Alibaba: The Biggest Threat To Luxury Industry In Europe?

No one thought that the Alibaba, which had been rejected by the luxury industry three years ago, has now become the sword of Damour Chris on the head of the major brands.

Johann Rupert, chairman and chief executive of Cartire's parent group, has long anticipated this. He once said at an event organized by the financial times that the comprehensive strength of the European luxury industry will be overtaken by technology giants such as Amazon, Google and Alibaba one day. It is more sincere to invite LVMH and Kai Yun group to form an alliance to cope with the upcoming wave of electricity supplier, but it has not attracted enough attention.

Although the prediction of Johann Rupert is not fully fulfilled, it is half of it.

Amazon today has entered the fashion industry and has made a startling growth, but still lingers on the edge of luxury goods. Alibaba is the only one who really entered the luxury industry. In 2017, the Amazon launched the Luxury Pavilion, a luxury e-commerce platform, and the Western luxury industry recognized Alibaba as the biggest threat.

At the same time, competition among European luxury electric providers is becoming more and more intense.

Last year, the Group invested 2 billion 800 million euros to buy Yoox Net-a-Porter, the world's largest luxury electronic business platform, and sold Farfetch in New York. At present, it has a market value of $5 billion 300 million, and is launching a new round of "luxury fashion enclosure movement".

More and more luxury executives have realized that the US and Chinese technology giants who enter the luxury industry will really jeopardize the dominance of European luxury goods industry.

The loss of consumer control

What worries European traditional luxury brands is the loss of control over consumers.

In the social media key opinion leaders and the big business platform's "spoiler", high quality luxury brands suddenly found that the market share firmly held in their hands is being carved up by "outsiders", and everything is testing the strain ability of the old European luxury goods.

Back to the luxury itself, a rare product that few people can buy or get, because of high profit and entry, it has a high sensitivity to the rise and fall of the economy. It mainly originated from Europe. With the expansion of consumer groups, it has developed into a global industry.

Affected by the economic shocks in 2008 and the continuing global geopolitical shocks, the European luxury industry was once enveloped in a pessimistic atmosphere. Consumers were discouraged from selling Louis Vuitton handbags priced at 2000 euros and Gucci sports shoes priced at 700 euros.

After maintaining its relative stability for nearly 20 years, the luxury fashion industry seems to be undergoing a disruptive pformation as some operators of traditional power systems have withdrawn.

In the face of different difficult challenges, there are different factions in the industry. One is the multi brand luxury group represented by LVMH and Kai Yun. One is the independent luxury brand which takes Chanel and Hermes as its typical example. The third one is a family run luxury brand with Salvatore Ferragamo and Tods as an example.

But the real turning point is that in the 2016, Millennial consumers began to enter the society and have their own economic autonomy. The luxury industry has been dominated by consumers from the brand leadership before, and the emergence of the new competitors has made it difficult for the future of the industry. The luxury industry that has passed through the winter has ushered in a big reshuffle while ushering in a new round of growth.

Among them, the most successful development at this stage is the two giants of LVMH and Kai Yun group. Under the escort of multi brand matrix, the growth of these two groups' income has resumed growth since the second half of 2016 and led all the way. In the third quarter of fiscal 2018, double-digit growth has been recorded, mainly due to the strong purchasing power of Chinese consumers.

Chanel first disclosed its brand performance for the first time last year. Its total sales in fiscal year 2017 rose 11% to 9 billion 620 million US dollars, or 8 billion 300 million euros, operating profit of 2 billion 690 million US dollars, net profit of 1 billion 800 million US dollars, and total turnover exceeding Gucci and so on, competing with Louis Vuitton.

With the support of Chinese consumers, Hermes has also maintained a steady growth in revenue, and sales in the third quarter increased by 9.4% to 1 billion 460 million euros.

Salvatore Ferragamo, Tods and Prada, such as family luxury goods group, are restricted by their own management mode and fail to respond to market changes in time. At present, they are still in the throes of pition. The sales performance that has not been improved has made the brand itself fall into a rumor that it will be forced to sell.

In this regard, Salvatore Ferragamo chairman Ferruccio Ferragamo admitted that he had approached private equity funds and a French luxury group, but reiterated that she would not sell shares in family businesses. Tods CEO Diego Della Valle and Prada chief executive Patrizio Bertelli explicitly excluded the possibility of selling family businesses.

What it means is that the family Italy luxury brand Missoni and Belgian designer brand Dries Van Noten, which once emphasized never to sell, were changed hands last year, respectively, by the Italy private equity fund and the Spanish perfume group Puig.

In addition, the luxury goods group in the United States is also growing. The most representative Coach and Michael Kors have been buying through the past two years, trying to accelerate to the first tier luxury group such as LVMH.

In May 2017, Coach spent $2 billion 400 million on the acquisition of Kate Spade, the US luxury handbag brand, and was renamed the Tapestry group.

A year later, Michael Kors suddenly announced a $2 billion 100 million takeover deal with Italy's luxury brand Versace, and will be renamed the Capri group, which bought the British luxury brand Jimmy Choo for 1 billion 200 million US dollars earlier.

In the increasingly important Chinese market, investors holding solid capital are also trying to get a slice of the luxury cake. Shandong Ruyi and Fosun have taken the Swiss luxury brand Bally and the French luxury brand Lanvin and so on, which has attracted the attention of the industry at home and abroad.

In fact, with various mergers and acquisitions, the days of European rule in the luxury industry have long ceased to exist, and the boundaries between countries have become increasingly irrelevant.

However, some people in the industry pointed out that luxury fashion brands face three challenges if they want to achieve greater growth. That is, the new generation of consumers will gradually form personalized fashion awareness, declining purchasing power and changing preferences.

According to McKinsey's latest report, the growth rate of the global fashion industry will slow to 3.5% to 4.5% in 2019 after a brief recovery, slightly lower than in 2018.

The report also stressed that Britain's off Europe and the global economic slowdown will begin to permeate the fashion industry.

In the global economic situation is not optimistic about the environment, a new round of shock has begun to emerge, the luxury industry can not be alone.

New winners in the concussion

Obviously, the "big shuffle" of the latest luxury industry has spread to a wide range, but the "water level difference" caused by the constant concussion has created new business opportunities for new players, especially the third most important e-commerce platforms at the beginning.

When luxury magnates are still sticking to the battleground, European Yoox, Net-a-Porter and Farfetch, eBay and Amazon in the US, and Alibaba and Jingdong in China first got the first gold in the online market in early twenty-first Century.

After forming a more stable business mode and grasping most of China's online fashion resources, Alibaba has begun to anchor its head towards luxury brands since 2015, and the pace of expansion is accelerating.

According to public information, Tmall international has introduced nearly 19000 overseas brands of 3900 categories in 75 countries in the past four years, of which more than 80% are the first to enter China, and have become the preferred platform for international brands to enter the Chinese market.

Up to now, there are more than 80 brands including Valentino, Versace, Burberry, Zegna, Marni, Stella McCartney, Tod 's, MCM and Moschino, etc., which have been placed in s, covering heavy luxury to light luxury, spanning clothing, leather goods, cosmetics and watches.

Not only is the platform of LVMH, the world's largest luxury group, but also the relationship between Tmall and Kai Yun group is easing. The group's three largest luxury brand, Bottega Venetta, was officially settled in December 28th last year.

On the user side, the platform now has nearly 100 thousand years of consumption of more than one million high-end members, of which 28 luxury brands received a mean number of 6 million 500 thousand growth in the number of consumers, the largest increase in the brand gained about 30000000 consumers, only the luxury brand consumer assets increased by an average of 64.9%.

However, three years ago, Alibaba was once in a desperate dilemma.

In 2016, Alibaba was unanimously resisted by luxury brands. In the two days before the scheduled time, founder Ma Yun was forced to cancel the keynote speech at the IACC spring conference held in Orlando, USA, and Alibaba's membership in the international anti fake alliance was also cancelled.

Some members of the international anti counterfeit alliance pointed out in a joint letter that Alibaba's Taobao platform had a thriving and huge gray market, specializing in the sale of unauthorized goods, which can be said to be more serious than the problem of fake goods. Many luxury fashion brands had long been against Alibaba.

But there are also foreign media analysis that luxury fashion brands can not solve their fake and shoddy problems in online shopping in China by refusing to talk with Alibaba. If they want to solve the problem, there seems to be no better way to cooperate with the Chinese e-commerce giant.

Robert Bachs, chairman of the international anti fake alliance, also suggested that you should not miss the opportunity to fight with Alibaba.

L2, a digital research firm, pointed out in its report that luxury brands could not control Alibaba's search results. Even though they opened stores on the Tmall mall of Alibaba B2C platform, some unauthorized sellers who wanted to crack down on luxury brands tended to dominate.

Facing the aggressive boycott protest, Alibaba chose to face the attack, set up the AACA anti fake alliance in January 2017, and obtained 20 brand platforms such as Louis Vuitton, SWAROVSKI, Shiseido and di su.

In September of that year, AACA set up an advisory committee as a "think tank" to provide ideas and solutions for "dealing with fake commodities like drunk driving".

As of last August, AACA members of Alibaba's counterfeiting alliance have broken through 100 places, from 16 countries and regions in the world, covering 12 industries including luxury goods, jewelry, clothing, intelligent equipment and so on.

Over the past year or so, the counterfeiting Union has broken up 247 counterfeiting and selling bands, helping the law enforcement agencies to capture more than 300 people, involving nearly 1 billion yuan.

Some analysts have pointed out that cooperation between Louis Vuitton and AACA will undoubtedly play a strong role in luxury brands and international fashion brands.

As the first luxury brand for Ma Yun's platform, Louis Vuitton said that the reason for choosing cooperation with Alibaba is Alibaba's big data and the offline resources of public security, industry and commerce, quality inspection, food and drug administration.

In an interview with fashion headline, Liu Xiuyun stressed that behind Tmall's trust and rapid growth in the luxury industry, it is inseparable from the support of new technologies and big data, which is also a fatal flaw in traditional Western luxury brands.

For luxury brands, Tmall, which sits on nearly 500 million high-quality users, is like an accurate pmitter. Through Tmall's intelligent analysis of consumers' data in different scenarios, the lifestyle of consumers can be better understood. Luxury brands can better understand the target customers and turn the data into the greatest commercial value.

"60% of the active consumers of Tmall are less than 30 years old. They love to try new things, and innovation is very important," Liu Xiuyun pointed out. "Tmall will better communicate with young consumers through innovation, especially in the field of luxury consumption."

Data show that 80% of luxury goods stores are concentrated in the top 15 cities in China's GDP. However, only 25% of the wealthy people who live in luxury goods live in these cities. The mismatch between supply and demand makes it urgent for luxury brands to embrace young consumers with online platforms such as Tmall.

But surprisingly, the growth of Alibaba in the current growth momentum of the most fierce Gucci eyes do not have much temptation, brand CEO Marco Bizzarri in the interview with the financial times clearly stated that "it is better to wait for risk than to wait, we are still in wait-and-see condition."

In the view of Marco Bizzarri, Alibaba and Jingdong really cover most of the resources of China's electricity supplier market, but joining the third party e-commerce platform will dilute the most important uniqueness of luxury brands, which is not a risky business.

Chanel fashion President Bruno Pavlovsky also said earlier that the brand still has a conservative attitude towards the electricity supplier. Brand clothing and handbag business do not consider online sales for a long time. The physical store is the best medium for luxury brands to connect consumers.

He stressed that if every commodity is presented directly to everyone, the luxury will lose its unique feeling and the ultimate consumer experience.

Chanel also hopes that with the help of related technologies, consumers can book products online and try to buy them in physical stores.

There are people in the industry that, like Gucci and Chanel, behind the brakes on the electronic business platform, on the one hand, in order not to expose the brand too much, and at the present time, these luxury goods have large scale of physical stores. If the radical business expansion is adopted, the physical stores will become a huge burden, and luxury brands have to be vigilant.

Reducing dimension and cracking down on luxury brands

The luxury war has been raging in full swing. Market investors are worried about whether Chinese consumers can continue to support the industry's ambitions. Alibaba, which has more than 600 million active users, undoubtedly holds the core of the global luxury industry.

What is more alarming to the industry is that Alibaba, which has already been leading, has never relaxed.

While competing with the giants for luxury brand online resources, Alibaba's target in recent years has gradually shifted to overseas markets. It has acquired Pakistan's Daraz and Lazada.

In October 26th last year, Alibaba succeeded in winning the "Yoox Net-a-Porter". The two sides will set up a joint venture in China, and Net-a-Porter and Mr Porter will enter Luxury Pavilion.

At the end of last year, Bloomberg quoted sources as saying that since July, Germany's largest electricity supplier, whose stock price has dropped more than 50%, has become Zalando's new acquisition target of Alibaba.

If Alibaba can bring Zalando into its pocket, it means that luxury brands will have to get around this platform even harder.

For Alibaba, which is developing at a high speed, Yoox Net-a-Porter, as the first batch of luxury electric providers, has the cooperation resources of the world's top luxury brands and the huge user group in the overseas market.

Zalando has more than 25 million of European consumer data and more than 2 billion 500 million of Web site visits per year will make up for Alibaba's blind spots in the European market.

In addition, the magazine's way of thinking, which is initiated by Net-a-Porter, will help to form a joint effort with the Luxury Pavilion, which wants to expand the fashion content sector.

The latter also worked with Vogue China Version of Vogue clothing and beauty last year to launch weekly featured theme columns.

Not only does the electronic commerce layer encircle and suppress the luxury brands, Alibaba also tries to get more breakthroughs from the technology side to better serve the luxury brands and increase the stickiness of the industry users.

In May 2018, Alibaba produced about $20 million, or about 128 million yuan, to invest in luxury online wholesale technology company Ordre, which was jointly established by Simon P Lock and its wife, BAZAAR Kirsten modeling director, in 2015. Now it has 2700 fashion retailers, including Sax Fifth Avenue boutique department store, Lane Crawford and Barnes New York boutique. It also works with 156 luxury fashion brands such as Stella McCartney, Proenza Schouler, and McCartney.

In terms of business mode, Ordre mainly provides three kinds of digital services, namely, immersive live show, image capture technology through virtual reality technology, 360 degree model clothing display and fashion retail data analysis.

The company not only sells goods directly to consumers, but also supports designers, brands and other retailers in the online virtual exhibition hall.

It is reported that Ordre's technology will soon be butted into Luxury Pavilion, aiming at Tmall's 500 million high-quality users after screening big data.

For the Alibaba, Simon P Lock pointed out that the investment will be used to accelerate the development of cutting-edge technology to help cooperative designers better carry out the fashion business, while Ordre's digital services will also be applied to the rapidly growing Chinese luxury market.

Liu Xiuyun said the move consolidated the group's influence in the global fashion industry and hoped to create a new growth engine.

Some analysts believe that Alibaba's leading move to invest in fashion technology company Ordre is conveying a signal that the group has further invaded luxury business.

Betting technological innovation to optimize service experience is the core advantage of Alibaba's electricity supplier.

It is noteworthy that Jingdong, a competitor of Tmall, has also accelerated the expansion of luxury business in recent years, and has constantly upgraded the fashion war.

According to fashion headlines, Jingdong invested $397 million in Farfetch in June 2016 and became one of its largest shareholders. At the same time, Liu Qiangdong, chairman and chief executive officer of the board of directors of Jingdong group, joined the Farfetch board.

Six months later, Jingdong launched the luxury service platform TOPLIFE for benchmarking Luxury Pavilion. Although the opening hours were relatively late and the number and depth of cooperation brands were not as good as those of Tmall, Jingdong was trying to find a breakthrough through capital and technology strength.

In October last year, Jingdong also separated the luxury business from the men's luxury department and set up the luxury department of the two tier department.

At the same time, Jingdong's luxury platform TOPLIFE, after attracting several luxury brands, plans to control the number of brands within 100 stores in the year to break the supply chain and industry side of both sides.

The e-commerce platform believes that the cooperation with luxury brands should not be restricted to the "surface" business, but can be integrated into the integrated supply chain, so that brands can reach the precise customers through e-commerce channels.

Amazon, which has yet to take a favorable position in the Chinese market, is beginning to feel anxious. Last month, it decided to launch the "fashion +" project to help Chinese fashion sellers better develop their overseas fashion businesses and create their own brands through their platform, covering five major categories: clothing, jewelry, bags and so on.

Amazon will integrate its global fashion resources with Chinese market resources, and set up a fashion category seller's exclusive service team to provide customized services for sellers of different types and stages of development.

Some people in the industry say that behind the acceleration of the invasion of Alibaba, Amazon and other electronic commerce giants, the DTC mode is shaking the entire luxury market. Although the luxury shopping experience has traditionally taken place in the physical stores, with the reduction of the global price gap and tariff relief, the number of consumers aiming at buying more favorable luxury goods is decreasing.

In a newly released report, HSBC stressed that Apple mobile phone sales in China would not be a slowdown. The next affected brand may be the luxury handbag products such as Louis Vuitton. If the relevant brands want to get a new breakthrough in 2019, they may only bet on more flexible business channel, or increase investment to establish their own full channel supply chain.

In a summary, Morgan Stanley wrote, "when the economy is not booming, luxury consumers will be able to shop more than three stores, while brands with more exclusive sales channels and superior brands will always stand out."

Citibank and European investment bank chairman Luigi de Vecchi believe that Alibaba is most worried about the luxury industry. According to the fashion headline monitoring, the total market capitalization of Europe's three largest luxury goods groups LVMH, Kai Yun and Li Feng is about $267 billion 200 million, while Ali Ba Ba is up to 400 billion US dollars, which is 1.5 times the total of the top three.

In order to please young people, luxury brands, once regarded as eternal symbols, have become a changeable fashion brand.

In the constantly changing industry of luxury goods, the greatest threat should be "unpredictability".

Obviously, "outsiders" are in the firing line.