Walton Brown fills out Chinese mobile commerce through joint venture

Image courtesy of Maison Mode

Lane Crawford Joyce Group’s Walton Brown is boosting its mobile commerce presence in Greater China through a joint venture with a China-based technology company.

Walton Brown, which operates the upscale mall Maison Mode as well as the high-end Times Outlets, together with ecommerce developer eCargo, will create a social shopping platform catering to Chinese clientele. In addition to the platform, the joint venture called WWE & Company Limited will focus on helping brands from outside of China enter the market for the first time or scale their existing business in the country.

“This is a smart partnership in the sense that both companies led with their strengths and in a sense tacitly admitted their growth challenges,” said Brian Buchwald, CEO of Bomoda, a consumer intelligence company focused on the Chinese outbound consumer.

“For Walton Brown, the company has done a fine job of building up perhaps the finest luxury portfolio of any player in Asia,” he said. “Still, their capacity to leverage those relationships in ecommerce is hampered by the firm’s shortcomings in digital.

“For eCargo, the opposite proved true. They have done much of the legwork to enable online sales via their investment in technology and infrastructure. Yet they have been unable to enlist enough valuable brands to the platform to fully realize the vision.

“The combination, while promising, still runs into the challenge of being commoditized by other Tmall and JD partners and by those platforms themselves. The success of Alibaba has trained the Chinese consumer to look for particular priorities for purchase – led by price, convenience and authenticity. Never thus far has purchasing from a multi-brand retailer been high on the list for the consumer.”

Mr. Buchwald is not affiliated with Walton Brown or eCargo, but agreed to comment as an industry expert.

Neither Walton Brown nor eCargo responded before press deadline.

Coming together
WWE is starting with 300 million renminbi in capital, which amounts to approximately $45 million at current exchange. Fifty percent of the venture will be owned by co-investor Novel Color Limited, a subsidiary of The Wharf Limited.

Leading the joint venture will be Walton Brown president Thomson Cheng and Christopher Lau, CEO/founder of ECG.

Both of the partners come into the venture with expertise within China.

With its ecommerce solutions including digital marketing, fulfillment, warehousing and delivery, eCargo powers online selling for brands including La Perla, Karen Millan and Espirit.

Walton Brown similarly works with monobrand companies like Brooks Brothers, Juicy Couture and Kate Spade New York, managing their retail, wholesale, ecommerce, travel retail and outlet channels. The company’s flagship mall chain Maison Mode has shopping centers in Chengdu, Changsha and Urumqi, with boutiques for brands such as Salvatore Ferragamo, Saint Laurent and Bottega Veneta.

Maison Mode

Walton Brown’s Time Outlets, the first of which opened in Chengdu in 2009, hosts brands including Burberry, Tod’s, Canali and Armani. A second 1.3 million-square-foot location is being developed in Changsha, with an expected opening this year.

Early in 2017, WWE will launch MyMM.com, a multibrand online marketplace that will sell in-season merchandise across fashion, beauty and lifestyle exclusively to Chinese clientele. This platform is designed to bring a social shopping experience to mobile commerce.

“This partnership is in line with our overall strategy of investing and advancing our mcommerce footprint in China by working together with luxury, premium and contemporary brands to fill the white space that currently exists in the online market,” said Thomson Cheng, president, Walton Brown and joint-CEO, WWE, in a statement.

“For the time being, this APP will be a rounding error,” Mr. Buchwald said. “The companies are steering MyMM.com in the right direction strategically. But the truth is that between Taobao, JD and WeChat it is difficult for new entrants to gain scale in mobile commerce at this time.

“If the brand can articulate a differentiated and meaningful value proposition there is an opportunity,” he said. “But that remains to be seen. JV’s are difficult. Often times competing interests amongst the partners and sometimes between the partners and the new company itself stymy development. This one appears good on paper. But time will tell.”

Changing channels
Whereas only 3 percent of Chinese consumption was through ecommerce in 2010, online purchases today account for 15 percent of spend, according to a report by BCG.

Online is expected to outpace offline in sales growth up to 2020, growing at rates of 20 and 6 percent respectively. Ecommerce will then represent 24 percent of all private consumption, or $1.6 trillion.

Consumers often turn to ecommerce to get access to products not sold in stores. This is also a place to find premium priced merchandise, leading to greater online purchases among affluent families (see story).

Luxury brands can no longer forego a presence in China and hope to make up the difference with tourists, according to a new report by L2.

Double-digit growth days are over in China, and even if it will continue to grow at rates that will make western countries envious, its domestic luxury market contracted in both 2014 and 2015. With China growing, brands will need to adjust to digital issues ranging from poor localization to varied pricing as they compete for a clearly finite market (see story).

“Luxury brands have largely until now steered clear of direct digital sales in China,” Mr. Buchwald said. “There have been a multitude of reasons, but the largest is the confused nature of the consumer market itself, rife with grey and black market goods.

“As brands have become more aware that digital may be the only path into building a viable business in China for the long term, they are now starting to weigh their options,” he said. “Legitimate partners like a combination of Walton Brown and eCargo certainly will be on the shortlist if they can realize the vision of this [announcement].”

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