Alibaba Group’s online marketplace Tmall has launched a new discount channel Luxury Soho, with huge savings on seasonal luxury items.
Luxury Soho, named after New York’s SoHo district, works in parallel with Alibaba’s Luxury Pavilion, a site created for high-end brands to sell on Tmall. Luxury Soho will increase high-end brands’ digital footprint in post-COVID-19 China.
“Luxury brands have a specific lifespan. Tmall, as the main platform for luxury partners’ digital operation, provides various solutions for different scenarios,” said Weixiong Hu, vice president of Alibaba Group and general manager of Tmall’s apparel fashion business unit.
To maximize the life cycle of luxury products, iconic products and new launches are highlighted in Alibaba’s Luxury Pavilion, while seasonal items with mark-downs can be accessed in Luxury Soho.
Tapestry’s Coach was one of the first brands to join the Luxury Soho channel, offering discounts as high as 70% on its range.
“This strategic cooperation with Tmall will help us to connect deeply with Chinese consumers and show them the unique brand image, products and experience of Coach,” said Coach China CEO and president Yann Bozec.
Other brands to join the channel include Emporio Armani, Hugo Boss AG, Versace, Diesel, La Perla and Calvin Klein.
With luxury goods facing an overstocked inventory due to the economic lockdown caused by COVID-19, Tmall is attempting to capitalise on the oversupply with Luxury Soho, which is basically selling unsold stock without diluting a brand’s identity.
Before the pandemic, luxury brands were mainly unwilling to discount their unsold products, with companies like Burberry even going so far as destroying its unsold items to prevent them from being sold cheaply. However, more and more consumers are becoming conscious of environmental-friendly and sustainable issues after going through the COVID-19 global trauma.
Luxury global brands have recognised this and are embracing — far more than they normally would have before the pandemic — discounting stock as one approach of returning to business. For example, Kering acknowledged that they will be discounting seasonal products later this year in last week’s first quarter earning call.
Alibaba Group in February announced its financial results for the quarter ended December 31, 2019, with Chairman and CEO Daniel Zhang praising “robust growth” and “new heights” reached by its digital economy.
Analysts had estimated revenue of US$22.8 billion but the Hangzhou-based firm generated US$23.2 billion in the quarter, an increase of 38% year-over-year. Alibaba also posted net income of 50.1 billion yuan (US$7.2 billion), a 62% year-over-year growth.
The company also revealed that the total annual active consumers on its Chinese retail marketplaces reached 711 million, an increase of 18 million from the 12-month period ended 31 September 2019.
“Alibaba Group experienced robust growth across our business this past quarter,” said Zhang. “Continued investment in user engagement, especially through social commerce content, contributed to our strong gains in annual active consumers.”
In the coronavirus pandemic, Alibaba has grown its presence in the US and Europe, particularly in Italy and Spain. Alibaba Group’s logistics arm Cainiao is building an US$82 million massive logistics centre in Belgium, which connects to a new freight train line from China. Former CEO and founder Jack Ma and Alibaba Group’s charitable arm has shipped through AliExpress more than 40 million items of personal protective equipment to 150 countries. It also pledged to give 101 million masks to the World Health Organisation.