YNAP China's collapse highlights the problems facing luxury e-commerce more broadly. Coupang announced it would cut Farfetch's workforce by 30% since rescuing the company in December. Matches Fashion's collapse in March cast a huge cloud over the industry.
Meanwhile, industry sources say Feng Mao plans to scale back operations in China, settle all outstanding debts, and treat employees fairly, but YNAP's China dream is now completely over.
Chinese consumers have money, but they expect concierge service
Nishta Mehta, change agent at Collabo Central Consulting in Shanghai, said the problem could be simplified by the weakness of the Chinese consumer. China's household savings rate is among the highest in the world at 31%, according to 2023 figures, compared with 13% in the EU and 3.9% in the US. That means the Chinese lack disposable income to spend.
Mehta believes it's important to understand exactly where spending has weakened and why, as well as where it has grown. “While domestic spending on apparel and beauty products has declined, the shift in spending to other areas such as food services, travel and automobiles indicates a shift in people's desires from discretionary spending on 'material' to more collective 'experiences,'” he says.
Should YNAP have paid more attention to extra services? Pablo Moron, managing director of Chinese digital agency DLG, urges retailers and brands to focus on adding value in the Chinese market. He points out that some multi-brand companies such as YNAP have not given consumers enough reasons to visit online. Chinese luxury consumers expect customized services such as personal styling guidance, product selection advice, super-fast and convenient delivery, 24-hour salespeople and flexible return policies. Despite its wide range of problems, Farfetch seems to be doing well in China by investing heavily in extra services for key opinion leaders and a wider range of VIPs.
YNAP's product marketing in China also lacked aesthetic flair, says Lucrezia Ceu. Moreover, she points out that it had a limited product mix and lacked unique opportunities. “Against this backdrop, NAP seemed unable to offer the same level of convenience, which resulted in many customers voicing their dissatisfaction on social media,” she says. “Unfortunately, NAP was unable to match the level of concierge service that has become completely second nature to most luxury consumers in China.”
