By 2020 China’s luxury market will be worth US$99 billion. While Europe’s economies struggle to achieve any positive growth at all, many in China still bemoan the “leveling off” of their economic surge at 7.8 percent growth per annum. Still, it remains the page of hope on the global CEO’s annual report and so it should – as long as brands keep up with a country that is changing as fast as it is accumulating wealth.
This is not a nation where western brands can simply “import” ideas and practices from more mature markets, as distinct new behavioural trends and attitudes towards luxury are emerging. Once upon a time, a brand could arrive from overseas like a touring rock star; play the same set and local fans would swarm in. Luckily times have changed. Brands nowadays should see themselves more like a party host, one with lots of difficult friends and family who need to be engaged and entertained on a more personal level. The problem is, like so many aging rockers, some might not notice when their audience move on.
Most importantly – nobody is quite sure luxury brands really understand Chinese culture: the feeling is they don’t know much about it and would rather value their customer by the money they spend.
A logo for its own sake is no longer the compelling sales proposition it once was. Angelica Cheung, the editor-in-chief of Vogue China observed last year that “a new class of Chinese consumers is ready to spend money on quality and style without showing it on their sleeves.” This was echoed later by Geoffroy de la Bourdonnaye, CEO of luxury conglomerate Richemont Group, who announced “China’s more sophisticated consumers are now looking for the brands that are not necessarily on the top of the radar screen. They’re looking for new interesting brands that bring something that other brands don’t bring.” Discernment, not display, is coming to play a far greater role in Chinese luxury consumer decisions. As the old saying goes, if you’re one in a million in China, there are more than a thousand others like you. If you are a millionaire in China there are now over a million like you. Forget the times when Coca-Cola was poured in blinking Chateau Lafite glasses, this is a new breed of super-wealthy who consume luxury in a distinct way from their western counterparts.
Their Swiss watches sit alongside Chinese paintings and calligraphy, they are the reason Hermes created its Chinese brand ‘Shang Xia’, the reason Louis Vuitton sends customized Chinese new year cards and, even further down the market, Starbucks makes moon cakes. Although western brands still carry an enormous significance through their history and authenticity they must do more to communicate and educate their consumers about their brand story in a culturally relevant way or risk losing their differentiation.
Being aware of the size of the country, most brands are now looking at the digital space— finally knowing failure in this space may have dramatic consequences and it is not an option. Not only is the medium practical but a recent study by Microsoft revealed that 81 percent of luxury consumers in China use the Internet to make a purchase decision, with a similar number planning to shop online for luxury within the next twelve months.
But how they seek this information online is distinct. Peer to peer discussions are extensive pre-purchase, and sharing online by both email and social networks for validation is often more common than official messages from the brand. Over half of luxury purchases by the Chinese are made abroad so brand building online before the trip can take precedence over physical presence.
Whereas many luxury brands’ efforts online are limited to translating the website, others have focused a large proportion of their marketing budget on digital and social media initiatives on local platforms like Weibo and YouKu. In China, personalised correspondence is favoured over public responses and quality content over constant updates. In the best examples, every blog post, e-newsletter and tweet should embody the brand’s values, elevating it above online voices clamouring for ‘likes’ and page views.
Burberry remains one of the best practice examples of such activity, with fashion shows streamed live in Sina Weibo, exclusive invites for local fashion bloggers associated content promoted across channels, they fuelled and directed the conversation online without directly engaging in it, retaining the “distance” of a luxury brand balanced with excitement and relevance. Many brands still have a very long way to go to be successful in the Chinese digital space. The increasing sophistication of Chinese luxury consumers has transformed luxury brands from rock star, but they should not despair: China is a huge opportunity, and this digital exercise will have to be repeated soon elsewhere (does India ring any bells?).