On August 3, Italian luxury brand Prada won a legal dispute against the Chinese online luxury retailer Secco. In early 2022, the brand demanded Shanghai Jiading District People’s Court freeze more than 11 million RMB ($1.6 million) of its assets. According to a court document, the request was made as a result of a contract dispute between the two entities.
Prada first joined forces with Secoo in May 2019, which was the brand’s first entry into China’s e-commerce world. At that time, Secoo was among the most prominent luxury goods dealers in China, helping notable brands like Valentino boost their online presence and revenue. According to Secoo’s fiscal reports, 2019 was by far its most profitable year. However, its financial situation soon began to deteriorate at an alarmingly fast rate.
Faced with increased competition from China’s e-commerce giants and weak consumer spending brought by the pandemic, Secoo’s success eventually began to wane. In 2020, revenue dropped by 12% to 6.02 billion RMB. In 2021, sales dropped another 34% year-on-year, and employees began to file complaints about unpaid salaries that were months overdue. By January 2022, the online luxury goods retailer reportedly filed for bankruptcy and a total of 153 million shares in the company were frozen. While the company immediately refuted this as a rumor, no further explanation was given.
According to a researcher at the International Business School of Zhejiang University, a combination of operational issues, limited range and lack of price advantages compared to other duty-free stores is what truly trumped the company’s growth.
Though it tried to salvage itself by entering the metaverse trend with the release of its own NFT, Secoo’s counterfeit scandals and refund disputes were much too difficult to overcome. In addition, the company did not pay enough attention to local luxury brands. Therefore, when the pandemic arrived and international supply chains were blocked, the e-commerce brand was at a total loss.
From its glory days of being China’s largest luxury one-stop shop to its sudden fall from grace, Secoo serves as a cautionary tale for all companies aiming to get a foothold in the Chinese market.