Editor’s Note:The Interview is done for TechNode byTimothy Coghlan, an expert on the fashion industry in China and writes about the China fashion business in his blog maosuit.
A seasoned veteran of luxury brand retail in Asia, Thibault Villet held senior positions at both L’Oreal and Coach before launching Glamour Sales in China in 2009. With Glamour Sales now a proven and growing business in China’s super-competitive e-commerce space, Thibault spoke to TechNode about the business and operating at the intersection of fashion, luxury and technology.
Please tell us a bit about the Glamour Sales business model?
Glamour Sales is a flash sales site focusing on luxury products. We follow the European (flash sales) model of selling on consignment rather than the US model where the website operator buys all merchandise up-front. To source merchandise, we only work directly with luxury brands or their official distributors and we don’t buy and re-sell parallel imported goods for two reasons: firstly, because the margins are too low, and secondly, to ensure that through selling authentic products our business had the chance to scale.
Now in China, after four years we work with 780 brands of which 95% internationally sourced brands. In terms of our China sales breakdown, we do 70% of sales with fashion, 20% with beauty and 10% with home décor/lifestyle products. In terms of fashion, we are very pretty balanced between footwear, apparel and bags and accessories and other items meaning jewelry, watches etc.
How do you select the merchandise and what percentage of Glamour Sales merchandise is current versus out-of-season stock?
For all of the first-tier luxury brands, the merchandise is one to two years old, while for accessible luxury brands; we are dealing with products a few months past their season. So for brands like Dolce & Gabbana we are now selling the winter 2012 collection and for a kids brand like Jacadi we are selling the Spring/Summer 2013 collections that only just passed.
We have a team of 20 people in our merchandising department and they are constantly in discussion with brands and the brands propose inventories and then the team selects what we think is most interesting for our members whether it be the style, price, or blend of both. At the end of the day what we care about is selecting the right merchandise for our members, and we also incentivize the merchandise team not only on sales but also on the sell-through.
Many e-commerce sites in China sell a wide selection of merchandise across different product categories from luxury to home goods etc. In other countries the luxury brands would never tolerate this? Why is China different?
We found that customers are more comfortable testing a website with entry level products and once they trust the platform, service and products then will trade-up. This is one reason why we still offer 18% of our product assortment through cosmetics [because they are cheaper and hence a less risky to try the service].
Of course as the market [in China] evolves and becomes more mature we ourselves are also trading-up. Some brands we accepted onto the site two or three years ago we aren’t inviting them to participate anymore because they no longer match our image and also because we now have other preferable brands.
Also to be honest the supply of luxury goods is a bit erratic. Some seasons [the designs] work very well and the brands have no left over stock that we can sell. I don’t think its wise to build a long term scalable and sizeable business only with first-tier luxury brands, so we also work with fashion brands and accessible luxury that include Glamour Sales as part of their distribution strategy and some are even manufacturing products just for us.
Will Glamour Sales always focus on luxury in the future? I’m not sure – I don’t think so! We might try a site that has different products environments like a real shopping mall with a basement level, first and second floor etc. In this December, we are launching the virtual tree of our website where we will separate some products in terms of presentation and so the accessible and first-tier luxury designer brands will be featured separately as has been requested by both the brands and customers.
Are Glamour Sales customers coming to you specifically for flash sales?
People like the concept of flash sales that start everyday at 9am. They also like the fact that it’s a bit of a race and competitive because some products are limited. We have up to seven new brands going on sale everyday and each brand has about 100 different items, so altogether around 700 new items go on sale every day, and the sales last for seven days. About 50% of sales happen in the first day, 80% in first three days.
At the end of the day why do people come back? It’s because they enjoy the overall experience and the customer service. So from the brands we choose, the products we choose, the overall display, sizing, photography, product description, all the way up to the experience with payments, then deliveries, returns and after sales service, I think all of this is what we call the customer’s experience and we focus on that.
What effect is the rise of mobile having on your business?
Mobile is huge for us! In four years we went from 2% to 22% of sales come via smart phones and if I include tablets, then its about half of our business today. In comparison, in Japan, smart phone sales are already 40%. So based on this trend, I’m very confident, that by end of next year we will realize half of our sales coming from mobile.
We are challenging ourselves and I’m pushing all the teams from IT to creative to refocus the whole approach to concentrate on the mobile first. Whereas before we developed things first for the desktop website and then adapted the apps etc. for mobile. Now the transformation of the company is to think mobile fist, and then once you have the mobile elements right, to adapt them into the desktop. So now, everything from the description we write about the product and the images we shoot to the interfaces we develop etc. is now mobile centric.
Glamour Sales receive a large investment from US based retailer Neiman Marcus. Can you tell us more about that?
Neiman Marcus invested in Glamour Sales for two purposes. Firstly, because they believed in flash sales in China, and half of investment was for that. Secondly, to launch their own full-price (e-commerce) business in China. Neiman Marcus then decided that their full-price move into China was probably a bit too early for the market’s needs and they decided to change the business model. Neiman Marcus’ own full-price e-commerce service has now relocated and so the to the US and there will be a Chinese website operating from Dallas to supply the Chinese customers.
Glamour Sales operates at the intersection of retail, fashion and technology, how do you balance the different needs of each industry and also find staff who can work across these areas?
I would say we began as a ‘retailer’ and the market forced us to become much more open minded and we are now spending much more time developing the (technology) ‘product’ so far as the web platform is concerned.
With staff, we first focused on people with a retail or fashion background who had skills like merchandising and customer service. Then we added an extra skill dimension which you could call ‘data sensitivity’, so this would include people with marketing, user experience, merchandising and obviously IT and finance people because they are all very data focused.
Now, we are focusing more and more on CRM and the integration and convergence with social networks. The challenge today is tracking a customer who uses Glamour Sales via their phone in the morning, an ipad in the afternoon and desktop computer in the evening. Moreover, their use of social networks is changing all the time. Last year Weibo was clearly the dominant SNS platform in China and now this year its Wechat. A few years ago Google was still in China, now its gone! So tracking customer engagement, comments and buying etc. across multiple devices and platforms, to interact with her according to what she wants, through the channel she wants, when she wants while presenting a consistent Glamour Sales experience is critical.
This requires a very strong CTO who is constantly scouting and searching for what is happening [in tech], but its not only him. We developed a department called the BSM team which is specifically to interface between the marketing and IT teams [who may not always ‘get’ each other] and really their job is to scout and follow all the IT trends from mobile apps, payments, social commerce, mobile advertising and to them guide and push the direction that we should go towards.
Many foreign retailers wanting to enter China, think e-commerce can provide a quick-fix to the challenges of setting up a physical store network (which can take a few years). How do you see this?
I believe China (e-commerce) is the most competitive market in the world because you’re not only competing with other B2C platforms be they Chinese or foreign, but your also competing with foreign websites shipping to China and with 70% of the market still being C2C platforms [like Taobao], with individuals who buy (fashion products) overseas and resell online. So we are really in a super-competitive market.
Based on my experience, operating and being successful in China requires an understanding of the Chinese market. This market and ecosystem is different and it requires time to understand, adapt, and localize everything from advertising to consumer tastes and behaviors. The Chinese internet ecosystem is already in version 3.0 or 4.0, so you can’t just come in with your existing (web or e-commerce) platform from the US or Europe, you really have to adapt your platform and give the best you have to China.
I would also say that China requires a long-term commitment and there is no pay back in one or two years. This means you have to have plenty of money to fuel growth and for Glamour Sales we took four years to break even. With the China opportunity comes a big (potential) ROI but it requires time and payback not immediate.
What else is unique to the China e-commerce market? As a foreign entrepreneur working in a super-competitive e-commerce space in China and raising investments and overseeing operations, how have you found the journey?
Its very exiting and challenging, sometimes although you think you have a better project and opportunities, not being Chinese can sometimes be a handy-cap, but at the end of the day we built a team with 150 people and 148 of them are Chinese.
What I like with this business is that although it goes super fast, it always goes in stages. Sometime we wake up and think “merchandise” so we put a lot of effort into the merchandise, then “wow, I have so much merchandise, but I need more clients”, so you focus energy on building traffic and customer, then “wow, I have merchandise and customers but too many orders, so I need to fix my operations.”
The best reward we can have is the recognition from our customer and over 70% of customers are repeat buyers (I never got more than 50% in my previous jobs) and the second thing we get recognition from our brand partners, 90% of them are willing to come back and work with us.
Overall, the Chinese business ecosystem and environment is pretty positive because e-commerce is a booming industry. The local Shanghai Municipal Government is supportive and believes in e-commerce companies operating in the district.
We want employees to be happy, and develop themselves and behave like entrepreneurs and we are lucky enough in this industry to offer entrepreneurial careers in an environment that is changing so much that people anyway have to learn and in an environment which we try to keep fun and playful.