JD.com on taking luxury retail online in China

At the tail end of 2017, Chinese eCommerce giant JD.com launched a dedicated app for luxury retailers. This exclusive channel is miles away from the hustle and bustle of traditional Chinese eCommerce, of which 90% of the marketshare is taken up by JD.com and competitor Alibaba’s Tmall marketplace.

JD.com started out as a bricks & mortar store selling electrical goods in Beijing back in 1998, before launching online in 2004. It is now the largest retailer in China reporting $55.7 billion revenue in 2017 and 301 million customers. Increasingly, JD.com is seeing its marketplace business as a way to offer more products to Chinese shoppers, with a zero tolerance for counterfeit goods.  

Toplife is JD.com’s dedicated luxury marketplace app. The 30 brands on Toplife have their own mini-stores on the app, providing them with a channel to communicate with Chinese consumers. Brands on the Toplife site currently include Alexander McQueen, Oscar de la Renta, Armani and Mulberry, while Burberry is currently in talks to join in the near future.

But Xia Ding, president of JD international fashion, who also heads up Toplife, says she wants to be working with at least 100 brands by the end of 2019.

“Luxury is not just about fashion, it’s a lifestyle,” she tells a small group of journalists who have made their way out to China to learn more about JD.com. Ding says she wants Toplife to soon feature more cosmetics and home items – it already has Dyson on board – while also selling virtual services such as high-end travel.

Luxury warehousing

Nearly all of the 30 Toplife brands use JD.com’s luxury warehouse to store their goods in China. Essential Retail visited the Toplife warehouse before interviewing Ding, and the first impression was surprise at how a warehouse could feel luxurious.

Compared to the highly-automated warehouse seen earlier on the tour of JD.com’s logistics operations, Toplife’s warehouse could not feel more different: a red carpet lines the entrance of the black marble flooring and a chrome furnishings are the focal points of a comfortable seating area and boardroom which welcomes guests inside before venturing on towards the storage area. Even the bathroom is luxurious – another surprise for a warehouse on the outskirts of Shanghai, trust us.

But Ding says the look and feel of the warehouse is only one way to make brands feel JD.com is serious about luxury – the most critical part is the technology built into the warehouse.

“Facial recognition, double-door security, humidity control – that’s what they really pay attention to,” she describes. “I wouldn’t pay attention to the sofas, but the technology behind it.”

White-glove delivery

Only 10% of brands choose not to use JD.com’s luxury warehouse – because they have their own warehouse operations in the country – but Ding says 100% choose to offer their customers JD.com’s luxury “white-glove” delivery service.

Customers who order from Toplife will receive their beautifully wrapped parcel from a handsome, white-gloved delivery man who arrives, not on bike like the rest of JD.com’s online orders, but in a premium black car.

The white glove delivery service started with three Chinese cities and within three months expanded to cover nine, with plans to upscale to a further six. For regular JD.com orders, speed is of the essence – seven years ago the eCommerce giant began offering same-day delivery on orders placed before 11am – but according to Ding, with luxury the urgency for speed decreases. She explains that customers tend to order for a timeslot they will be in to receive their order, the average of which is valued at 10,000RMB (£1,169).

“People don’t ask for [the item] to be shipped right away, only 60% request this. They want that superior service to present it to them personally, not to a family member when they are not there.”

Ding describes how when she first looked at the top-line numbers she was impressed with the number of orders, but concerned that the deliveries didn’t match JD.com’s delivery KPIs. “Because half of our customers delay the shipment,” she explains.

“They want this handsome guy to turn up, so they can show their wife that they bought this expensive bag for her. Speed is not top, but service and the way products are presented, and the returns process – that’s what really matters.”

While the white-glove delivery isn’t widely scaled out as yet, products on the Toplife app are available in 56 cities across China, which Ding believes is impressive considering luxury brands have struggled to penetrate smaller cities in China independently.

“There are a lot of wealthy people there, but the brand doesn’t have the economy of scale to open up a store in a lower-tier city.”

Luxury going online

This is where Ding and her team of 40 believe they can bring luxury brands from around the world to China’s dense population.

But it hasn’t been easy. Luxury brands have struggled to go online in western markets, never mind in China where eCommerce is dominated by two huge players. But Ding also points to internal organisational issues as a reason luxury brands are taking their time to digitise.

“The discussion they’re facing is ‘how are we going to organise this?’” she says. “It takes a long time for luxury brands to make a decision and internally they need to figure out how to do it.”

Luxury brands are also more worried about damaging their brand by making a mistake with digital commerce. And in China, where fakes are all-too common, JD.com’s wider business has already put in place checks to weed out fake sellers across the business.

For those brands who have yet to set up a .com website in China, Ding says Toplife allows them to “dip their toes into the water to see what is going to happen before they take another step”.

“They have a lot to worry about when the brand is 100 years old,” she explains. “They think one thing they do wrong is going to destroy their empire.”

The business recently completed an online pop-up store for Fendi which Ding says had “a billion concerns” about digital. The local Fendi team created 100 specially-designed bags to sell exclusively to Toplife customers. JD.com built the pop-up website and also managed the marketing, which included a game which incentivised people to download the Toplife app.

Ding says Fendi were “super satisfied” with the volume of sales they saw in a mere two weeks. “It’s a step – they say: ‘OK, nothing happened to hurt my brand’.”

Ding says she is seeing more brands who are on the fence about eCommerce request pop-up trials, with watch brand AP being another success. And this flexible “dip your toes in” approach may be a clever move by JD.com in its bid to see 100 brands join the platform in the coming year.

Take a read of the other articles from Essential Retail's trip to China to visit JD.com:

#ERinChina with JD.com

Inside JD.com’s drone strategy

Blog: Inside JD.com’s 7Fresh grocery store

Retail Ramble podcast: #ERinChina with JD.com

How will JD.com’s ambitions to outsource its technology impact global retail?