One of Net-a-Porter’s best-selling items in China right now is a studded Valentino bag that costs $2,489.
The luxury retailer wants to sell a lot more of that kind of fashion item in the growing Chinese market, and it has tapped the country’s biggest e-commerce company, Alibaba, to do so.
Yoox Net-a-Porter and Alibaba (BABA) are establishing a joint venture to launch two mobile apps for Chinese customers, one for Net-a-Porter which caters to women, and one for Mr. Porter which sells men’s fashion.
Net-a-Porter and Mr. Porter will also launch online stores on Alibaba’s shopping website Tmall. The companies didn’t say when the apps or the online stores would go live.
Net-a-Porter launched a Chinese version of its website in 2013 before it merged with Yoox in 2015. Swiss luxury conglomerate Richemont (CFRHF) gained control of the combined company earlier this year.
Richemont Chairman Johann Rupert acknowledged that teaming up with Alibaba gives the group access to a better platform in China.
Yoox Net-a-Porter “is continually upgrading its own systems, but now we’ve got to look at systems that are quite frankly so advanced to the rest of the world,” Rupert said on a conference call Friday.
“I told [Alibaba CEO] Mr. Daniel Zhang we need a gear box, because if we’re in second or third gear, you can’t shift into fourth without synchronicity in the gear box,” he said.
Alibaba has an extensive gear box.
It sells everything from laptops to groceries on its Taobao and Tmall websites. Last year, it launched a luxury site on Tmall, offering products like high-end clothes and fancy cars from brands including LVMH (LVMUY), Burberry (BURBY) and Maserati.
China luxury market shrugs off trade war
Chinese consumers accounted for more than a third of the global luxury market last year, according to consulting firm Bain & Company. China is also expected to make up the lion’s share of market growth in 2018.
Luxury sales have powered ahead despite weaker economic growth in China and the country’s trade war with the United States.
Reaching China’s online shoppers often requires teaming up with local players. Yoox Net-a-Porter rival FarFetch last year partnered with China’s second largest e-commerce company, JD.com (JD). Retailers like Dior and Givenchy have had flash sales or opened stores on Tencent’s (TCEHY) hugely popular social media platform WeChat.
Yoox Net-a-Porter’s venture with Alibaba will tap into the Chinese company’s sprawling logistics network and affiliated payment platform, Alipay. The luxury retailer has an established network in Europe and the United States, but it has struggled with delivery to mainland China, according to Alibaba President Michael Evans.
Yoox Net-a-Porter “built its brand and reputation by having an internet capability that is really second to none,” Evans told reporters. “Within China that got slowed down a bit” because the company was shipping packages from Hong Kong or London, he said.
Storing those Valentino purses at an Alibaba warehouse will certainly make for faster shipping in China, but it will remain out of reach for the vast majority of the country’s population. The bag costs more than double the average monthly salary of an office worker in China.