Only Three Brands Qualify As Digital “Geniuses” In China; 36 Rated As “Feeble”
This week, the New York-based L2 Think Tank released its new Prestige 100 China IQ report, ranking 100 prestige brands operating in China on their adoption and use of digital platforms to reach China’s ascendant luxury consumers. Following up last year’s report, which found that most high-end brands were failing miserably in their attempts to connect, digitally, with Chinese shoppers, this year’s far more comprehensive China IQ includes facts both well-known (China’s luxury consumers are relatively young, enjoy shopping abroad, and increasingly located in tier-2 cities) and obscure (no clear leader among online communication platforms). As such, the report is critical reading for anyone interested in the rapidly developing, and even more rapidly shifting, Chinese luxury market.
Highlights of this year’s China IQ report:
- Audi, Burberry and BMW are the only brands ranked as “Geniuses” (3 percent, Digital IQs of over 150), owing to cutting-edge campaigns like Audi’s use of six different social media sites, Burberry’s use of Jiepang and Youku, and BMW’s excellent translation of global campaigns for the China market.
- Nine brands, including seven automakers, rank as “Gifted” (IQs between 110-133). Of these brands, Volvo (which challenged consumers to design its newest commercial via Sina Weibo), China newcomer Benefit Cosmetics (which launched its astonishingly popular “Benefit Beach Honey” campaign on Sina Weibo and Kaixin), and Cadillac (which debuted its “Route 66″ short film, starring popular Hong Kong actress Karen Mok, on its site and across social media platforms) ranked highest.
- 20 brands, including seven fashion labels and five cosmetic brands, rank as “Average” (IQs between 90-108). Top “Average” brands include Herborist, Swarovski, and Cartier, all three of which incorporated microsites or BBS communities into their campaigns in limited ways.
- 31 brands, including 13 watch and jewelry brands, rank as “Challenged” (IQs between 70-89). Watchmakers and jewelry brands were called out on the study for one-dimensional use of platforms like Sina Weibo, Youku and Taobao.
- A whopping 37 brands rank as “Feeble” (IQs between 24-64), with five wine and spirits makers among the 10 lowest-ranked brands in the study.
- The highest-ranked Chinese domestic brand is cosmetics maker Herborist (which comes in at #13), owing to the sampling program its launched through the popular fashion BBS communities Only Lady and Metroer. All other Chinese brands rank as either “Challenged” or “Feeble.”
- Two of 2010’s five Genius brands, Audi and BMW, kept their positions, with the other three (Lancome, Estée Lauder, and Clinique) staying in the top quartile. This, according to L2, backs up “the notion that constant innovation and investment are requisites for digital success in this dynamic market.” Due to their e-commerce launches and massive investments in Chinese social platforms in the last year, Burberry and Benefit Cosmetics “were among 2011′s biggest winners.”
- Over two-thirds of the Prestige 100 were “Challenged” or “Feeble,” which L2 notes suggests that digital efforts in China “remain nascent across the industry.” The biggest factor differentiating “Genius” and “Gifted” brands was the website dimension, as brands that scored best in this year’s report have developed transaction-oriented sites with “superior customer service, Chinese-specific technology integration, tailored content, and consistent translation.”
- Automakers account for nine of the top 12 spots on this year’s list, up from seven in last year’s top 12, and make up six of the top 10 spots in terms of “organic buzz.” (Relative aggregated organic mentions on Sina Weibo and QZone, and number of videos on Youku and Tudou)
- The biggest change in site investments year on year are tied directly to sales. The number of e-commerce enabled brands doubled this year, and one-fifth now sell online. Additionally, 23 brands have added offline retail locators. Brands selling online registered average IQs 16 points higher than those without online sales, “suggesting that as an organization begins generating revenue online, additional resources are allocated to digital marketing.”
- “Weak credit card penetration rates and online fraud fears” still present some of the biggest obstacles to greater e-commerce penetration in China. Methods that brands are using to combat the inadequate payment infrastructure in China take a number of forms, including accepting payments from the customer’s bank online. Over 60 percent of brands provide a payment option through Alipay, and nearly 60 percent of brands still accept cash on delivery (COD).
- Reflecting the nagging “missed opportunities” caused by underserving Chinese outbound tourists, though 56 percent of Chinese luxury purchases are made outside of the Mainland, just over half of Chinese-language sites have a U.S. and European store locator.
- Luxury brands continue to grapple with visibility on Baidu, with only 31 percent of brand sites coming up first in organic search results for the Chinese brand name, and 42 percent of sites are not returned in the top three. Interestingly enough, L2 notes that organic visibility has actually declined on Baidu since its May 2010 report, “as the Baidu algorithm increasingly prioritizes organic returns of customers purchasing terms on other Baidu platforms.” A presence on Baidu is critical, however, as brands are, otherwise, “virtually invisible in China.” Baidu’s algorithm, L2 adds, is different than Google’s and requires a dedicated strategy: “In many ways, Baidu is simpler and more accessible than Google, and can be a very powerful tool with minimal investment.”
- Traffic to Sina Weibo is up more than 490 percent in the past three months, and high-end brands are rightfully turning to the platform in record numbers. Of all prestige brands with a presence on Sina Weibo, the domestic Chinese jewelry IDo (previously on Jing Daily) leads the pack with over 400,000 followers, most of whom took part in the “Irresistibly Appealing” campaign.
- Brands continue to miss an opportunity in the mobile space. A little over half of the brands in this year’s list have apps in the Chinese iTunes store, but two-thirds of these apps lack a Chinese-language option. Only three, Lancome, L’Occitane, and Shanghai Tang, are commerce enabled, and only two brands, Aston Martin and Dolce & Gabbana, have apps for Nokia’s Ovi platform.
Jing Daily Observations
- Luxury automakers, buoyed by strong sales, have been among the most motivated proponents of Chinese digital platforms, and we’re seeing similar moves by automakers not included on L2′s list this year, such as MINI — which launched its second “Chinese Job” nationwide event online this summer. Considering premium automakers like Audi and BMW are now targeting younger, middle-class car buyers who have yet to purchase their first automobile, the decision to “go digital” is both smart and obvious. This is particularly true for Audi, which is more readily associated in the minds of younger Chinese with the ubiquitous black four-door Audis that have been, for the last decade or more, the default automobile of Chinese government officials. BMW, on the other hand, has been more associated with more active, successful entrepreneurs. Considering both brands want to court drivers in their late 20s and early 30s, leveraging popular platforms like Sina Weibo is a no-brainer.
- The poor performance of watchmakers and jewelry brands perhaps indicates that they’re still not entirely comfortable with the democratizing effects of digital outreach. As an article this week in AdWeek pointed out, though major luxury brands have reluctantly embraced the digital world, many are finding that “digital isn’t as easy to do as some of them would like to think,” and if these brands flub their digital turns, the democratizing effect of digital “can backfire on them, further eroding the aura of exclusivity that defined them for generations.” Though watchmakers like Hublot have, in recent months, launched microsites or digital campaigns (featuring celebrities like Han Han, in Hublot’s case), the fact that so many Swiss heritage brands rank among the “Challenged” or “Feeble” brands indicates that most are content to simply, as L2 says in the case of Omega, “rest on the laurels of [their] China legacy.” This may not adversely affect sales right now among the often middle-aged buyers who make up the core of these Swiss watchmakers’ sales now, but could damage perceptions among the younger consumers who’ll be shopping for $10,000+ watches in coming years.
A copy of the L2 Digital IQ Index: China is available for download on the L2 website. Anyone interested in, involved in, or thinking of investing in the Chinese luxury market would be well served to give it a thorough read.