Sponsored Buying Trips Focus Not Only On Price, But Also Branding
With two-thirds of Chinese luxury purchases occurring in either Hong Kong or countries outside the mainland, luxury companies must come up with ways to respond to the unique qualities of this market. Yesterday, Reuters pointed out what it calls a “casino approach” that many retailers are taking, in which high-spending clients on the mainland are given complimentary flights to purchase goods in Hong Kong or Europe, where luxury prices are much cheaper than on the mainland.
To get more details on the strategy, we checked in with Sage Brennan, Jing Daily columnist and co-founder of China luxury consultancy China Luxury Advisors. He talked about the practice with us via email, offering a more in-depth look at these stores’ strategies. According to him, the trips provided by companies aren’t just about price but also branding – customers are often given exclusive experiences, such as visits with craftspeople to learn about a brand’s heritage and quality.
Read the full Q&A with Brennan below.
How long have these casino-junket-style shopping trips been going on?
Jewelers and watchmakers have been flying VIP clients to their boutiques for many years, and have adapted the practice to China as its market mushroomed during the past decade. Jewelers often make as much as 80 percent of their profits from the top 1 percent of their customers, so they have always employed a “whatever it takes” attitude with their top customer segment. The once-in-a-generation opportunity that China’s emerging luxury customers presents has changed the calculus for every smart luxury brand.
How common a practice is it among luxury brands and retailers?
Brands in other (non-jewelry) categories are starting to experiment with a similar model, to varying degrees – not only due to Beijing’s luxury crackdown but also because it’s the next logical step for China-focused “soft luxury” brands like Zegna or Roberto Cavalli in learning how to convert the most affluent and spendy customers. Customers from China appreciate VIP (or at least “special”) service more than most, and have come to expect special perks from prestige brands… wherever they may disembark around the world.
How frequently are these junkets arranged, and for how many shoppers at a time?
This is all over the map, so it’s hard to come up with a concrete answer. Most are 1-5 people. The best junkets include “special experiences” like fashion shows or visits with craftspeople (watchmakers, etc.), or even golf outings. Brands that do this best will find creative ways to demonstrate their heritage and depth of expertise and quality, while providing memorable experiences for customers.
Are they largely focused on Hong Kong, or are shoppers also flown to Europe?
Europe is common, because many luxury brands are headquartered there and have better local resources. But companies are quickly learning that Chinese customers probably place more trust in their brand than in any local tour guide or hotel concierge, which gives them a very unusual opportunity to provide advice and leadership when VIP customers travel and shop. This is not limited to their home base, especially given the strong presence of luxury brands in New York, Los Angeles, and Las Vegas, for example.
It almost goes without saying that this is an extremely erratic market, with broad data variance over time and across brands and luxury categories: this makes generalizing or forecasting very complex. Brand managers need to find experienced advisors and ask thoughtful questions about their unique situations. The good news is that we are very early in the development of this trend, and companies with the strongest brand awareness have time to get on board.