The global luxury market is facing a time of rapid change: from the evolving tastes of millennials to the slowing China market, and from the growing importance of e-commerce to the influence of social media, brands face many challenges and opportunities in Asia for the decades to come. At the recent International Luxury Conference 2015 organized by ASCo that took place in Seoul, South Korea from May 20 to 21, luxury experts from across the Asia-Pacific and beyond gathered to discuss key trends shaping the industry. Speakers from Ogilvy, Rolls-Royce, Swarovski, Ipsos, Jing Daily, Boucheron, Estée Lauder, and more provided a wealth of advice for luxury brands and marketers. Below are five main takeaways for brands in regards specifically to Chinese shoppers:
Look to the international Chinese luxury consumer.
Thanks to the conference’s location in Seoul, a big topic was Chinese tourist shoppers—especially in South Korea, where their numbers are booming. Thanks to South Korea’s close proximity to China and abundant duty-free shopping options, Chinese tourists are a significant force for the country’s retailers. According to Giulia Callegari, the head of e-commerce & luxury for Asia Pacific at OgilvyOne, Chinese spending in South Korea is expected to top US$29 billion by 2020, and 67 percent of all duty-free purchases are expected to be driven by Chinese nationals. Ipsos Asia-Pacific Executive Director Simon Tye noted the importance of analyzing shopper demographics, stating that 55 percent of all Chinese shoppers in South Korea are female (compared to a 46 percent average for all other countries), while 54 percent are below 35 years old.
Data is vital to digital luxury marketing.
According to Tye, digital marketing is crucial for reaching luxury consumers—he noted that 51 percent of mainland Chinese luxury consumers say social media is relevant to their lives, while 31 percent said it is completely relevant. But it’s important for brands to remember that they “don’t need a digital strategy,” but rather “need a strategy for a digital world,” emphasized Callegari when discussing the optimal ways luxury can utilize digital channels to reach their customers. “Don’t count the people who reach, reach the people who count,” she said. While mass-market brands are all about quantity of views and shares, luxury needs a different digital mindset due to its exclusive identity.
As a result, it’s important for luxury to use digital tools to collect data for CRM strategies. “Customer journeys and the amount of touch points have gotten really, really complicated,” she noted, stating that in China, it takes 10 to 11 digital “touch points” to convert a luxury consumer, and as many as 14 or 15 when it comes to consumers in China’s Tier 3 and 4 cities. This is because “customers are less confident” and “need a higher level of a burden of proof” in these locations.
E-commerce is necessary for luxury success in China.
While some luxury brands are wary of setting up e-commerce, Callegari outlined its strengths for the China market, stating that it is “still mainly used as a virtual showcase” for Chinese consumers. “The importance of a digital presence in China is key because people research and decide the purchase before they leave the country,” she said.
Learn about the Chinese millennial mindset to prepare for the future.
China’s “post-80’s” or millennial generation is of crucial importance for luxury brands. According to Tye, China is the world’s youngest luxury market, and many experts examined key characteristics of the millennial generation. Tye outlined the ways in which they dramatically differ from China’s “baby boomers” born between 1950 and 1964 and Generation X, born form 1965 to 1979. The changes in the social political landscape of China have led to dramatically diverging characteristics that are unique to China—millennials grew up with the one-child policy and face strong pressure to succeed. Like many members of their generation across the world, however, they are accustomed to Western brands and closely follow the latest trends.
Millennials are also redefining what “luxury” means, said Callegari. “They challenge the luxury brands’ pricing codes,” she said, “so they have a value-for-money concept. The value-for-money concept is dangerous for luxury brands because one of the foundations of luxury brands is that the price is completely irrational, and the moment you try to rationalize the price of a luxury item, you’re not discussing a luxury item anymore.”
Don’t forget in-store service.
While digital marketing and e-commerce are vital for appealing to China’s luxury shoppers, luxury is also all about the brand experience. A total of 92 percent of Chinese luxury shoppers are dissatisfied with their in-store experience in China, said Callegari, a number that is much worse than other parts of the world. “If you go to Paris, there’s not only the allure of the city,” she said, but “you have someone in front of you that’s very knowledgeable—that believes and breathes the brand, that knows a lot about the brand, that has something in common with the brand.”
“The experience that people are getting with the physical purchase has lowered in quality a lot because it went up in volume, and what happened is that a lot of people turned to online purchases,” she said, noting that “it’s a pity and a missed opportunity.”
The first things brands should do is manage their China sales staff, which are known to go rogue in China in an attempt to boost sales. “Most salespeople use WeChat,” she said, “and they manage the conversation with the clients in a way that is not on-brand because they take snapshots of the items in-store, they say ‘come in, I’ll give you 5 percent off…’ and brands are completely excluded from this conversation, which is potentially the most important conversation that’s happening with the customers right now.”