What Do Changes In China’s Digital Landscape Mean For Luxury Brands?

Recent Alibaba Deal Highlights Importance Of Social Media Strategies Incoming Alibaba CEO Jonathan Lu, who will be replacing Jack Ma. With two of the largest online platforms in China announcing a $586 million deal last week, luxury brand professionals are left wondering what impact this new juggernaut might have on their efforts to acquire customers among China’s 560 million Internet users. Last week, Alibaba.com Limited, the Internet giant that operates Taobao.com and Tmall.com, two of China’s largest e-commerce Web sites, announced that it had agreed to acquire an 18 percent stake in Sina Corp.’s Weibo.com, one of China’s leading microblog platforms, for $586 million in stock. Alibaba has the option to raise its stake to 30 percent. This deal underscores the immense importance of social media and word-of-mouth in the purchase decisions of Chinese consumers – both online and offline – and their impact on shareholder value for luxury sector investors. Under the terms of the deal, Alibaba gains unprecedented access to the country’s dominant social platform, allowing it to more closely integrate social commerce into its Taobao e-commerce platform. Although few luxury brands are conducting e-commerce on the Tmall platform so far, brand professionals should pay close attention to this deal and its potential impact on how brands interact with customers on Weibo and its role in the online and offline purchase process. Sina Corp’s Weibo has more than 500 million users, 46 million of whom are active daily. Taobao, Alibaba’s consumer-to-consumer online shopping platform, similarly has 500 million registered users, and Tmall.com, the business-to-consumer portal, is now home to more than 70,000 brands for sale via 50,000 merchants. Early Standouts in China’s Social Media Scene Automakers and beauty brands were the quickest to understand the importance of social media in China. But few luxury brands leverage the plethora of Internet platforms to their full advantage as a strategy to drive traffic not only to their doors in China, but also to high-profile locations around the world, where more than 60 percent of China’s luxury purchases occur. An image from Coach's recent Mother's Day marketing campaign on Weibo. (Coach) In a market in which the average age of a millionaire is only 35, luxury brands such as Coach and Burberry have been leading the market with innovative engagement of younger Chinese consumers through social media. Coach runs frequent digital media campaigns to connect with China’s online population, for example: operating a game to bolster the brand’s New York heritage, generating mobile interest in its monthly Coach Newsletter, hosting a “hot mom” picture competition, creating buzz with promotions such as their “Surprise Friday” as well as brand-driven campaigns with their Coach mobile wallpaper. Perhaps the most successful digital prestige brand campaign to date was the recent L’Oreal product launch for its “Deeply White” product line. In late March, the company teamed up with Tmall on a social media outreach campaign highlighting celebrity participation from the controversial and popular winner of China’s first reality singing competition, Super Girl. The campaign sent pre-sale promotions to Weibo’s millions of users, resulting in more than 10,000 pre-orders in four days, and became the first brand-driven content ever to land itself in Weibo’s Top 5 Trending Discussions. As luxury brands continue to experiment with the digital landscape in China, look for more innovative and integrated campaigns to attract China’s affluent, digital and mobile-savvy consumers. What Does This Mean For Your Brand? Here are some recommendations for maximizing your efforts in China’s digital landscape: Chinese-language social media is not just about the mainland China market. Doing it right can have significant implications for your global Chinese consumer business. Make sure you are using Chinese-language social media to drive traffic to your global doors. Don’t forget about online forums , or “BBS,” which are extremely active in China. They’re the go-to platforms for researching purchase decisions and travel options. Brands should be actively engaging with users and driving conversations on online forums to gauge their brand perceptions, as well as to actively provide information and answer questions. Engage across multiple platforms. Luxury brands should be on Sina’s Weibo, but they should also be evaluating the rich universe of digital platforms such as Tencent Weibo, Youku, WeChat, and JiePang to develop a comprehensive strategy, not just for online but also for the very active mobile users in China. Optimize your digital platforms for China. The best content in the world won’t produce any results in China if its not hosted correctly and optimized for China’s unique search, mobile, and desktop access vectors. Take risks and try new and innovative campaigns in China. Chinese customers love to learn about brand heritage and history – so innovate around these concepts to find unexpected and delightful ways for Chinese customers to learn about and love your brand. E-commerce opportunities in China for luxury brands are still in their infancy, due to customers’ tendency to associate e-commerce with discounting and group purchasing, and to persistent channel conflicts with offline boutiques. Luxury brand professionals need to embrace Chinese e-commerce early and often, not only to learn about this crucial customer segment and build brand, but also to feed consumers’ extensive online research prior to offline purchase. Renee Hartmann is co-founder of China Luxury Advisors, a boutique consultancy that helps luxury brands and retailers to develop China-related strategies, ranging from market entry to social media to attracting, converting, and retaining Chinese tourists. Renee has been focused on the China market since 2000, with a specialty in understanding and selling to the emerging Chinese consumer. She has worked as a brand owner, retail operator, consumer researcher, public relations specialist and market entry strategist in China. Follow China Luxury Advisors on Facebook and Twitter.

What Do Changes In China’s Digital Landscape Mean For Luxury Brands?

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Published May 13, 2013

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What Do Changes In China’s Digital Landscape Mean For Luxury Brands?