Marketing in China: How to Engage Consumers of Luxury Goods - eMarketer
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Marketing in China: How to Engage Consumers of Luxury Goods


Javier Calvar
COO
Albatross Global Solutions

Some experts question whether consumers in China will continue to drive luxury sales worldwide, but Javier Calvar, COO of Albatross Global Solutions in Shanghai, has no such doubts. The consultancy, which helps luxury and premium brands develop marketing strategies across China, sees no signs of a slowdown. Calvar spoke with eMarketer’s Lisa Barron about the future of luxury consumption in China and best practices for brands that want to capture the market.

eMarketer: What is the impact of the current stock market turmoil and economic uncertainty on the luxury market in China?

Javier Calvar: Obviously the economic situation has an impact, and there is a certain degree of uncertainty, but frankly I don’t think that the market crash will have any long-term impact on the consumption of luxury. The property market has a much greater impact on consumer sentiment than the stock market, and the property market is now back on a growth path. That is creating positive momentum.

The Chinese are buying a tremendous amount of luxury [goods] outside of China. In 2014, the luxury market globally grew by about 4% to 5%. In China, it went down by 1%. We estimated about half of the luxury purchases that Chinese consumers made, they made outside of China. This year, we estimate that about two out of three purchases are made out of China.

“Luxury brands need to think multichannel, omnichannel—they need to think of all the touchpoints.”

eMarketer: Why do you think consumers are buying so much outside of China?

Price is a fundamental driver of that, but there are also other elements. The range of colors that you see in China is not comparable with the range of colors you see overseas. The level of service that you get in a boutique in China is not comparable with the level of service that you get in a boutique in Paris, New York, London or Geneva. And of course, there is cachet in buying a Hermès scarf in Paris or a Breitling watch in Geneva, as opposed to buying it in Shanghai, even though it’s the same watch.

Chinese consumers buy brands overseas that they are familiar with, so to create that familiarity, foreign brands need to do a number of things in China so they are on travelers’ shopping lists before those consumers actually get on a plane.

eMarketer: What role does storytelling play in the marketing of luxury brands in China?

Calvar: With luxury goods, it’s all about aspiration, it’s all about dreaming—and storytelling is clearly the best way to bring those dreams and aspirations to life. It’s not about just owning an expensive bag or an expensive watch, it’s the whole array of associations that go with that.

Storytelling is usually done across a number of flashpoints. Of course, the best place that a brand can tell its story is a boutique. The boutique is where the brand can bring those dreams to life in a more old-fashioned way with colors, smells and songs.

But the story can be narrated through different touchpoints, and of course all those touchpoints need to be aligned. Digital is playing an increasingly important role in any communication and strategy for any luxury brand. Luxury brands need to think multichannel, omnichannel—they need to think of all the touchpoints.

eMarketer: How important is mobile as a touchpoint?

Calvar: It’s critical. A boutique is still where the purchase takes place, but digital and digital information are more important in China as places where people go to look for information on the brand. And those digital sources of information are increasingly accessed through smartphones.

The penetration of smartphones in China is huge, and the proportion of people who use smartphones and mobile technology to access those sorts of information will only grow over time. So brands need to embrace that technology and use it as a bridge to reach consumers. We need to reach them where they are, and they are increasingly out and about. They are not sitting home in front of a TV or in front of a PC.

eMarketer: The mobile messaging app WeChat is huge in China. How can luxury brands best leverage it?

Calvar: What we found in China is that most affluent consumers—about 75%—follow brands online. And about eight out of nine want to be contacted by brands after they purchase from those brands. So if you take both of those facts into consideration, you have a great opportunity to develop a relationship with consumers that goes beyond the point of sale.

WeChat is a great platform for engaging consumers in that ongoing dialog. Of course, the types of conversations and the type of engaging interaction that you have on WeChat is different from the type of dialogue that you can have when you use emails, but it’s not either/or. It’s about complementing email communication with WeChat activity.

“A boutique is still where the purchase takes place, but digital and digital information are more important in China as places where people go to look for information on the brand.”

There have been very good examples of luxury brands using WeChat in a very creative way. [UK-based fashion company] Mulberry, for example, recently launched a campaign around Chinese Valentine’s Day. They invited Chinese consumers to send a love message to their significant others using WeChat, and the recipient of the love message could go to a Mulberry boutique with the message and get a leather bracelet with some sort of engraving. The campaign was extremely well put together, it was very culturally relevant and it used WeChat in a very efficient way.

eMarketer: Can microblogging site Weibo be used as effectively?

Calvar: Certainly. For a number of reasons, historical reasons, Chinese consumers rely more on advice from peers and friends than they do on corporate communications. The role of word-of-mouth is very important in China.

What we’re seeing is that advice from friends and family is now being replaced to a certain extent by consumer feedback on things like Weibo, so Chinese consumers look at what other consumers are saying about Louis Vuitton or Mulberry or Montblanc or Breitling or Rolex, and to them, that is part of this word-of-mouth information.

It has taken on a new meaning in the sense that it’s not just the people I know from the office or my immediate acquaintances, it’s also millions of people who post comments that I now use as a basis to make decisions on the brands I want to buy. So Weibo is here to stay.

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