Chinese online market provides plenty of untapped potential

The Chinese online market is rapidly growing. In 2012, it generated a turnover of 39 billion euros and experts predict that amount will have tripled by 2016. However, only 41 percent of all luxury brands in China are active online and experts say that the brands

that do have an online presence, are making mistakes in their efforts to reach consumers.

Last year an estimated 564 million of the 1.35 billion strong Chinese population had access to the internet. Of that group, 242 million placed an order online. Thanks to the increased popularity of smart phones and tablets (the most common way to gain access to the internet in China) it looks like that number will rise significantly within the near future.

On paper, that gives clothing retailers enormous opportunities. And yet, both local and foreign retailers are having trouble entering that market. The cause is twofold. First of all, the largest portion of apparel that is sold online consists of copies. 360buy and Taoboa - China's version of eBay - achieve record sums with the sale of copies of the big brands.

With an annual turnover of 7.6 billion euros, the latter is China's biggest e-tailer. Consumers are therefore afraid to place orders with a web shop, fearing they may receive a fake.

Big online opportunities in China

The Japanese brand Evisu, which is building a name for itself in China, therefore uses its web shop more as an online look book than as a retail channel. The company has only been active in China for two years and, last year, generated a turnover of 49.8 million euros. Only 20 percent of that amount was derived from online sales.

"Our web shop has two goals," Tommy Zhao, CEO of Evisu China, tells WWD. "Our first goal is to show consumers from remote areas our products. The second goal is information. We want to keep our consumers abreast of our new collections. But if consumers want an item, they still come to our physical store. It's difficult to trust web shops and reproductions are one of our biggest problems."

Morton Severon, general director of Otto's subsidiary web shop KeenOn Fashion, acknowledges the problem and therefore wants to build consumer confidence off line first. "We need to begin with the consumers," Severon tells the news site. "The consumers now find themselves in the old world and we need to pull them into the new world. Chinese consumers are going to spend more and more time online in the coming years, which will eventually allow us to decrease our off line presence and grow online."

The Digital IQ Index China by L2 Think Tank further shows that existing web shops by international brands are making errors in China with regards to digital marketing. According to the Jing Daily, 67 percent of the brands scored 'weak' and not one brand was categorized as 'excellent'.

According to the researchers, innovation is sorely needed. The current luxury brands make too little use of new technologies and Chinese applications, which means they prevent themselves from reaching the Chinese market. Even the official websites have yet to be optimized for Chinese consumers.

Often heard complaints are that the websites take too long to load, that they lack international allure and are poorly translated. Only a handful of brands hosts its website in China or has an ICP certificate; the key to appearing high up on the list on Chinese search engines.

Above all, only a very small group of brands offers Android apps, while no less than 90 percent of Chinese mobile users uses this system. Furthermore, none of the existing applications are available in Chinese.

Fifty-two percent of the websites is not even suited to mobile phone use, while this is China's primary source for access to the internet and therefore an area of major potential growth. In the first half of 2012 the Chinese mobile shop market increased by no less than 488 percent to 1.9 billion dollars.

Currently, Burberry best meets the needs of the Chinese market. The brand is one of few to make use of Chinese social media such as Weibo and tries to attract customers to its off line stores with giveaways. The fashion house recently also collaborated with Jiepang, the Chinese version of the check-in application Fourquare.

Louis Vuitton is also in the running with a Chinese campaign From Paris to Shanghai to celebrate the opening of its store in Shanghai and Chanel scored extra points thanks to its collaboration with the Chinese actress Zhou Xun. But having one's own website geared towards the Chinese market like Coach does and publishing a Chinese version of one's magazine as Dior did, are prerequisites for brands who want to build more consumer confidence and make use of the potential in the Chinese online market.

Images: Burberry