 US dollars, 836.

580 thousand dollars and 1.

07 billion dollars.

Even with the annual sales growth rate of 25%, the annual sales volume will reach 20~30 yuan next year, although it predicts that the annual sales volume will reach 1 billion yuan this year.

"Luxury electric providers are almost at a loss at this stage."

At the same time, due to low price restrictions, in order to reduce costs, luxury electric providers often sell products that are discounted in season, or sell goods in foreign countries by buying goods that are discounted abroad.

"I haven't heard of luxury items coming in from formal channels so far."

Insiders said.

In addition, as Shen Dongjun said, "the problem derived from cheap is the loss of brand personality."

After all, the price of most luxury electric goods sold on the Internet is in the majority.

Compared to luxury stores, "this is nothing more than the price of an accessory".

Take vip.com, the largest luxury goods supplier in the country, as an example. Now it relies mainly on the sales of two or three line brand stocks to maintain its operation. Now, "the two or three line brand continues to extend to the three or four line brand".

Luxury electric business has been seriously disturbed by "low price" and "high cost", and is increasingly deviating from its initial position.

In fact, "luxury is extravagant because it is not owned by most people, and the high price is an important trait."

Shen Dongjun said that with the reduction of the price of luxury goods and the popularization of purchase, it is difficult for luxury electric providers to maintain the unique connotation and uniqueness of luxury brands.

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The consequences of crazy money burn are unpredictable.

Although luxury electric providers are willing to make a "cheap cut" marketing at a loss, there are still a lot of electricity providers coming together, and the result is that more and more competitors are flooding the market.

"Before the industry pattern is stable, competitors will use various means to make themselves stand out in the competition."

Lin Mingkai, general manager of enchanda network, told this magazine.

"At present, the luxury electric business is in the stage of corporate spree, in order to gain higher market share and user reputation, and then earn the money that has been lost."

An insider who did not want to be named revealed that the frustration of "shopping" could only be vigorously promoted by burning money and smashing advertisements.

Once the luxury goods as the positioning of the network, its "burning money" has reached the level of white hot.

In 2011, for example, in addition to the first half of the year, Yang Mi, a popular actress, gave voice to a large number of outdoor media such as the subway.

Online and offline advertising has reached 50 million yuan.

According to Chen Yijia, vice president of Xiu Xiu net, "the luxury electric business is basically in a stage of pure burning money. In 2012, advertising will continue to increase."

Originally faced with a group of small luxury electric providers, with "burning money" for mass media means, and even remote mountain areas are not "let go".

For example, the advertising brand of crazy advertising can be seen in remote mountainous areas.

In addition to filling the pockets of advertisers, the most direct way is Lin Mingkai's saying: "luxury electric providers often burn two thousand yuan advertising, which only brings consumers one thousand yuan of consumption."

Therefore, in a sense, "the more consumers we bring, the greater their losses."

Not only that, for luxury electric providers, besides the large amount of advertising, human resources and operating costs are not cheaper than traditional channels.

"Small to such as the wages of employees, website development, administrative costs and so on, large to a large number of procurement costs, procurement costs and operating costs, warehousing and logistics costs, and so on, the operating costs are increasingly high, to the original burning of more than luxury business providers" worse. "

"If the money is burned, many luxury goods providers will not be able to support them."

Insiders predict that luxury electric business is likely to be like red wine, which can only be integrated by a comprehensive e-commerce website, or the two luxury electric business money has been burned and merged to "survive for a period of time".

The warehouse of luxury goods providers is full of two or three line brands.

Financing "blood pfusion" increasingly fanatical

Frequent burning of "burn money card", if only rely on the strength of the company, can not let luxury electric providers "survive".

This also makes luxury electric providers have to seek external blood pfusion for development.

Lin Mingkai said, "the biggest problem facing luxury electric providers today is the need for more funds to support them."

The financing boom is beginning to flow in the industry.

A monitoring statistics released by China's e-commerce research center last August showed that in recent years, various investment funds involved in luxury electric business have reached nearly 500 million yuan.

For example, when vip.com raised $20 million last year, it quickly gained $50 million from the combined venture capital of Sequoia and DCM.

In March 2011, after being invested in 20 million dollars by Kay Peng Wah, he was awarded $100 million in Huaping and Kai Peng Wah Ying in August.

In July of the same year, Shang pin won $50 million C round of financing.

The most typical example is the Jiapin network, which was founded at the beginning of last year. It has already held the Taishan angel investment fund. After several months, it quickly obtained the second round investment from song wo capital and jiapong capital, and then got the third round of financing of Jinsha River venture capital.

"Huge cost inputs make it urgent for luxury electric providers and many industries in the Internet to rely on capital investment to drive them."

A network executive told reporters.

For investors, it seems to be slowly awakening.

"Although the big environment is playing a leading role in the consumption of luxury goods in China, it does not mean that the opportunity to develop luxury electric business is ripe."

A venture capitalist who did not want to be named was analyzed.

Low price and high cost, hot financing and frequent losses.

These represent the key to the rapid imbalance of luxury goods and electricity providers, so that the luxury electric business has been in a crisis situation since the end of last year.

The collapse of NetEase's Shang pin network, the closure of Huha network, and the stop operation of the product convergence network due to the fragmentation of the capital chain.

Caused panic in the industry.

And Xiu Xiu net has been laid off, and CEO has left behind. This series of people's concussion began to happen frequently, and pushed the luxury electric business to a difficult situation.

But still can be in the edge of the loss of "breathing" luxury electric business, in this battle to continue to increase the horse power, everyone wants to hang on to wait for crazy burning money, with the "leftover return" attitude to win the final victory.