Luxury Brands and the Social Commerce Opportunity in China
Luxury brands have a specific challenge in using social media: the need to retain the aura of exclusivity around their brands even as they embrace the inclusive, accessible nature of social media.
The solution lies in using social media in a manner that awareness of the brand’s promise is accessible while achievement of the brand’s promise is exclusive.
Sometime back, I had outlined four powerful strategies for luxury brands to use social media to balance accessibility and exclusivity –
1. Create awards, magazines and communities to interpret luxury lifestyle, fashion and design with the brand’s unique lens.
2. Leverage the brand’s desirability to create sharable digital artifacts on social networks.
3. Bring together designers, artists and customers to share how they interpret the brand.
4. Create a private invite-only social network to underline the brand’s exclusivity.
China has the world’s second biggest market for luxury brands and the world’s largest social web user base, so it’s important to ask if luxury brands can apply these strategies in the Chinese market.
But first, it’s perhaps useful to start by trying to understand consumer behavior in China as it relates to premium brands.
McKinsey’s Max Magni and Yuval Atsmon in HBR argue that some multinational brands like Starbucks and Haagen Dazs are able to charge a more premium price in China than in the US because the usually value-conscious Chinese consumers often regard price as a proxy for quality, and increasingly buy premium brands as status symbols and as gifts meant to gain face.
Tom Doctoroff in Huffington Post outlines the golden rules of brand management in China: maximize public consumption to charge a premium, highlight external benefits in simple and direct messages, and maintain premium quality perceptions even when you extend premium-priced brands downwards across lower price tiers.
A recent research report byL2 Thinktank and LabBrand titled China Digital IQ (PDF) calls internet in China the biggest opportunity for prestige brands in a generation.
L2 founder Scott Galloway argues that e-commerce is more important for luxury brands in China than anywhere else because –
1. China has about 385 million internet users and 140 million Chinese internet users engage in e-commerce.
2. 80 percent of Chinese luxury consumers are below the age of 45 and therefore more likely to be web-savvy.
3. 75% of wealth creation in China through 2015 will take place outside of Tier 1 cities and therefore can’t be addressed through traditional retail channels.
Third party services like Wooha are already addressing this market aggressively, even though luxury brands themselves have struggled with their social media and e-commerce strategy.
L2 quantifies the digital aptitude in China of 100 global prestige brands across four sets of criteria –
1. The effectiveness of the brand’s website in terms of translation, local relevance, and e-commerce functionality.
2. Search engine optimization in terms of site traffic and visibility on popular search engines.
3. Social media in terms of presence, following, content and influence on Chinese social platforms RenRen, Qzone, Youku and Kaixin001.
4. The effectiveness of digital marketing in terms of off-site brand presence on blogging and micro-blogging platforms and email, mobile and social media marketing.
Out of the 100 prestige brands in the study, Lancome, BMW, Estee Lauder, Audi and Clinique emerge winners, with Digital IQs that are nearly double the average.
80 brands have a Chinese language website, but only 40 promote brand events within China, only 42 are mobile enabled and only 10 are e-commerce enabled. These Campaign China and Economist articles list several reasons why luxury brands in China and elsewhere haven’t embraced e-commerce yet.
While several brands attract a high volume of conversations on social networks, few are participating in these conversations. Mercedes-Benz, Audi, and BMW host pages and run contests on RenRen, Dior has a page on Qzone, while Lancôme and Johnnie Walker host groups on Kaixin001.
A few brands have also created customer and evangelist communities. Fashion brands Lancôme (Rose Beauty), Estée Lauder (e-Lady) and Clarins host branded beauty communities while BMW (My BMW Club) has created a customer community. Audi, Mercedes-Benz, and Porsche have created BBS microsites to help facilitate discussions with brand evangelists.
Surprisingly, local luxury brands have higher Digital IQs and better e-commerce enabled websites, even though they lag behind in social media buzz. Hong Kong based Shanghai Tang is perhaps the first prestige brand to have a Chinese language iPhone application: it’s City Chic app serves as a guide to Shanghai style apart from promoting Shanghai Tang events and promos.
Even more surprisingly, beauty brands Lancôme, Clarins, and Estée Lauder have higher Digital IQ in China than in the US. Finally, brands with a high retail footprint don’t necessarily have high social media buzz.
So, it seems that luxury brands in China will benefit from all the four strategies in my toolkit, and (perhaps?) an additional fifth one: combine social and commerce functionality on your website to benefit from the Chinese social commerce opportunity.
Finally, if you are convinced why your brand needs a social commerce strategy in China, Gang Lu has some great tips on how to create a social commerce strategy for luxury brands in China.
If you would like to interview me for a story or invite me to speak at a conference, please e-mail me at gauravonomics@gmail.com, call me at +91-9999856940, or connect with me on Twitter.
