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Luxury fashion: keeping up with China's digitalised brands

China is one of the largest luxury fashion consumer markets in the world: according to the McKinsey China Luxury Report 2019, China accounted for 32% of the world's luxury goods purchases in 2018.

July 2019

Despite volatile markets and trade conflicts, the luxury goods market in China is expected to grow 40 % from 2018 to 2025. However, China can also be a daunting environment. The recent PR disasters of well-known luxury brands and the swift and angry reaction of Chinese consumers demonstrate the incredibly high levels of scrutiny and reaction speeds, with Chinese users relying on WeChat and social media to provide immediate feedback.

Getting things right can lead to massive growth for a brand in China, but getting them wrong can destroy it.

Going digital

Against this backdrop, marketing concepts are becoming increasingly localised and tailored to the cultural and social needs of Chinese customers. Going digital has become an inevitable step for successful marketing in China.

The general high speed of digitalisation in Chinese society, as well as a young target group of luxury consumers (mostly consisting of Millennials and Gen Z), contribute greatly to this development.

In China, the trend for making luxury fashion purchases online is particularly advanced. 2017 saw Alibaba launch its 'Luxury Pavilion' on T-Mall, and JD.com launch its own luxury site 'Toplife', with both focusing on luxury brands.

On Alibaba's 'Luxury Pavilion' site alone, customers reportedly spend more than USD159,000 per year. In order to reach these young, tech savvy customers, brand owners and non-Chinese platforms and retailers have started cooperating with Chinese e-commerce platforms such as Alibaba and JD.com. Farfetch recently announced that it would be integrating 'Toplife' into its China business with a 'Level 1' entry point on the JD.com app.

To maintain the exclusive character of the brands, various marketing tools are used. On T-Mall, for example, access to the 'Luxury Pavilion' is reserved for customers with a proven track record of buying luxury goods. And there is more than one way to play the game: JD.com offers special delivery services for luxury goods in white-gloved butler-style.

A marketing strategy which combines of social media with e-commerce and classic advertising channels is also widely popular and common in China. The most popular advertising channels are currently Douban 豆瓣,Weibo 微博, WeChat Official Accounts 微信公众号, Douyin 抖音,and Xiaohongshu 小红书.

These platforms allow luxury brands to interact with customers, enable user-generated content and create a more intimate way of marketing for the digitalised generation.

Louis Vuitton was one of the first luxury brands to open a WeChat Official Account. This allows brand owners to operate a 'micro-homepage' providing product and brand information, links, live chat customer service, and even seasonal features like Chinese New Year stickers.

Key influencers and celebrities with a big fan base in China play an important role on these platforms, shooting v-logs, publishing personal contributions on their social networks and also partly running live streaming. With more than 100 million followers alone on Weibo, Yang Mi (a well-known actress in China) has become known as the 'shipper queen' (带货女王) within the industry as a result of her advertising power (see our article for more on influencers).

Most of the marketing methods which use social media are still legally in a grey area although Chinese legislators are working hard to keep up with the market changes. The new E-Commerce Law (2018) for instance restricts paid search engine results and paid customer comments, while the Interim Measures for the Administration of Internet Advertising (2016) and new Advertising Law (2019) provide for a labelling requirement for indirect advertisement (eg influencer ads).

Additionally China's strict Cyber Security Law could present challenges for Western luxury brand owners in terms of customer data transfer abroad. Technology is driving the law, with the luxury goods industry as a key influencer.

Research online, buy offline

Success in the e-commerce market for luxury brands does not mean that classic brick-and-mortar luxury stores have been replaced. On the contrary, according to McKinsey, the majority of luxury purchases in China are still made offline.

Customers usually buy smaller items like accessories via the internet, but for big ticket items, customers tend to research online and buy offline. This means that for marketing purposes, while it is vital for luxury brands to have a high profile presence across a wide range of internet and social media platforms, an essential piece in the marketing jigsaw is creating an in-store experience by connecting the online and offline store, a new trend in China. Burberry, for instance, has installed iPad and touch screens in its stores, and incorporated RFID chips in products.

This chips trigger videos and interactive displays on mirrors and screens, to allow customers to see special collections, watch shows and interact with touch screens to receive product details and request sizes and styles to be sent to the fitting room.

The genuine article?

A large part of luxury spending of Chinese customers takes place overseas because Chinese customers feel more secure about the origin and authenticity of luxury fashion goods if they come from outside China.

To solve this problem, there are now AI programs available on the market able to conduct authenticity checks of luxury fashion products, including QR codes on products in combination with blockchain technology to guarantee better traceability of goods being shipped as well as their provenance.

China – fashion forward

China exhibits many of the trends in the luxury retail market that are demonstrated elsewhere by the Millennials and Gen Z shoppers, but if anything, the characteristics are even more pronounced, Brand loyalty is generally lower in China (outside the older generation), and the purchasing behaviour of China's younger generations appears highly social and trend-dependent.

Marketing platforms, influencers and marketing tools are constantly changing in China at a much more rapid pace than in the Western world. Chinese customers are even thirstier for innovation than their Western equivalents, and tend to switch quickly between different brands.

The luxury marketing landscape in China is particularly diverse and fast-moving. This constitutes a unique challenge for brand owners when marketing luxury fashion goods in China.

Creating a successful and sustainable marketing strategy requires luxury brand owners to keep up with the newest trends, including the use of the latest fashtech.

If you have any questions on this article please contact us.

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Thomas Pattloch



 

Thomas and Ang discuss the challenges and opportunities for luxury brands in China.

"The luxury marketing landscape in China is particularly diverse and fast-moving. This constitutes a unique challenge for brand owners when marketing luxury fashion goods in China."