L2 released last week the Digital IQ Index: Luxury – China, which assessed the digital competence of 95 global and five local brands in the Watches & Jewelry and Fashion categories. Here is a Q&A with Emma Li, who led the study:
How was doing a China Luxury study different from doing a study that focuses on one category, such as Watches & Jewelry or Beauty?
When doing category comparisons, it’s interesting to see how brands from each category prioritize their marketing approaches in the China market. Watches & Jewelry brands perform better on average than Fashion brands, focusing on brand education and driving online traffic to stores. But they are less likely to experiment with e-commerce. A few Fashion brands set the model for digital innovation in China with full e-commerce and cross-platform campaigns, but the majority is still reluctant to invest digitally in China. Thirteen Fashion brands currently do not even have a Chinese-language website. Overall, our methodology does not aim to penalize brands for what they are not doing; instead, this type of study is tailored to credit innovation. It’s clear that China means many different things to many different brands, and there is no single way for a given brand to tackle the market.
Local brands did really well in this Index. Do they have an advantage over global players?
Local brands do have an advantage, as they know the consumer more intimately and have shown a willingness to change strategy at the drop of a hat based on emerging trends. This is perhaps most visible in terms of superior customer service and user engagement. For example, Chow Tai Fook saw growing demand for in-store pick up in China, and quickly began to offer consumers the ability to customize products online and pick up at physical stores. Currently, Chow Tai Fook is the only brand in the Watches & Jewelry category to give customers this option.
Were you surprised that that Burberry opened up a storefront on Tmall? What are some of the benefits and drawbacks?
It was surprising. Yet, it’s unclear whether the shop is similar to Coach’s “pop-up” Tmall store, which opened in 2012, or if it’s a long-term commitment. That said, Burberry has always been at the forefront of digital, not just in China, but worldwide. The brand’s partnership with Amazon Luxury Beauty indicated the brand’s determination to expand its e-commerce portfolio.
A clear benefit for Burberry is better control over its brand on Tmall. This move helps mop up rampant gray market sales and helps Burberry reassure customers that products they’re buying on Tmall are authentic and official. Another benefit for Burberry is to the ability to take advantage of Tmall’s traffic and superior customer service via the platform’s established infrastructure. Unlike Salvatore Ferragamo’s partnership with third-party e-tailer Xiu.com in which the brand provides limited and dated product selections, Burberry provides nearly identical product lines on Tmall and their brand site, indicating this move is not only aimed to clean up the gray market, but also to make sales.
One drawback is the relatively “mass” and “fake” reputation of Tmall, which has the potential to dent Burberry’s luxury appeal in China. However, Tmall is aggressively trying to go upmarket and attract high-quality brands. Ahead of parent company Alibaba’s planned IPO, Tmall is working to reassure brands that it takes its anti-counterfeit message more seriously than ever before.
What are the best social destinations for brands in China?
In the past, some brands maintained accounts on several Chinese social media platforms, all serving different purposes. As a result of this stiff competition, Chinese platforms rolled out similar features to compete with one another, rather than differentiate themselves. Faced with these nearly identical platforms, Chinese social media users are increasingly consolidating their online presence, pushing clear social media leaders to the forefront. WeChat is the only one to rise to prominence after Sina Weibo, and has become a key destination for brands. Unlike Weibo, which fans use to read news and socialize with new and interesting people, WeChat is a way to get updates from trusted friends and acquaintances. For brands, WeChat opens new possibilities to create online-offline synergies, improve CRM, and ultimately boost sales online or offline. Tactics range from auto-reply FAQs and one-to-one live chat, to geo-local store locators to improve the customer service experience on WeChat. While Weibo and WeChat are the most popular social destinations for brands, and once powerful platforms like Douban and Kaixin have largely fallen by the wayside, other platforms are worth considering. Fans continue to enjoy streaming sites like Youku, Tudou, and iQiyi, and others such as the Vine-like Weishi show promise for brands that produce video content.