Savvy Luxury Brands Will Refocus Marketing Efforts Online For the past week, Beijing's latest edict banning luxury advertisements on official radio and television stations, as well as billboards, has gotten industry observers all atwitter. According to a statement released Wednesday by the State Administration of Radio, Film and Television (SARFT), such ads "promote incorrect values and help create a bad social ethos,” vices the Chinese government has desperately tried to ward off with a comparable ad ban in 2011, a public spending crackdown this past summer, and a luxury property clampdown for government officials. As such, radio and television stations have been ordered to pull any advertisements that promote extravagant gift-giving -- i.e., “waste” -- for items such as high-end watches, rare stamps and gold coins. Unlike the outdoor ad ban in 2011 (previously on Jing Daily), which prohibited ads in public places that “promote hedonistic or high-end lifestyles” to “ease public concerns about the country’s widening wealth gap,” this year’s ban is just another attempt to curb ostentatious gifting by (or to) officials while papering over deeper societal issues. However, we're doubtful that the ban will ultimately have much of a damaging effect on the luxury market for a number of reasons. Keep in mind that 2011, the year of the last highly publicized ad ban, was the biggest boom year for the Chinese luxury market. One reason the ad ban will most likely fail is that the consumer segments that are most vulnerable are older consumers who still rely on publicly printed or broadcasted advertisements for information, or those who have not yet acquired the digital touch. Over the past two years -- only hastened by the last ad ban -- the luxury market within mainland China has undoubtedly gone digital. China’s burgeoning luxury e-commerce market is expected to have surpassed US$3 billion last year, enticing an increasing number of retailers and brands to jump on the online bandwagon, both for sales and marketing. Additionally, China's relatively young luxury consumer -- far younger than their counterpart in the West -- has, by and large, turned to mobile devices for luxury news and e-commerce, getting product information and brand updates in bite-sized pieces via social media platforms like Weibo and WeChat. WeChat’s Verified accounts capability also allows brands — among them Louis Vuitton, Cadillac, and Coach -- to blast out “rich media content” such as video, text, audio messages, and photos to their WeChat followers, building brand awareness by exposing the audience to more immersive mobile content. Furthermore, both Weibo and WeChat have recently rolled out payment systems, making mobile shopping through these platforms a hot topic. Finally, with a travel market worth some US$232 billion as of last summer and Chinese tourists projected to take 100 million by 2020, Chinese consumers continue to spend lavishly on luxury items outside of the Mainland. So what does this all mean? It means the ad ban will fail to have much of an influence on arguably the most active luxury buyer segments in China: young, white-collar, digitally native, outbound-traveling shoppers, who do a significant amount of pre-purchase research online. (And have serious sway on the luxury purchases made by their older parents and family members.) Though print and TV ads are unlikely to disappear in China -- fashion magazines continue to burst at the seams with them, in fact -- as one Seeking Alpha report suggests, the ad ban could be good news for online platforms such as search engine Baidu and online video site Youku, as luxury brands may invest more in digital to get their message out. Since, according to Tech In Asia, Baidu is one of China’s largest advertising providers, it certainly stands to benefit both in the short and the long-term from this ad ban, as vendors who buy successful ad campaigns online will be more likely to stick with web ads in the future. Similarly, as luxury brands already have a significant official presence on video streaming sites like Youku, the ban will most likely just convince these brands to reallocate resources. In many ways, they have already made aggressive moves in this direction, with branded “mini-movies” (微电影) — trailer-length, cinematic segments often featuring celebrity faces – moving to the forefront of digital advertising in mainland China. As such, the ad ban is essentially targeting advertising segments that have become less ubiquitous, influential, interactive, and cost-effective than digital marketing. While Beijing's edict aims to project a moral agenda amid still-rising luxury demand, it does not take into consideration the nature of today’s market in China, in which more consumers are conducting big-ticket transactions online or overseas.
