Alibaba unveils 'Luxury Pavilion' courting super-wealthy Chinese

Chinese e-commerce giant Alibaba Group has launched the Luxury Pavilion, a brand new section within its business-to-consumer site Tmall for premium and luxury brands. The initiative is part of a broader bid, according to Alibaba’s news site Alizila, to push forward its new retail initiative in the luxury arena to reach out to the country’s super-wealthy online shoppers.

The new platform currently features a wide range of products including apparel, watches, beauty and cosmetics, and luxury auto from brands such as Burberry, Hugo Boss, Maserati, and the LVMH-owned brands Guerlain and Zenith. Notably, these labels have already had flagship stores on Tmall.

The timing of the launch of Luxury Pavilion is interesting considering that the country’s second-largest e-commerce company, JD.com, recently announced it was speeding up its foray in the luxury industry with a partnership with Farfetch. In June, JD.com invested $397 million in the leading British luxury e-commerce platform, and the new partnership welcomed its first comer, Saint Laurent, the high-profile French luxury label owned by the Kering Group.

Patrice Nordey, the Founder and CEO of the Shanghai-based luxury consulting firm Velvet Group, said the project follows the investment of Alibaba into Mei.com in July 2015.

“The deal between Alibaba and the fashion private sales company included the development of a luxury platform,” Nordey told Jing Daily over email.

Part of the team of Mei.com joined Alibaba to prepare the launch of Luxury Pavilion.

Alibaba invested more than $100 million in the flash sales luxury site Mei.com in July 2015.

Banking on exclusivity

As evidence that “exclusivity” is a highly important element for Chinese luxury spenders, Alibaba has made Luxury Pavilion an invite-only platform. According to Jiemian, a domestic media site, out of Tmall’s 500 million total users, it selected a limited number of consumers who are either ultra rich or are members of APASS (a Tmall members club for top online shoppers based on their annual purchasing records).

“Exclusivity is key to this project,” Nordey said, “hence the invitation-only business scheme to onboard luxury brands on the platform.”

The entry-point to the online Pavilion, which is located on the Tmall website, is only viewable to this select group of customers. However, while the front-end of the new luxury area is separate for consumers, the back-end will be connected to the Tmall platform, allowing the company to fully leverage synergies, such as traffic building.

A customized shopping journey

The Luxury Pavilion also aims to offer a customized shopping journey to users. Alibaba told Alizila that the new platform is nothing like the current Tmall and Taobao Marketplace that are still mass-facing. Based on the personal information of consumers, it will create personalized homepages, customized brand pages, product recommendations, exclusive VIP awards and individual post-purchase customer service to align buyers’ expectations with luxury brand offerings. The new platform will also be more interactive, imitating the real in-store shopping process, thanks to advanced technology such as augmented reality (AR) and virtual reality (VR).

Testing a ‘new retail’ model

The Luxury Pavilion ultimately attempts to test out the “new retail” business model, an innovative concept that has been engineered by Alibaba in recent years and utilizes new technology to deliver a more tailor-made and interactive shopping experience to consumers from online to offline (O2O).

“Luxury brands increasingly want to use new retail technology and consumer insights to connect with younger consumers, as well as drive business-model innovation,” Liu Xiuyun, the head of Tmall’s fashion unit, said in a statement.

Alibaba will provide brands on the platform with a number of marketing and branding tools that allow them to effectively engage with Chinese consumers and connect online sales to offline commerce.

After its summer warm-up period, the Luxury Pavilion plans to organize a grand opening by the end of the year.