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China’s limitless potential for online luxury

There’s an unprecedented opportunity in China’s online luxury market, according to a new report.

Research firm Observer Solutions said there is huge potential awaiting online luxury brands and retailers in China as the nation’s booming e-commerce growth is converging with the luxury market.

China became the world’s largest consumer of luxury goods in 2012. Likewise, the nation will surpass the US to become the number one e-commerce market by market size later this year.

With the Chinese government supporting ongoing improvements to online shopping ‘ecosystem’, including development of online payment safety and logistics capacity, China’s e-commerce market will continue to grow at double digit rates over the next three years, the report predicts.

Also, with China’s 242 million online shoppers on track to increase rapidly in conjunction with the overall increase in Internet users, luxury brands and retailers should consider e-commerce a vital component of their China expansion plans.

Observer Solutions found out that Chinese consumers are willing to make ‘big-ticket’ purchases online, hence, luxury e-commerce has significant growth potential.

The research firm said the Chinese e-luxury sector has exploded since 2011, with growth rate continuing to increase, registering 71 per cent growth in 2012.

Western luxury brands have executed well in first tier cities like Beijing and Shanghai, however, there is tremendous unmet demand in China’s lower-tier cities. Relying on traditional bricks-and-mortar stores is a costly and time-intensive strategy for inland China expansion. Thus, the online channel is the only viable way to reach these consumers today.

Furthermore, data suggests that nearly 70 per cent of Chinese consumers are open to luxury shopping online.

The barriers to shopping for luxury online are concerns about product authenticity and quality. Nearly 50 per cent of Chinese consumers worry that the luxury products they find online are not genuine merchandise.

Therefore, earning consumers’ trust is a critical challenge for online luxury brands and retailers. They need to guarantee product authenticity and deliver a meaningful customer experience.

Despite the risks associated with product authenticity and quality, luxury consumers are still motivated to shop online due to larger selection, greater product availability and ability to compare prices.

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