The rise of eCommerce — and specifically, preferred payment methods — is a lifeline for luxury brands, for the marquee names that, in large part, depend on cross-border spending to keep top lines robust.
That’s especially true for those companies seeking to maintain the loyalties (and wallet share!) of Asian consumers.
As noted in this space in recent days, Chinese tourism has been hampered amid the lingering impact of the pandemic. The impact has been seismic, given the fact that spending by those same tourists has accounted for one-third of luxury brands’ global sales. We’re unlikely to see a return to Chinese tourism spending, as measured by pre-pandemic levels, until 2025.
And the shift may be one where spending, then, is confined to transactions done within China itself. This means that the luxury brands — think Rolex and Givenchy, etc. — must increasingly focus efforts to catering to the preferences in those markets.
And while there is evidence of growth in markets such as Europe, “the next step is digging down into the next-tier cities, outside of Beijing and Shanghai,” Ting Zhou, founder of Yaok Group, told Financial Times, as recounted here.
Offering a roadmap of sorts, South Korea, the sixth-largest eCommerce market, is instructive in how brands can capitalize on potential spending from Chinese consumers and from consumers in Asia at large.
As detailed a recent Global Commerce report, the foreign firms looking to capitalize on South Korea’s potential encounter hurdles when processing payments. Half of the cards issued in South Korea come from local brands rather than international providers, which caps, in a sense, some of the billions of dollars in spending that could be unlocked.
We’ve seen that turning to third-party payment providers is the most efficient solution to handling the complexities of that market – including payments options such as buy now, pay later, where these services have grown 76% year over year to reach $5.4 billion in 2022.
The data shows that these providers and platforms, with the aid of application programming interfaces (APIs), can seamlessly integrate into existing payments infrastructures, offering merchants local card acceptance and reduced foreign exchange risks. The use of these APIs can reduce abandoned transactions by up to 40%, per PYMNTS data.
In an interview with Karen Webster, LianLian Global Executive Chairman David Messenger said that eCommerce companies must be “local” to their consumers and suppliers, offering preferred payment methods, interacting in the local language, with a presence across all online channels.