March 6, 2013 1:03 pm

Shangpin taps China’s fashion eshoppers

From the streets of London and Paris to the flagships of Fifth Avenue and the futuristic malls of Hong Kong and Shanghai, the offline influence of wealthy Chinese foot traffic – and its staggering spending power – has underpinned the soaring fortunes of luxury brands.

However, when it comes to the country’s luxury etail industry, which is worth an estimated $3.2bn according to Barclays Capital, it is a different story.

Historically, foreign players have struggled to reach levels of online popularity and patronage with China’s 535m internet users that reflect their bricks and mortar returns. This is particularly true when compared with domestic-based rivals such as deep-discount titan Taobao, which accounts for 79 per cent of all Chinese commerce sales.

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Perhaps this is why attention has turned to a new market segment. According to David Zhao, chief executive of Shangpin, a members-only website offering 80 niche brands such as Stuart Weitzman, Alice by Temperley and Rebecca Minkoff otherwise largely unavailable in China: “Contemporary fashion has huge growth potential here.”

“Chinese customers are becoming increasingly knowledgeable and sophisticated about what they want from luxury purchases – there’s been a shift away from logos and ubiquitous brands to smaller niche labels with an alternative exclusivity factor,” Mr Zhao continues, noting Diane von Furstenberg, M Missoni and Milly by Michelle Smith have proved particularly popular, all accessibly lifestyle brands that lean towards a bold, colourful print-based aesthetic.

“Until 20 years ago, people had one option – a dark, ill-fitting Mao suit – so it’s of little surprise to us that customers are looking to assert their individuality,” says Mr Zhao, adding that the core Shangpin customer base is the young female professional.

Combine their desire for the unknown with the fact that Chinese netizens traditionally scour the internet for bargains rather than full-price purchases, and the underexposed, relatively less pricey segment of the fashion market seems ripe for expansion.

Shangpin launched its full-price website last October having raised $60m in funding from Walt Disney’s Steamboat Ventures and two other international investors. It initially began as a service for 2.4m VIP credit card holders at three major Chinese banks, after Mr Zhao recognised the trust Chinese have in national institutions.

The site gained credibility by association, a crucial asset considering 45 per cent of Chinese eshoppers say they fear products will be exchanged with fakes during delivery, according to a study by Boston Consulting Group.

The company also advises foreign brands with limited local experience on how to establish themselves in China. On Tuesday, it announced an alliance with the Council of Fashion Designers of America that will help both fledging and established US designers by providing business-to-business expertise on marketing and trends, local media exposure, plus translated customer information so brands can learn more about their new client demographic.

“China is of huge interest as a hitherto untapped market to American designers,” says Steven Kolb, chief executive of CFDA. “This new partnership will give members vital insight into the Chinese market, as well as the opportunity to build their brands via online distribution.”

“The geographical scale of the country means that ecommerce in China, much more than in the , is the most effective distribution and marketing platform for smaller designers who want to reach Chinese regions where traditional bricks-and-mortar stores do not exist,” says Mr Zhao.

Indeed, up to 30 per cent of Shangpin’s sales now come from secondary and tertiary cities such as Wenzhou and Kunming, where there is a significant appetite for fashion but limited brand awareness beyond the global giants.

“While competition is fierce, demand from the 21st-century second tier Chinese consumer is undoubtedly booming – there’s millions to be made by winners in the space,” says Sage Brennan, a founding consultant at China Luxury Advisors.

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