Young, urban, tech-savvy, and the world’s fastest-growing group of luxury consumers—is there a better reason for purveyors of conspicuous consumption to gather in Paris to further de-mystify digital trends in the prized Chinese luxury market?
At the March 5-6 China Connect conference, Europe’s largest gathering of experts on Chinese consumer trends, 40 speakers shared tales of diverse innovation in the face of China’s luxury sales dropping between 1 and 11 percent in 2014, according to varied estimates.
Common threads to successful brand strategies suggest it’s time to stop talking about the “luxury market in China” and to talk about the “Chinese luxury market” (worldwide), prepare for a massive increase in tourism when in 2020, 20 percent of China’s 200 million outbound travelers will visit Europe, and to respect Chinese culture when introducing a new brand, rather than behave as “brand colonialists.” Case in point: “Fendi chose a fashion show on the Great Wall (2007),” said Christophe Cais, co-founder of the consumer insights group Albatross Global Solutions. “The rest of China enthused but Beijingers thought it disrespectful.”
Understanding those born between 1982-94 is key to engaging the “me, myself, and I” high-spending millennials in their pursuit of happiness and instant gratification. “For this generation shopping is social,” said Thomas Meyer, co-founder of Asia-based Mobile Now. “It means brands must adopt the fastest technology—or this crowd switches off. It’s the reason WeChat will introduce an ‘Open Wallet’ service, linking a personal scan code for shoppers to buy, track delivery, pay, and see a bank debit online.”
The growth of e-commerce is at the front of every retailer’s mind. Italy’s LuisaViaRoma, one of the world’s chicest multi-brand boutiques, is a standout pioneer in China. The Florentine shop has annual sales of 100 million-plus euros, with 90 percent online and Chinese consumers their fastest-growing market. On China’s November 11 e-commerce holiday Singles’ Day, the company’s sales to China outstripped all others.
That distinguishes CEO Andrea Panconesi as one of the most influential luxury e-tailers in the China market. So why have Chinese fallen for a single Italian boutique—admittedly with an astonishing 500 brands?
“The authenticity of a product packaged and posted from Florence (four to five days to ship to China) ensures everything is genuine in a market where it is increasingly difficult to discern the real from the fakes,” said Panconesi.
The company, which began in the 1920s when Panconesi’s grandmother Luisa opened a small millinery shop on the via Roma, now employs 120-plus people in the logistics headquarters where all operations are handled in-house. He’s not concerned with Amazon or eBay trying to crack this market—since he will always ship from Europe.
“Even major brands who warehouse in China have problems fighting fakes. We remain the genuine vendor and we will never have a warehouse in China because our premise is to send authentic luxury—brands like Balmain, Valentino, and Dolce & Gabbana—from Europe.”
Chinese tourists visiting LuisaViaRoma’s brick-and-mortar store (Panconesi says, “even Americans can’t pronounce it, certainly not the Chinese, so we changed it to LVR”) have increased as a result of the e-commerce site. They’re in search of a richer European shopping experience that takes them beyond the ubiquitous Asian malls.
Hermès, with 23 stores in China, recognizes this need for “experiential” shopping. They bucked the “mall” trend last September, opening a flagship store in Shanghai’s French Concession. Taking over a former police headquarters, the company restored the historic 1928 building to become what Guillaume de Seynes, MD of Hermès International said “was a risk but resulted in a flagship as impressive as our three in Paris, Tokyo, and New York.”
De Seynes, whose grandfather designed the famed Kelly bag and whose uncle designed the Birkin, described the biggest challenge in China as the “virgin” customer—or the one with little knowledge about the brand.
“We want our customers to understand our history, quality, craftsmanship—what it is that makes us unique,” he said. The new mini-emporium addresses that, with three ateliers on the second floor where craftsmen share the experience of leather and watchmaking, and tailoring.
“Chinese buy 30 percent of all our goods and we enjoyed double-digit growth last year,” said de Seynes. “This was despite falling sales in men’s watches when the market was hit by the government’s crackdown on gifting.”
De Seynes said Hermès cannot keep up with demand. “We do not restrict sales—we cannot meet demand. We are hiring and training craftsmen constantly. Two new ateliers will open in France in June. It takes 18 months to train a craftsman. We can’t move faster. We are growing volume at 10 percent a year and making big efforts for our Chinese customers, who will lead the market in the future.”
Providing Chinese shoppers in Paris with a richer visitor experience is key, Eileen Le Muet, VP International of Figaro Medias, told the 300-plus guests, who came from 16 countries to China Connect’s conference.
The French newspaper Figaro launched a Chinese-language website late last year, complementing the Chinese language newspaper, Paris Chic, delivered free, four times a year, to leading Paris hotels.
Edited by Anne-Sophie Von Claer, both the newspaper and online site share news of French fashion, food, beauty, and travel with chic Chinese consumers—at home or when traveling to Paris.
Le Muet further supports Figaro Chic through social media, including a WeChat account, tempting visitors in Paris with special offers including free museum passes. Later this year Figaro Chic will launch a standalone app.
Muet said that as recently as a year ago major French brands were not interested in discussing the local market, choosing to ignore the buying power of successful Chinese living in France.
“In the space of 12 months, retailers have recognized this massive audience, since each year thousands of Chinese in France return to China, carrying gifts.”
These Chinese travelers splashing out on luxury abroad prompted Sonia Faucher, co-founder and managing partner of My Luxury Shopper, to team up with Mobile Now to develop an app that will address Chinese outbound global shoppers. Each client will customize the app and engage with the their favorite brands for a richer, advantageous shopping experience.
Faucher, whose Chinese website presents the concept, noted that 75 percent of all luxury purchase decisions are made before departure. With no release date set, the new app will find its way to all Chinese consumer groups shopping around the world.
“It’s time for brands to look at ‘consumer groups’ when they differentiate the market,” said Christophe Cais. “Levels of sophistication in China are segmented. China is not a unified market. However, while Tier 3 and Tier 4 cities are still looking for branded logo products, they are fast catching up. Everybody has the same exposure to the media and influencers.”
Speakers consistently referred to the millennials’ desire to express their identity through their appearance, referring to “mespoke” as an extension of “bespoke.” For a generation seeking sophistication, American television series are their finishing school and the growth in videos that teach “how to dress for the office” or “on a date” is booming. What Japan did in 30 years, in terms of sophistication, China has done in five years, one delegate remarked.
One major concern for brands is the use of KOLs (key opinion leaders) and bloggers to broadcast news on social media, including Sina Weibo. The experience of paying US$500-5,000 for posts—which may not generate satisfactory results—is beginning to cause blogger fatigue for media and marketing executives who are demanding a shake-up of “who’s who” among these influencers.
Brands are looking for new ways to connect—or at least genuine brand ambassadors without fake or purchased followers and with whom they can develop long-term strategies. The brightest star with the most followers is not always proving a guarantee of success.
Susan Owens is the founder and editor of Paris Chérie, a Paris-based fashion website dedicated to bringing French style news to Chinese readers.
China Connect is a two-day bi-annual conference in Paris connecting experts on Chinese consumer trends with French luxury. The next one-day conference, “Selling Fashion Online,” will be on June 4, 2015.