How Tiffany’s China Strategy Combats Economic Turbulence

Diamond retailer Tiffany & Co.’s latest June earnings attributed its continued negative growth to two main factors: a strong U.S. dollar throttling its overseas sales and softer tourist spending across its main markets. Indeed, shifting currency headwinds constantly challenge luxury brands who depend heavily on Chinese tourist spending. Meanwhile, foreign policy like the full-blown trade war between the United States and China continue to add to economic uncertainty. As such, it is vital that brands focus on building a relationship with the local Chinese consumer that withstands political and economic shifts. Tiffany aims to do just that, with the launch of the brand’s “Vision & Virtuosity” exhibition, which will open on September 23 (running through November 10) at the Fosun Foundation Art Center, in Shanghai. The exhibition is the largest exhibition that Tiffany has ever done in China. The brand will celebrate its 180-year history and heritage in a unique experiential setting, with installations contextualizing the brand’s trailblazing moments and documenting the numerous “Tiffany firsts” such as the introduction of the modern engagement ring, the Tiffany Setting. Last week, Jing Daily sat down with Tiffany & Co.’s chief executive officer, Alessandro Bogliolo, at the company’s headquarters in the city of New York to chat about their upcoming Shanghai exhibition, the effects of the trade war, and the brand’s China strategies. What made you decide to have such a massive exhibition in Shanghai in September? Out of our research, what we found is that Chinese customers are very interested in luxury brands, but there has been a sort of overexposure of messages to about all these different brands. We feel it’s important to be very clear about a brand like Tiffany, the depth and the richness that it has. It’s a brand that has an amazing history, legacy, capabilities, and a lot of these things are not well known in China. So, we wanted to communicate that in a special way. It’s also the first exhibition that we'll do in a totally different way — that instead of being just a retrospective, a little bit museum style of the history of Tiffany jewelry, these 350 archival and some modern pieces of our jewelry will be displayed in a more experiential environment that refers to certain themes that are the DNA of the Tiffany brand. The ultimate purpose is, hopefully, for the visitors that go to the exhibition, will be to fully grasp what Tiffany stands for. In this exhibition, how does Tiffany's heritage connect with digital-savvy Chinese millennials and Gen-Z consumers? There are a couple of digitally interactive components to the exhibition designed to be shared and experienced. There’s a digitally interactive element with the Breakfast at Tiffany’s script in which visitor's can read Audrey Hepburn's personal annotations. The script is accompanied by a video installation displaying selected sequences enriched by behind the scenes content and film excerpts. Then, in the Love Room, there's another digital element, Celebrate Modern Love, where visitors can write their own personal declarations of love that then ripple together with the handwritten messages of other visitors into a virtual piece of artwork. But what, for me, was very important, was to be authentic — not just to be gimmicky and have a lot of digital things. Behind every single Tiffany piece, there is a history, which will be presented for those that are more interested in the history of the brand and the craftsmanship. How is the trade war weighing on the brand's sales? Where we are affected is our jewelry that is exported from the U.S. into China now has a higher duty than before. [Note: tariffs increasing on jewelry that companies export from the U.S. to China from its current levels to a new level of 25 percent on average] But we have decided not to penalize the Chinese consumers for this, and we have decided not to transfer these extra costs into the price of our jewelry but to remain competitive on the market. But as it comes to the relationship between Chinese consumers and Tiffany, they are actually excellent: our digital penetration in China keeps on increasing, and our sales in mainland China are of double-digit growth, which has been very strong for several quarters. In other words, there has been no negative impact on consumer sentiments. What are Tiffany’s plans for sales channels in China? We have about 35 stores in mainland China. So, we could open maybe a few more stores in the future, but with the main investment that we are making in stores in China, number one is to make our existing network more prominent. So, rather than having more stores, there are some stores that have to be relocated or have to be enlarged in order to really give Chinese customers a reflection of the experience. The other one is digital. We have a website in China now which is not e-commerce enabled, but in Q3 it will be in a way that Chinese customers will be able, like in other 13 markets in the world, to shop directly from Tiffany.cn. How do you guarantee a luxury shopping experience online? First of all, it’s on our own website, so price integrity is there. People talk a lot about the trillions and zillions of e-commerce shoppers in China, but like in other parts of the world that is discounted, promotional, et cetera. So, this is not what we want to do. This is why we will focus on our own website. But it’s not only for prices. It’s also for experience. We invest a lot of money in assets, video, information, imagery, and also chat in a way that you provide a service online about information or where you can book an appointment from the website into physical stores. So, this is the way we make sure our digital experience is sophisticated. Then ultimately, I expect customers for more expensive products to ultimately go to the store, because it’s always a beautiful experience to visit a Tiffany store. But there is a lot of information and education that can happen on the website. “Experiential retail” is trending in China and your Tiffany Blue Box Cafe at your NY flagship is a prime example. Do you plan to bring it to China in the future? In terms of experience, we do different things in different markets. So, in China this year, we will have a pop-up version of our Blue Box Café, but it will only be temporary for the exhibition. This interview was condensed and edited.

How Tiffany’s China Strategy Combats Economic Turbulence

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Published July 08, 2019

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How Tiffany’s China Strategy Combats Economic Turbulence