Selling luxury goods online - the Chinese marketplace

China is the world's largest digital retail market, with shoppers emptying their bank accounts to purchase retail goods, clothes and technology. Last year alone this spend amounted to of RMB 1.3 trillion ($190 billion). In addition, the sale of luxury goods is skyrocketing, with the Chinese becoming known as the largest consumers of luxury goods on the planet.

But these two trends do not run side by side. The country's high import tax on foreign luxury goods puts off Chinese shoppers, while online sales have a perception of being for discounted products only - with luxury brands reluctant to collaborate with such web sites.

Zia Daniell Wigder, vice president and research director at Forrester Research, explains: "In some ways the opportunities seem to be like the perfect storm. You've got luxury goods sales increasing rapidly in China, you've got e-commerce sales increasing rapidly in China, but there are a few factors impeding the growth of luxury e-commerce in China."

Tapping into the luxury market

Selling full-priced items online just doesn't seem to work for Chinese brands. China's most popular retail platforms offer discount services so shoppers can scoop bargains; selling full-priced items just doesn't seem to attract the same market. Furthermore, counterfeiting is a big problem; Amazon China - a seemingly reputable brand - was caught selling counterfeit items at the end of 2010, erasing any trust shoppers had for big sites, let alone the smaller players.

According to Lu Zhenwang, CEO of Wanqing Consulting, cut-price luxury sites just can't make their money back due to the type of shopper they attract.

"Major consumers for online luxury shopping are new white-collar workers. They want to buy a purse, but at the same time don't want to spend a lot of money. And it will be a while before they shop again. So the costs are very high," he said.

Importing goods

As a result, a lot of Chinese shoppers buy their luxury goods abroad, with more than $80 billion worth of purchases recorded last year. In fact, of the luxury purchases made by shoppers last year, two-thirds were made outside China.

In addition, overseas retail agents called 'daigou' can help circumvent import duties, ensuring luxury goods from around the world - including the UK - are hot property. Quite simply, Chinese luxury shoppers send money to agents who purchase products outside of China that are not available domestically or are too expensive. They can operate between Hong Kong and China or internationally; New York, London, Paris, Tokyo, Seoul to name but a few.

These agents are legal if items are properly declared and import duties are paid; many do not pay and risk the wrath of Chinese law. However for some shoppers, the reward outweighs the risk.

For regular eBay users, China's rise to ecommerce power may have gone unnoticed. In fact, sellers may have sold and sent luxury goods to daigou agents without even knowing it. The next time you send a parcel of luxury goods domestically or internationally to a buyer, just think; it might actually end up heading to the other side of the world.

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