Internet sellers polishing their shop windows

The French call it leche-vitrine, window shopping, which deliciously encapsulates the chagrin of someone who loves luxury goods but cannot afford them. The expression literally means window licking, and someone who would no doubt appreciate the sentiment is Li Lu.

Li, a magazine editor in Hangzhou, Zhejiang province, adores brands such as Prada, Chanel and Hermes, but until recently, for want of deeper pockets, was resigned to those luxuries remaining beyond her reach.

But that has changed, thanks to the emergence of online luxury stores.

About four months ago Li bought a Prada handbag from Xiu.com, an online discount luxury store, that was a steal at 3,825 yuan ($607, 454 euros).

"Had it not been for the discounts of at least 50 percent that the website gives, I just would have been unable to afford the bag," Li says.

Millions of shoppers like Li who have a penchant for the good things in life but cannot afford luxury goods in official outlets on the Chinese mainland, let alone traveling to Hong Kong or Europe to buy them, can now satiate their desires.

Last year the value of the luxury e-commerce market in China was 10 billion yuan, an increase of 70 percent from the year before. The Shanghai consulting firm iResearch reckons that the market will increase 30 percent annually over the next few years.

Data from McKinsey and Boston Consulting Group shows that China, which has 145 million online shoppers, will replace Japan as the largest market for luxury brands by 2015.

Those heady figures are proving to be a magnet for companies in China and overseas, and last year hundreds of e-commerce companies were set up within the country.

One international company to make an entree into China last year was the handbags and accessories company Coach. The company, which celebrated its 70th anniversary recently, opened its store on Tmall.com, the business-to-consumers platform of China's e-commerce giant Alibaba Group. It was open for a one-month trial, selling limited-edition bags and accessories.

The president and CEO of Coach China, Jonathan Seliger, said the dry run would help the company understand the needs of Chinese shoppers and prepare for a long-term future in the Chinese e-commerce market.

Another overseas luxury goods seller to make a foray into China is Giorgio Armani, whose online platform opened at the end of 2010. Zhang Tao, an analyst with Analysis International, says luxury e-commerce provides a unique market niche that most luxury brands tend to overlook or ignore.

"In recent years luxury stores spreading across big Chinese cities have helped to cultivate the market and lay a sound foundation for luxury e-commerce.

"But these stores have been unable to meet the demands of Chinese consumers in second- or third-tier cities, because of the high prices and the geographic limitations."

While many see rivers of gold in the online luxuries industry, there have been warning signs that optimism may be a little overblown, some top websites in the business having closed at the end of last year.

Others have broadened their terms of reference from "online luxury retailer" to "online retailer", with luxury goods accounting for a small portion of their business.

"It would be a dead end if we limited ourselves to luxury e-commerce," says Huang Jin, co-founder of Xiu.com.

Huang says that the proportion of luxury goods sales has been reduced to 20-30 percent. And the website has repositioned itself from a flagship of renowned luxury brands to a high- and middle-end shopping mall.

Gao Ming, senior vice-president of Ruder Finn Public Relations, says the major attraction to Chinese consumers is hefty discounts, but there is a catch: suppliers and consumers alike have doubts about the integrity of what is being sold and who is selling it.

"Online sales have advantages in convenience and price, but most luxury e-commerce sites do not have authorization from brands. Their supply channels are unreliable."

Reports from Analysis International indicate that luxury goods sold via e-commerce are obtained from two main sources. Companies either buy authorized goods from luxury brands or get overseas buyers to purchase discounted luxury goods in outlets.

"The different suppliers may cause problems in quality control and even counterfeits," Gao says, adding that in the long-term these sites will fold as luxury brands begin to assert their legal rights.

Angela Kapp, executive vice-chairman with Huisheshang.com, which bills itself as "The Luxury Club", says that besides product quality, after-sales service needs to be improved.

"There are many fake goods and unauthorized goods in Chinese online stores. The goods are normally sold at more than 50 percent discount, and (with poor) after-sales services.

"Luxury brand is not only a logo, but also a commitment to quality, craftsmanship and service, especially after-sales service in the watch business and beauty business.

"Unauthorized companies cannot deliver the same service to consumers as those luxury brands do."

Kapp says that to survive in the long term, Chinese luxury e-commerce outfits need to improve their supply chains and provide better services.

"Local sellers should keep their promises to both brands and consumers. Rather than (low prices), luxury e-commerce should be dedicated to providing a wonderful shopping experience."