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For the Chinese luxury markets, leave what you know at home

by wrich
gawdo

By: Domenica Di Lieto, founder and CEO of Chinese planning and marketing consultancy, Emerging Communications. https://www.emergingcomms.com 

China was once an easy and happy hunting ground for luxury brands from outside. Older heads in the luxury sector tell stories of European and US labels only having to present themselves before an adoring Chinese public to sell a seasons stock in a matter of days.  

Though memories of the past often flatter to decisive, there were times when mere presence alone was enough to stir the luxury buying public of China. That was a long time ago. A past so different in terms of current consumer buying behaviour it is best forgotten. 

There is no longer a default bias to buying brands from Europe and US, and there has not been for some time. There is, however, another crucial fundamental yet to be understood by luxury Western brands. The majority are still trying to connect with Chinese buyers by talking about themselves. The discussion is about how great the brand is, and it simply is not working.  

Brands no longer the hero

Chinese consumers are not interested in the brand as the hero. They are interested only in what a brand will do for them as an individual, how it will add value and benefit to how they see themselves, reflect their life choices and their values.  

Talking at consumers rather than developing storyboards in which the buyer is hero is compounded by self-compromise when it comes to brand positioning. Often value proposition is too vague. Brands frequently generate communication based on dreams, which is all very well, but when the dream is focused on the brand, not the target consumer, nothing resonates. Nobody cares. 

Western brands need to leave their marketing principles at home. Most don’t. It is understandably difficult. Frequently this is not helped by the use of the global advertising groups that have offices in China, but managed by those from outside who themselves suffer the marketing illusions from home. They confuse use of effective Chinese marketing assets with effective marketing. 

There is a tendency to believe brand localisation is achieved through working with expensive premier influencers (Key Opinion Leaders – KOLs), top celebrities, and placing brilliantly creative content in key media like Little Red Book. These can be very effective channels. However, content from Western fashion houses is nearly always focused on the brand, and not generating a successful narrative around target buyers. The creative output looks great, but there is no reason to buy.  

Blinkered awareness is also one of the reasons so many outside luxury brands in China self implode through cultural faux pas. Dolce and Gabbana’s video of a Chinese model struggling to eat pizza with chop sticks led to it being wiped out in China. More than two years on, and the brand is still highly toxic. Many other big names have suffered severe reputational damage, and lost millions of sales through similar mistakes.

No substitute for information 

Lack of knowledge is the root cause, which often sits alongside a willingness to carry on regardless of information deficit. From the outside it seems brands must have internal talks, sometimes involving ad’ agencies,’ in which all parties myopically agree they can see their way forward.   

The counterpoint to this are the millennial and Gen Z consumers who actually will dictate the future. They dominate the Chinese luxury sector. They are highly savvy, and keenly aware they own the marketplace. They have their own individual agendas, and when you deal with people this informed and powerful you have to do so on their terms, always. In this situation, marketers have to be at the top of their game. 

Western brands need to leave their marketing principles at home. Most don’t. It is understandably difficult. Frequently this is not helped by the use of the global advertising groups that have offices in China, but managed by those from outside who themselves suffer the marketing illusions from home. They confuse use of effective Chinese marketing assets with effective marketing. 

Equally, to create an effective story around prospects, you need to know what the story should be. For this, and for correct positioning, information is needed and lots of it. 

There is no substitute for dedication to continuous deep learning. It is essential. Social media listening, data analyses, focus groups, behaviour tracking, and listening and testing via social media community management should be used continually and intensively to acquire consumer insight. 

A symptom of lack of insight has been a reluctance to digitise sales, and slowness to respond to Covid. In China, digital selling does not undermine luxury brand equity. Consumers don’t want omni channel service, they insist on it so that they can buy what, where and when they want, take it away from the store, have it delivered from the store, buy with a swipe of the phone at a vending machine, or have delivery to the doorstep in an hour. Brands have to know what CX target buyers want, and they have to respond accordingly. This was brought home with covid. 

When the pandemic hit China, most outside fashion brands entered a state of inertia. However, Chinese retailers and individual consumers knew exactly what to do. They got selling. Retail staff from department store beauty counters started live stream selling from home. They broke year on year category sales records. Others started selling luxury brands through live streaming. They sold huge volumes. It got to the point that the leading luxury and lifestyle social media platform, Little Red Book, recognised individuals as official luxury brand representatives. 

The fact that the fast eat the slow in China was never better illustrated. While luxury brand head offices across the globe wondered what to do, the other group that became effectively busy in China were indigenous luxury rivals. They accurately measured the consumer mood, and they understood how to responded. Chinese luxury brands were already ascending, and the commercial repercussions of covid gave them more impetus.  

Selling luxury cross border directly into China

For smaller luxury brands without a presence in China, the pandemic still presents a major opportunity that remains unfulfilled. Cross border sales directly into China are extremely popular among luxury buyers. Sales figures are difficult to assess, but there is acceptance it ran to more than £5 billion last year. 

A large proportion of cross border buying comes from the Chinese millennials that have not been able to take European holidays. Lack of travel meant they could not fulfil the aim of acquiring large quantities of luxury rarities and limited editions. Instead they have turned to buying direct. They have been joined by wealthy Gen Z luxury buyers, who want the unusual and the niche that support their life choices. Money is no object, and unofficial agents (daigous) in Europe cannot not fulfil the majority of their needs, so consumers buy direct mostly from the French and Italian brands and retailers that quickly responded to the large demand.  

Surprisingly, British luxury brands and retailers that have suffered severely from the absence of travelling Chinese buyers, have not attempted cross border sales. Given that a fully branded WeChat retail store can be established relatively cheaply, this is strange. WeChat shops look similar to website outlets, and are one of the most popular ways to buy luxury in China. A small investment establishes a selling presence to rival those with the deepest pockets. The opportunity is still there. 

Meanwhile, most Western brands continue underperform in China. Expectations fail to be met, potential unrealised, and indigenous rivals increasingly prosper. Ironically, it is often smaller niche players from outside that are more willing to learn, quicker to adapt, and duly prosper. China’s position as the global centre of luxury will grow as the economy expands. To profit, Western brands must leave what they know at home, and accept they need to do things the Chinese way. 

www.gawdo.com

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