Catch me if you can: Marketing to the new Chinese luxury shopper
With Chinese consumers massively shopping for luxury abroad and online, traditional marketing formulas have limited impact. It is time for luxury brands to rethink their go-to-market approach, putting digital at the core.
Wei proudly shows her latest catch: a colorful textured leather mini handbag she bought during her last business trip to Paris. Wei epitomizes the shopper the whole luxury industry seems to be after at the moment: a start up entrepreneur from Hangzhou and representative of China’s ‘Cultured Youth’, she is both very success driven and hungry for culture.
In fact, she is part of the upcoming generation of Chinese shoppers who are redefining luxury marketing through a triple change: structural change in the market dynamic, change in consumers attitude towards luxury and change in how they navigate the world through digital.
Don’t look at the market numbers
At first, it looks like China as a market is not performing so well, with a ‘disappointing’ €17.9 billion in personal luxury goods in 2015, a -1% decline vs 2014. But market numbers are misleading as China only accounts for 20% of Chinese shoppers’ luxury goods purchases.
In reality, Chinese consumers represent a whopping 31% of the luxury purchases across the globe, way ahead of any other nationalities. It’s a more global marketplace than ever, which dynamic is directly influenced by exchange rates: recent growth in Europe and Japan can almost be purely explained by Chinese shoppers, whose buying power is at an all time high in the context of a low euro and yen.
From the bling dynasty to quality & experience seekers
But it’s not just a question of currency. As the relationship between Chinese consumers and the luxury industry matures, ‘bling’ addicts are giving way to a more informed generation of luxury shoppers. Cultured Youth shoppers, like Wei, are no longer into showing off oversized logos. 86% of them claim they are looking for quality over exclusivity and 78% for great experiences. This explains why more ‘niche’ brands are getting momentum vs the usual blockbusters.
Shut down the laptop: the mobile age is now
The way Chinese consumers navigate brands is also profoundly transformed by their heavy use of smartphones, with 40% of their internet browsing now going through mobile (vs 27% for the USA and the UK). As a matter of fact, China is already a leading country for M-commerce: last Singles Day in November 2015, 69% of Taobao’s total US$14.3bn revenue came through mobile purchases!
This new reality is a shock to a lot of brands’ system as luxury has been relatively late in embracing digital compared to other industries.
What luxury brands’ marketing departments should do
To capture the opportunity, luxury brands need to rethink their go to market approach around this atypical consumer journey, moving away from market boundaries and investing into digital. 75% of all luxury sales are now influenced by digital and Chinese consumers check an average 13 touchpoints, 7 of which online, before making a purchase decision.
Three areas are crucial to look at for luxury brands to be found, preferred and bought by Chinese luxury shoppers.
First, being found. As Chinese shoppers navigate the world capitals with their smartphones in hand, mobile search optimization is a key area of improvement. We’re not talking about Google, which is almost irrelevant for these shoppers: wherever they are in the world, Baidu is where Chinese search.
Being preferred: maximizing conversion will not happen without luxury brands building truly global consumer databases. Too many companies still have regional or even local databases which are not connected together. This is a big endeavour but an absolute must to enable a fluid CRM experience.
Wechat, China’s fastest rising platform for eCRM and social commerce, is becoming the mobile weapon of choice in this context, with its geolocation and electronic payment functionalities. It is expected to take on an additional 100 million users in 2016, reaching 750 million people.
Finally, physical stores are still crucial touchpoints as nothing beats the touching and feeling moment, not to mention the ability for brands to bring their own universe to life. Yet stores need to become ‘phygital’. Connecting them to the digital journey will help brands better leverage consumer insights in real time and maximize shopping basket value anywhere in the world. Naturally travel retail is a huge opportunity as it now represents 6% of the total luxury goods sales as a result of the rise of the traveling Chinese luxury shopper.
With the exception of connecting global databases, these changes are not so difficult to implement from a technical point of view. However they often require a significant shift in the mindsets of leadership teams as they fundamentally challenge years of established marketing recipes and have an impact on organizational setups.
One thing is for sure: the brands that embrace this new digitally-enabled marketing approach will be the ones winning the hearts of Wei and her fellow traveling luxury shoppers.
- Luxury Goods Worldwide Market Study 2015, Bain & Company
- ‘Is the definition of luxury changing?’ — Luxury Society, November 2015
- Taobao’s Singles Day report November 2015
- Digital Year 2016 report, Wearesocial
- ‘Digital inside: Get wired for the ultimate luxury experience’ — McKinsey July 2015
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Moodboard by Sophie Chalumeau