Genuine luxury and try-before-you-buy: The world of SECOO and TryTry

Two Chinese e-commerce platforms have gained prominence in recent years: SECOO, China’s largest online store for luxury goods of guaranteed authenticity, and TryTry, the SECOO-funded startup that offers a try-before-you-buy system for bags and cosmetics. Let’s take a closer look at how these platforms have made it big with Chinese consumers.

Guaranteeing the genuine article

The history of SECOO goes back to 2008 when CEO Rixue Li, along with four other friends, opened a consignment shop for second-hand goods in Jinan, a city in the Shandong province of eastern China. A year later, they launched the SECOO Luxury Brand Authentication Center in Beijing, followed by the e-commerce platform SECOO in 2011. Having secured US$10 million in a Series A financing round, SECOO smoothly went on to obtain funding up to Series E. In 2017, it was listed on the Nasdaq Stock Market and now has an aggregate market value of US$4.44 billion.

Take a look at the products SECOO handles and you’ll find a diverse range, from luxury branded bags and cosmetics to electronics and even holiday packages. With more than 300,000 different products available, the platform is a favorite among Chinese consumers. In the third quarter of 2018, SECOO users spent an average of 7,220 yuan (approx. US$1,070). The platform has already captured 25.5 percent of China’s high-end market and 15.4 percent of the market in all of Asia (data from 2016).

According to the company’s unaudited financial results for the third quarter of 2018, its GMV (gross merchandise volume) in that quarter was 2.19 billion yuan (approx. US$324 million), a 57.4 percent increase from the same period in the previous year. Its total number of orders also grew by 59.7 percent to 594,400, while the number of active customers almost doubled to 304,000. Total net revenue increased 60.1 percent to 1.57 billion yuan (approx. US$233 million).

SECOO has rapidly surpassed the competition because its values have not changed since it was established. The company’s priority has always been to provide genuine branded goods, no fakes. Competitors such as Tmall and Taobao have recently attempted to reduce their sales of fake goods but have been unable to eliminate them completely. By being rigorous in its authentication of designer goods, SECOO provides better assurance to customers, which, in turn, has led to their success.

Meanwhile, if you scroll to the bottom of the SECOO website, you’ll find a link with a QR code that will take you to another e-commerce platform. This is TryTry, which has been gaining wide attention and whose double use of the word “try” is of no small significance.

Trying designer bags for a pittance

Originally a SECOO employee, Huang PengSheng received funding from the company to start TryTry in July 2017 and was appointed CEO of the new firm. In fact, a number of SECOO staff have joined TryTry, which bears some similarities to an in-house venture.

First begun as a WeChat Mini Program, TryTry garnered 4.5 million users in just a month and a half after its release, with the number of active users rising to 980,000 at peak times. Within two months of its release, TryTry received an average of 50,000 orders per day. Huang attributed this swift increase to the proliferation of users sharing the program. In August 2017, TryTry finally shed its constraints as a WeChat Mini Program — which tend to have low retention rates — and launched a proper app.

The concept at the center of TryTry is “try before you buy”. Branded bags and other designer items can be rented for a maximum of seven days at the extraordinarily inexpensive price range of 1 to 10 yuan (approx. US$0.15 to US$1.50) per day. Many TryTry users leave their reviews of products, often varieties of handbags. Renting branded goods on TryTry requires a security deposit, although users with more trustworthy finances may be exempt.

Cosmetics often come as free samples or one-time-only trial products, with some costing as little as 0.01 yuan (approx. US$0.0015), delivery fee included! Other beauty products are regular-sized without a trial use period, such as many SK-II items. SK-II, however, does offer free sheet mask samples on the platform, which have proven popular — receiving scores of comments and photo postings — and are driven largely by the power of word-of-mouth. In this way, brands that offer free samples receive good exposure. This makes TryTry a useful marketing platform.

Users respond well to TryTry’s system too; many feel reassured about the authenticity of goods on the platform with SECOO as the backing company. TryTry also addresses an issue that comes with making online purchases — the difficulty of gauging a product from pictures alone. Its popularity stems from how the app allows customers to check a product’s practical aspects before buying: How does it feel to hold? What does it weigh? What does the texture feel like?

At first glance, TryTry’s business model looks surprising. The cost of trying products can be very low; most brands include delivery fees, apparently at a loss. But it’s likely that the platform is more significant as an advertising tool, allowing makers to spread awareness of their brands.

Although the company’s growth seems to have plateaued, it does have one wild card: Being well regarded by the Chinese government. This is likely because TryTry uses elements of the sharing economy, which President Xi Jin Ping’s administration has touted as the key to China’s future. China’s state-run newspaper People’s Daily also gave TryTry an Excellent Brand Award in 2018.

As China’s economic slowdown intensifies, the spill-over effects will likely be felt in the luxury goods market. Just look at car sales, which fell in 2018 for the first time in more than 20 years. Chinese consumers will become more prudent in their spending. Consequently, we can expect more consumers to use services like TryTry to try products and buy only what they’re sure of. Choosing and buying products smartly is the name of the game in China for the foreseeable future.

Text: Denyse Yeo
Original text (Japanese): Team Roboteer