Why Most Luxury Brands Fail with Chinese Millennials

Altogether, Chinese citizens represent the biggest group of luxury consumers worldwide. Within them, no other Chinese consumer group buys more luxury than Millennials, who account for roughly 70 percent of luxury sales — and no other luxury market in the world is younger or more digital. Despite the strong growth rate of the luxury market in China, most brands still fail to address Chinese Millennials appropriately. But this seems to contradict the continued high growth rates of the most successful luxury brands in China like Dior, Louis Vuitton, Chanel, or Gucci. How can we talk about them failing to address China’s biggest market? Yes, many brands are doing well, but most successful brands aren’t tapping into their full potential, and many others are failing miserably. While the majority of brands entering China have a steep learning curve, nearly every brand is not maximizing their potential in the market today. Here are five reasons why brands are leaving good money on the table when it comes to millennials: 1. Underestimating Chinese consumers Chinese millennial consumers are highly educated, and their familiarity with digital tools makes them highly empowered. Despite that, brands do little — or the wrong type of — market research. Traditional market research is a waste of money in China because surveys focus on too few cities, don’t reach enough consumers, and their results are too slow. In the fast-changing world of Chinese millennial consumers, studies that were taken even two months ago might already be useless or misleading. Only real-time consumer measurements of AI-powered social media listening techniques can steer brands accurately in China. Chinese social media networks are firewalled and challenging to analyze, but with the right expertise and machine learning, brands can correctly observe or analyze data on their consumers, brand, competition, and more. 2. Using the wrong communication content Many brands fail because they convince themselves that the content produced for the rest of the world will also be relevant in China. Aside from the content itself, brands must know the delivery systems. Many underestimate the importance of Chinese key opinion leaders (KOL) and influencers, given that they help brands successfully engage with potential customers on local social media platforms like WeChat. Meanwhile, companies waste millions of dollars with “classic” advertising in China instead of fully embracing digital methods that produce a measurable ROI. Creating the wrong type of content not only wastes money on bad methods, but brands can’t even measure whether or not that marketing has lead to any significant sales. 3. Underestimating the power of brands in China Chinese consumers love brands because they identify with them. That’s why brand storytelling is much more important in China than in any other place in the world. Yet despite this, most brands do not create an end-to-end brand experience for Chinese consumers. With few exceptions, they focus on selling and not on creating an experience across all touch points. That requires a thorough brand audit, a positioning exercise, and a customer journey assessment. Without perfect brand storytelling at each interaction point, luxury brands will lose the Chinese consumer, without exception. It’s surprising that luxury brands aren’t rigorous about experience creation. Chinese millennials are more discerning in China than in other countries, yet they are not serviced better. 4. Not being digital enough Some brands have a CRM (customer relationship management) system, but it’s handled by customer service, while others have a CRM online, but one that isn’t at all related to store visits. In other words, many brands do not use their most valuable asset: data about their consumers. And by not using their data, they are not servicing their consumers sufficiently. Therefore, by not being digital enough, they create inferior consumer experiences. This is positively the kiss of death in China. Everything MUST be digital there. In all cases, a digital infrastructure must be designed and deployed that connects all data — including sales data — and uses advanced data querying methods to create highly personalized experiences that feel luxurious. Only digital means can do that today. 5. There is no free lunch Launching in China without a budget and just hoping you’ll attract hundreds of millions of millennials in China is a guarantee for failure. Weak brands in China with bad economics, unprofitable store locations, and expensive overhead costs will infinitely weaken a brand, and in such scenarios, the brand’s best talent will quit, further accelerating its downfall. Investing in the perfect launch, after thorough brand and strategy development, is absolutely necessary. For many luxury companies, China has become their biggest headache and correcting mistakes winds up being much more expensive than if they’d done it right from the beginning. In short, brands need to rethink their approach when it comes to understanding China and its millennial consumers. They need to become consumer-centric, meaning that they must create relevant content and build a strong brand identity. That requires a strong story and a rigorous customer journey design. They also need to become digital: If they think they are already digital, then they need to become even more digital. And they definitely can’t launch in China without investing first. This is the only way to have a chance at success in this highly competitive market. Daniel Langer is CEO of the luxury, lifestyle and consumer brand strategy firm Équité. He consults some of the leading luxury brands in the world, is the author of several luxury management books, a regular keynote speaker, and holds management seminars in Europe, the USA, and Asia. Follow @drlanger

Why Most Luxury Brands Fail with Chinese Millennials

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Published June 03, 2019

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Why Most Luxury Brands Fail with Chinese Millennials