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Luxury Brands In China Must Keep Up With Digital

Western luxury brands are performing wildly inconsistently in China

21Jun

China’s luxury goods market dipped 2% last year, with menswear, leather goods and watches at the centre of the decline. Economic slowdown, coupled with a crackdown on conspicuous consumption, has Chinese customers slightly less inclined to spend big on luxury - and largely Western - goods. As disappointing as the slight drop-off might be, brands should see no reason to abandon their Chinese efforts, with the market still worth a huge $17.2 billion.

The Chinese market alone represents one-third of the global luxury market, and e-commerce in the world’s most populated nation is flourishing as brands become more digitally minded in the region. KPMG predicts that half of China’s luxury consumption (some $9 billion) will come from online stores by 2020, and with Chinese consumers keen to get hold of Western luxury products, the market is ripe for digital entry.

Alibaba Group president Michael Evans said: ‘One only has to look at China today to glimpse the future. The country is leapfrogging brick-and-mortar retail. Shopping is not only happening online, it’s happening principally on mobile. The brands that embrace the opportunities of the digital economy will be the winners.’ And as brands look to market their products in China, the likes of Tencent’s WeChat and Weibo will be vital tools.

But brands are largely getting WeChat wrong. Before we talk about the messaging app, we should be clear that this is an app with some 700 million monthly active users, a group just smaller than that of Europe’s population combined. The market is so vast that it deserves far more attention from Western luxury brands than it is currently getting. Fashion, jewelry and watch brands, though, are receiving an average of just over 7,000 views per WeChat moment post, which costs in the region of $7,700 - down from $30,800 prior to January, before the company decided it needed to attract more advertisers. A different approach is needed,

Principally, brands should stop seeing WeChat as just another social media network to be present on; its one-to-one nature gives brands opportunities for direct customer engagement, better CRM and online-to-offline techniques, rather than simply pushing content, as they would on other social media. A report by L2 found that the numbers for fashion and other luxury brands on WeChat are currently poor, and far more could be done to engage of what is such a well-used app.

Generally, though, luxury brands are waking up to the opportunities presented by such a huge market. Burberry, for example, encouraged users to create their own personalized Lunar New Year message on WeChat, an interactive message that asked users to shake, tap and swipe the ‘gift’. This is very much scraping the surface of customer engagement strategy on messaging apps, but is an example of the brand creating something exclusively and decidedly for their Chinese customers, something more should consider doing.

The British fashion brand also partnered with Wu Yifan, a Canadian-Chinese model, to push its 2016 fall menswear line. According to the Wall Street Journal, ‘Burberry expects e-commerce to make up a third of revenue in the next three years’ - China could very well help it get there. Michael Kors has, similarly, housed a CRM experience on WeChart, personalizing its shopping for its Asian consumers. The experience offers consumers digital customer service, whilst sharing in-store offers to encourage footfall. ‘From the online WeChat/Weixin experience to the premium in-store personalized services, we hope to provide our consumers with a full 360 experience through this new O2O application,’ Lisa Pomerantz, SVP global communications and marketing at Michael Kors, told Luxury Daily.

The more the established luxury brands are able to exploit the burgeoning Chinese digital market, the more others will follow suit. Where, previously, Western brands may have been apprehensive about engaging with technology not used outside of China, they are now having to get creative with their approach to digital as a result of the economic changes. The slight dip in the luxury market is by no means cause for panic, rather it should spur those luxury brands without strong digital strategies in China to update their approach. 

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