Main Image: Tiffany & Co Paper Flowers

Why Alibaba Dominates Luxury E-Commerce in China

Tmall Luxury Pavilion continues to grow in Q2, embracing international labels and offering exclusive deals to consumers as China’s luxury market booms.

This week saw the release of Alibaba’s second quarter results, and it should come as little surprise that the platform — arguably China’s leading e-commerce empire which serves around around 600 million customers annually — announced overall revenue growth of 61 percent year-on-year.

Alibaba’s invite-only platform, Tmall Luxury Pavilion, grew 34 percent year-on-year thanks to increased conversion rates and average consumer spend. Just over a year old, this quarter saw Tmall Luxury Pavilion bring on several international luxury brands, including MGM, Moschino, Giuseppe Zanotti and most recently, Tiffany & Co.

Stocking more than 60 luxury brands, including Burberry, Givenchy, Rimowa and Hugo Boss, Tmall is catering to China’s growing middle class. Millennials, who account for 30 percent of luxury sales in the country (according to Reuters) also make up more than half of Tmall Luxury Pavilion’s customer base.

Key to Tmall’s success is exclusivity: teaming up with brands to offer limited edition capsule collections upon their launch on the platform. The latest example is Tiffany’s Paper Flowers collection, which was made available to Tmall customers through a virtual pop-up two weeks before dropping into physical stores. The partnership comes at a good time for the brand: in a recent earnings report, Tiffany showed strong growth in the region. Revenue in Asia was up 28 percent, compared to 9 percent in the US and 13 percent in Europe.

Tiffany’s success could prompt even more international players to pay attention to China’s luxury market, which in the first half of 2018, grew between 15 and 20 percent.

Recent results from luxury conglomerates LVMH and Kering revealed strong sales in China have provided a welcome boost to revenue in 2018. So far this year, Asian sales have made up 31 percent of revenue for LVMH (an 18 percent growth on 2017), while at Kering, that number is over 33 percent (29 percent increase from 2017.)

If the Alibaba results are anything to go by, Tmall Luxury Pavilion’s offering is proving popular with Chinese luxury consumers, showing no sign of slowing down in the second half of 2018.

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