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Betting on China: Gilt's Relaunch into the World's Largest Luxury Market

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It’s no secret that China is an enormous market with significant potential for luxury retailers. It’s also no secret that operating in China is a riskier and more complex endeavor than operating in traditional western markets, which is why many retailers–including Nieman Marcus and eBay–haven’t fully figured out how to truly compete there yet. Taking a nuanced, intentional, and planned approach to entering China is essential. It is with such intentionality that Gilt approaches our recent relaunch into China.

We’re excited to announce today a significant set of new products and features for our Chinese customers in preparation for November 11th–otherwise known as Singles’ Day, or “1111.”

Success in China is highly dependent on relationships–关系, pronounced “Guānxì”–and, as such, our recent launch was done in close alignment with our friends at Alipay, Alimama, and UnionPay. Our relationships have allowed us to make Gilt known and accessible to our Chinese customers in ways that surprise and delight (as seen on our Gilt Weibo account), and at a level that many other western retailers have yet to achieve. We’re thankful for and excited about these partnerships, and hope to build even more relationships as we further expand into China.

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Our excitement and partnership is well encompassed in this quote in Jing Daily by Jingming Li, President of Alipay US:

“As China’s most widely used e-payment service provider, Alipay focuses on enabling commerce between global brands and Chinese consumers,” states Jingming Li, the president and chief architect of Alipay United States. “We are excited to partner with Gilt to help connect our consumers with the products and brands they desire. China’s e-commerce market could be worth as much as $650 billion in 2020,  and we see this as a great opportunity for global sites, like Gilt, that offer top-quality products and a premium shopping experience.”

How did we approach our China relaunch? And what should other companies keep in mind as they consider international expansion plans, and the nuances in those markets? In an attempt to answer these questions, I’ll discuss a few key topics:

  1. Why China? Examining the market opportunity for Gilt
  2. Gilt in China today
  3. Optimizing for the Chinese customer experience
  4. What’s next?

1. Why China? Examining the Market Opportunity for Gilt

Evaluating the market opportunity is always an essential step in any major geographic expansion. Prior to making this investment for Gilt, we had to understand whether we could be positioned to succeed. Key questions we asked:

  • How large is the luxury goods market in China? Is it growing?

  • What are customer expectations in China? How do they differ from what we currently offer?

  • What is Gilt’s current position in the market? What are competitors doing?

  • How must we alter Gilt’s customer experience to best serve the Chinese audience?

The Chinese Luxury Goods Market: China’s GDP is $8.3 trillion, and is growing at 7.4% per year. Ecommerce represents 5.5% of its total GDP. A portion of that is China’s robust luxury goods market–estimated at nearly $102bn and growing, and now the largest in the world (surpassing Japan). Chinese people also spent nearly $100 bn overseas, with 65% of that on shopping. Finally, Chinese consumers prefer to shop online, because online retail provides more assurances on product quality and origination than shopping in stores. Needless to say, China represents a significant and unique opportunity for a company like Gilt, which is especially positioned as an online purveyor of luxury goods otherwise difficult to obtain at our price points.

Chinese Customers Want Access to Western Goods: Overseas consumption of luxury goods accounted for nearly 60% of total Chinese luxury spending in 2012. Even though the growth of China’s total luxury market has slowed a bit, the pace of overseas consumption appears to be holding steady. Because of high customs and tariffs on import goods, local inventory and accessibility obstacles, and other market barriers, it’s difficult for Chinese customers to access luxury Western goods at Gilt’s prices. This might partly explain why Chinese tourists are the world’s biggest spenders–abroad, they can purchase items inaccessible in China.

Singles’ Day, 11.11: One of the primary goals of our China relaunch was to create an optimized experience by November 11–known in China as Singles’ Day. Singles’ Day is the anti-Valentine’s Day: a celebration of singles in which people are encouraged to splurge on themselves. In 2013, Singles’ Day drove nearly $6bn in sales in China alone, on just one day. That’s 2.5x the sales on Cyber Monday in the U.S. With numbers like that, Gilt saw Singles’ Day 2014 as the perfect opportunity to drive excitement for our Chinese customers.

2. Gilt in China Today

Gilt has been serving customers in China since 2011, when we opened our site to 100+ international countries. At that time, our strategy was to partner with third-party providers who could assist us with our international strategy in an aggregate level. Over time, and as Gilt has grown substantially, it has become clear that, in order to provide the best customer experience to all of our users, we must be intentional in tailoring our user experience to the specific needs of our many markets. This requires a multi-pronged approach.

Excluding Japan, International represented approximately 10% of Gilt’s revenue in calendar 2013 versus 7% in 2012–and our global growth continues to accelerate. Combining our Japan business, total international revenue accounted for approximately 20% in calendar 2013. Asia continues to be a high-priority, high-growth region for Gilt, and you can bet that China is on top of that list.

3. Optimizing for the Chinese Customer Experience

In order for us to succeed in China, we had to understand the needs of our Chinese customers and how to build a platform and experience that resonated with their preferences. We sought to understand, evolve and build for:

  • Chinese shopping expectations
  • language localization
  • local payment options
  • a mobile-focused approach
  • heavy social channel investment
  • improved shipping, logistics and returns
  • page load and latency
  • FAQs and localized customer service

Chinese Shopping Expectations Are Different. Customer service, engagement and user expectations in China differ from what western market consumers typically see and have come to expect. With different expectations come different user experience requirements. All of this translates into building products and features that make our shopping experience comfortable, trustworthy and delightful for Chinese users.

A) The Chinese online shopper behaves differently. As discussed in this Business Insider article, Chinese shoppers shop differently from westerners. In China, a good shopping experience might include pop-up windows, infinite scrolls, and substantially more information than what westerners are used to seeing.

Gilt made a number of technical and operational changes to improve our experience for Chinese users. We also took into consideration these UX differences: 

  • Chinese (and other Asian) ecommerce sites tend to be denser than western sites, with more information/copy
  • Infinite scroll is used much more frequently
  • Menu sidebar navigation is used quite often
  • When clicking on a product, Chinese shoppers prefer to see new product windows or tabs open, rather than view the product in the same page
  • Substantially more images and product information are expected in order to help users make their purchase decisions

B) Quality and authenticity of goods and products. Because counterfeit and fraudulent goods plague the Chinese market, many Chinese shoppers don’t trust unrecognized and unverified sites. Being able to establish guarantees of authenticity and having a reputation for offering quality goods is essential. This is one of the major reasons that Chinese users seek out known, reputable Western sites such as Gilt.

Language Localization. Making it possible to browse Gilt’s website, mobile apps and emails in Chinese was one of our first product roadmap items for our relaunch. Generally speaking, we know that we can’t just focus on English-speaking/reading international users in order to achieve our target growth internationally. While localization is key, however, we need to maintain some English on the site in order to assure Chinese shoppers that they’re shopping on a secure, international website. Balance, rather than total localization, is our goal.

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Our technology team’s localization efforts for China included developing:

  • a custom-built, flexible language localization platform that targets static site content

  • an easy language localization admin for instantaneous translations

  • a translation workflow for new content and new feature launches

Payment Options. Before our relaunch, Gilt only offered payment options with major U.S. credit cards and PayPal. Just 15% of Chinese consumers have U.S. credit cards, and PayPal isn’t widely used, so only a small percentage of Chinese customers could actually buy products from Gilt. To remedy this issue, we began working with Alipay and UnionPay, who represent roughly 75% of the online payments market in China.

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 For payment options and processing in China, we:

  • integrated the Alipay payment platform

  • integrated the UnionPay payment option

  • localized payment and checkout user flow for Alipay and UnionPay

  • optimized for these payment options to only be available for our Chinese customers

We’re excited about these partnerships and are happy to see that the Chinese press has taken notice. Alipay also shared the news on Weibo. Stateside, our good friend Martha Stewart leaked the news on Twitter a few weeks ago:

Mobile is essential. Google recently claimed that Asia was truly the world’s first “mobile-first” region. At Gilt, our experience confirms this notion: Our mobile penetration rates in Asia are substantially higher than our U.S. rate. In China, mobile is quickly becoming the primary and dominant method for online shopping. Additionally, Chinese shoppers are much more accustomed to purchasing and buying goods online than are Western shoppers. To that end, approaching and building for the Chinese customer without considering mobile would be a huge mistake.

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Gilt executed a number of key mobile-related projects for our China relaunch, including:

  • the launch of our iOS app in Chinese

  • the launch of our Android app in Chinese

  • localization of our Responsive Mobile Web experience in Chinese

Social engagement is mandatory. Given the quality and authenticity issues discussed above, savvy Chinese shoppers have forged a lively information-sharing community on social media networks such as Weibo and WeChat. In turn, companies need to establish a presence on these networks to establish their reputations, reinforce their legitimacy and remain transparent with Chinese users who wish comment and discuss their shopping experiences online.

Gilt prepared for our soft launch in China by launching our company Weibo and WeChat accounts two weeks ago. We found that users were sharing our fully translated FAQ site, and also commenting how delighted they were about our localized content.

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To continue building our social presence in China, Gilt is:

  • growing and managing our Gilt Weibo account, which is verified as authentic

  • growing and managing a Gilt WeChat account, also verifie

  • using all of our Chinese social media accounts as avenues for customer service and user interaction.

This Weibo user enjoyed our customer service and, through this public discourse, has enhanced our new and growing reputation:

“I sent a message to the @gilt account, just to give it a try. I didn’t expect a reply, but I received one. Gilt refunded my shipping cost, and now I’m happily waiting for my package to arrive. I feel I will come back to Gilt more–it sells some nice stuff. “ (Translated from the original Chinese text)

Elevated shipping and return experiences. China is the leading market for three-hour shipping, the implications of which could be substantial. In the U.S., our expectations for timely delivery have been shaped by Amazon Prime and two-day shipping, but we’re nowhere close to same-day shipping yet. New logistics companies and startups in China are rapidly changing their customers’ delivery-related expectations, and Western companies may have to catch up and integrate with capable partners in order to meet similar expectations.

Given the complex system for handling customs, duties and taxes, Gilt did some research and learned that our Chinese users overwhelmingly prefer to have DDU (Deliver Duties Unpaid) in their international transactions. We also sought out the best international logistics partners possible, and are excited to enable a number of key capabilities for our Chinese customers. These include:

  • direct to China international shipping at $9.95 on orders above $100

  • international returns

  • localized-shipping customer service

  • enabling DDU as the primary option for handling customs and tax

We still have much work to do in making sure that our customer experience in this area is as amazing as we want it to be, but are on our way.

Page load and latency. Anyone operating websites and applications for international users knows that page-load times and latency can be huge issues if you don’t have a local server or CDN to help speed things up for users. In order to have localized Chinese hosts and server support (including CDNs), your company needs an ICP that’s licensed and authorized by the Chinese government. We weren’t able to finalize our ICP licensing process in time for our relaunch, so we’ve had to be creative. In order to reduce page latency for Chinese users, our engineering teams:

  • optimized the process for loading fonts and images on our site

  • simplified the graphical, interaction design and UX

  • selectively reduced the number of JavaScript calls made to external sources

As a result of these efforts, on some areas in our site, we’ve seen nearly a 50% reduction in page load times, averaging between 20% to 40% improvements across our applications. This is only a first step: Our teams will continue working to deliver the fastest, best possible experience possible. Ultimately, our goal is to get our own local ICP up and running so that we can deliver our best intended UX for Chinese customers.

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 FAQs and customer service. Given the complexity of international shipping, transactions and purchases, having a buttoned-up and localized International FAQ is absolutely essential. Additionally, ensuring that our Customer Service team can serve all of our customers’ needs in any and every language is one of our primary goals. Our international customers overwhelmingly prefer to interact with Customer Service via chat instead of phone or email, so our online chat function has been core to our Customer Service strategy. 

To reduce friction and allay any fears our Chinese users may have about completing their purchases on Gilt, Gilt executed a number of key projects:

  • designed a China-specific FAQ experience

  • localized the China-specific FAQ in Simplified Chinese

  • hired and trained Chinese-speaking customer service reps

  • launched and grew our online chat capabilities with LivePerson

4. What’s Next

When we started working on our China relaunch five months ago, we didn’t fully appreciate how much this experience would bring together the multitude of teams across Gilt–from technology to merchandising and marketing and beyond. One of the main reasons I love working at Gilt is that I get to collaborate with so many amazing people–especially our engineers. Working on this project has strengthened that love. The massive amount of product management that this project required, and the effort and passion that everyone exhibited, may be unmatched in Gilt recent history and as such, I’m deeply in awe of what we’ve all achieved together.

We recognize that this is only the first step of many in making our experience better for our Chinese customers, and we’re excited to continue to grow and evolve with our customers as we learn more from them. We’re excited to apply these learnings as we continue to expand our business in Korea, Russia and other strategic countries. We’re super-passionate about ensuring that Gilt customers around the world are surprised and delighted with their experience with us, every single day.

International 1 China 4 Singles Day 2 11.11 2 Product 1 Product Management 5 UX 18 Logistics 1 Customer Service 1 Growth 1 Expansion 1 Gilt 340 GIlt Groupe 4 Alipay 2 Alibaba 1 Payment Platform 1 Shipping 1 Andrew Chen 9 tech 22 Gilt Tech 287 Gilt Product 17 gilt product 1 ecommerce 35 online retail 1 shopping 14 Weibo 1 Jingming Li 1 online payments 1