Luxury Retailers Aim to Digitally Invade China

Shoppers wait their turn outside of the Louis Vuitton store in Shanghai.

When I think about the Internet and China, one thing comes to mind: The Great Firewall of China, which is known as the world’s largest and most innovative Internet censorship program. It's been challenging for global Internet behemoths like Google and LinkedIn to break into China or, better yet, stay without controversy, but the luxury retail industry is doing it with ease.

The luxury retail market in China is huge, to say the very least. Behind Japan, China is set to become the second biggest consumer of luxury goods by 2015, and is eventually expected to overtake its neighbor. In 2009, the country accounted for 27% of global luxury sales, which is pretty astounding considering a luxury consumer market didn't even exist in China 15-20 years ago.

Goldman Sachs analyst, Jacques-Franck Dossin, says, “China is experiencing huge wealth creation, and there is lots of conspicuous consumption related to that. People want to show they are successful.”

Now that China is on a clear and unstoppable path to dominate high-end retail, luxury retailers are hurriedly flocking to China. But because it has typically been difficult to set up shop in China for many retailers, likely because of government restrictions and China’s hefty import tax (up to 40%), several luxury brands have taken to the Internet to breakthrough what is seemingly a difficult country to penetrate.

Louis Vuitton, the Pioneer

It wouldn’t be appropriate to talk about luxury retailers in China without mentioning Louis Vuitton. Louis Vuitton was the first foreign luxury brand in China, setting up shop in 1992, and has since blanketed the country with its products. Because of its early access to Chinese consumers, Louis Vuitton has been able to grow with the Chinese market, giving it an incredible advantage on the mainland. Opening the door to the Chinese luxury goods market, Louis Vuitton has undeniably designed the blueprint for brick and mortar stores that other luxury retailers have attempted to emulate in China.

Surprisingly, despite its colossal size and rapid growth, the Chinese market hasn’t been an easy target for Western brands because the initial investment in brand awareness, market research, and gaining approval to enter China is extremely high. Consequently, several luxury brands have decided to ride the digital wave into China with hopes of engaging with consumers in new and innovative ways.

The Digital Invasion

Kenneth Leung, Cisco retail marketing manager talks with Bertrand Pellegrin on the changing trends in the China luxury retailing market.

Key insights from the video: Chinese luxury consumers are in transition; they are constantly evolving and going online to learn about new brands faster than ever before. According to consultancy McKinsey & Co., 26% of China's female high-end shoppers checked out luxury brands' websites before making their purchases either offline or online.

Although luxury goods have been available on the web for several years in China, they have mostly been available through third-party retailers who offer an array of brands, rather than directly from the label. As a way to further and better introduce their brands, retailers such as Chloé, Dior, Armani and Burberry are making increasing use of online video and content to engage Chinese consumers.

"This is a strategic move that will open up luxury to the entire nation," said Federico Marchetti, founder and chief executive of Milan-based YOOX, which created a Chinese micro-site for the Giorgio Armani label.

With Chinese women increasingly heading online to search for, research and purchase luxury goods, luxury brands are making a beeline to grab a piece of the coveted online real estate in China.

The Digital Leaders

This past spring, Chloé, a popular French fashion label that currently has 13 stores in China, conducted a major runway show in Shanghai and streamed it live on a Chinese blog that the brand launched last December. This live show would actually become China's first digital fashion show, ever.

With music designed by Josef Fung, a renowned multimedia composer based in Beijing, and world-famous Chinese model Bonnie Chen being featured in the show, Chloé made sure to connect to the Chinese market with a dose of authenticity.

Earlier this year, Chloé boldly revealed that it expects China to become its largest market within the next two years, and is building an online store dedicated to Chinese consumers that will launch in 2013.

But Chloé isn't the only fashion label going digital in China; Burberry, a British-born luxury brand which currently has 57 stores in China, also announced that it would stream its fashion show live from Beijing. Burberry streamed the event on Fashionising, a fashion social network and community whose goal is to "stimulate your visual senses" through impressive high-definition images. Taking fashion and digital innovation to the next level, Burberry utilized virtual image technology, combining live models with animated footage and life-like holograms, to create a visually stunning show. And Burberry didn't stop there - they included a live performance from the popular British band Keane, making it the band's first show in China.

Burberry created a video to advertise the digital fashion show that would air live from Beijing.

Burberry also recently launched on four major Chinese social platforms: Kaixin001 and Douban (China's versions of Facebook), Youku (China's version of YouTube) and Weibo (China's version of Twitter), making it one of the leaders in the retail-social media realm in China.

Above all, these events reinforce how committed luxury brands are to the digital world in China and how committed they are to this rapidly emerging market.

Luxury and Innovation: the Future of Luxury Brands in China

With a global luxury market worth an estimated $80 billion a year, online audiences are being increasingly targeted by luxury brands these days, especially in an emerging and booming market like China. There are huge growth opportunities for luxury brands similar to Chloé and Burberry in China as luxury purchasing power continues to grow and consumers continue to go online to purchase luxury products.

"We think we can create a place [in China] where the Internet will mean beauty and extravagance, not just discount," said Mr. Marchetti, of YOOX.

Now that Chinese consumers have fully embraced the Internet, more retailers can target the fastest-growing web population in the world and give them unprecedented access to their products. Additionally, by going online and utilizing digital tools, retailers can grow in cities where affluent or aspiring consumers may not have regular access to the stores.

As more luxury brands attempt to establish themselves in the Chinese market, there are a few major factors when considering the future of luxury in China:

• Over the past decade, there's been a 50% increase in the number of Chinese millionaires, with most of them under 40 years old, according to CLSA Asia-Pacific Markets.
• With an estimated 300,000 millionaires and rising, China is the world’s fourth richest country, which translates into purchasing power.
• China’s online population became the world’s largest as it soared to 485 million users as of the end of June 2011.
• An estimated 80% of online shoppers in China are less than 45 years old, according to Forrester Research.
• China has a population of 1.3 billion, long starved of global retail opportunities.

This simply means that the young are the big spenders and they are doing it online, spending their wealth at a rapid rate and on Western luxury brands, and will continue to do so as more brands enter the market.

When I think about the Chinese consumer, two words come to mind: luxury and innovation. The Chloé and Burberry shows are merely the tip of the iceberg.

*Here are two really fascinating consumer market studies conducted by KPMG: Luxury Experiences in China and Luxury Brands in China.

South Africa Hopes to See You Soon

"Who lives sees much. Who travels sees more." — Arabic proverb

A 'My Mission South Africa' advertisement that utilizes QR code technology.

My fascination with Africa runs deep -- and it all started when I was eight-years-old when Disney's masterpiece, 'The Lion King' hit the big screen. Yes, you read that correctly; it's so cliche, but it's my truth. I vividly remember crying in a Sears when my mother refused to purchase the movie on VHS (her reasoning: I saw it in theaters), she eventually caved (those tears) and I excitedly went home and watched the movie on repeat over and over and over again for weeks, maybe even months. It became an obsession.

One of my wildest dreams is to visit Africa, specifically South Africa. While there, I hope to embark upon an adventurous wild safari ride, where I can spy on lions, cheetahs, zebras, elephants, giraffes and whatever else the scorching sun brings out; I also hope to cruise the gorgeous coast of Cape Town, known for its spectacular views. One day, I hope to make this rather expensive fantasy a reality; but until then, I will settle for planning this fantasy vacation through the "My Mission South Africa" campaign and will start by creating my very own fantasy mission.

'My Mission South Africa'

South African Tourism recently launched "My Mission South Africa," a social media campaign aimed to boost tourism by showcasing the diversity of South Africa's rich landscape and stunning destinations. Interestingly, the campaign is aimed at the UK market and hopes to persuade UK travelers into making South Africa their next travel destination.

Matthew Armstrong, acting country manager for the UK who worked in collaboration with South African Tourism, says: "This magnificent country offers something for everyone... South Africa is a country where just about anything is possible and this is why we’re inviting travelers to create their own mission."

The 'My Mission South Africa' campaigns invites prospective travelers to create their own South African mission (what they plan on doing while there) and implements several quintessential social media marketing elements:

Celebrity Endorsements

British celebrity, Jamie Theakston, describes his South African mission. 

The campaign tapped four popular British celebrities: Jamie Theakston, Monty Don, Gloria Hunniford and Chris Packham, who will be traveling to South Africa for their first time in September and focusing on their personal areas of interest. All four celebrities will document their experiences on video and then share these experiences via Twitter, Facebook, a micro-site and a specially designed mobile application throughout their time in South Africa.

Contest

Four lucky couples will be selected to win their chosen celebrity’s mission and will even spend a day with their chosen celebrity in South Africa. All that is required is entering the contest before August 6th, which after watching the "enter to win" video seems like a rather easy task. Likewise, the idea of being on vacation with a popular celebrity can be rather alluring to some, which will certainly attract more entries.

Interactive Social Media

The above dials are fixed to what would be my fantasy South African vacation. 

Prospective travelers will be able to create their very own South African missions online using the interactive 'My Mission' builder. The 'My Mission' builder allows you to quickly and easily build your ultimate vacation itinerary from a list of predefined activities which are considered to be four key attributes of South Africa:

• Adventure
• Sport Culture and Heritage
• Wildlife and Safari
• Affordable Luxury

Upon creating your fantasy vacation, you can then store the full details online, send to family and friends, and even share on your Twitter and Facebook pages.

Along with these exciting interactive tools, South African Tourism is active on Twitter and Facebook, and has also built a new website dedicated solely to the UK market, which provides everything you need to plan your trip, including airfare.

Partnerships

In life, it's always helpful when you have support from others. And when it comes to promoting tourism within a specific country and more specifically on a global scale, having an airline on your team certainly doesn't hurt. South African Tourism has partnered up with South African Airways who is now the official sponsor of any related initiative, including the 'My Mission South Africa' contest.

Digital Application and Integration

There is no doubt that South African Tourism understands the value of using a digital platform to promote a campaign. Not only are they planning to implement video into the campaign through their celebrity endorsements and stream these videos throughout their vacations, they have also taken advantage of the functionality of QR code technology by placing it in advertisements within traditional media outlets, and also built mobile applications that support smart phones specifically for the 'My Mission South Africa' campaign.

I really love that this is a deeply and fully integrated marketing communications campaign that uses so many social media marketing tools and tactics. It's not often that you see organizations effectively using so many different elements at once, but South African Tourism seamlessly incorporates several social media marketing elements which only further enhances their campaign.

Furthermore, what I find exceptionally fascinating by the 'My Mission South Africa' campaign is that it is aimed at a market outside of South Africa's borders, a market actually on another continent. Given the level of detail in this campaign, South African Tourism certainly sends the message that they not only understand the value within the UK market, but that they understand the UK market and, more importantly, want to better understand each traveler individually. This gives me the impression and the confidence that while any traveler is on vacation in South Africa, it will be nothing short of impressive and amazing. Why? Because they genuinely understand exactly what travelers are looking for in their vacations and are willing and eager to provide those experiences.

Now my mission is to see all of South Africa!

LG Gets Social in Chile

It is every company's mission to dominate a market with their products by way of productive and exciting consumer engagement. In the Web 2.0 era, productive and exciting consumer engagement often means utilizing social media in some capacity, if not entirely. In Chile, no company is engaging with consumers via social media better than LG. LG has been able to better position its brand and market its products by incorporating widespread consumer interests in its social media campaigns.

Paul Meadows, an executive at LG, recently said: "The next wave of our 'Life's Good' brand campaign continues to educate and encourage consumers to get involved in technology. These new initiatives highlight the growing popularity of social networking and our increasing focus in that area… Young people today communicate with their friends and the world around them via social networks."

With this in mind, LG heightened its level of engagement on social networks across the world, especially in Chile. It is tough to describe the scope of LG’s reach in Chile because they go beyond just having a presence on different social media networks -- it is truly about consumer engagement with LG. Here are two recent social media marketing campaigns in which LG capitalized on the public’s interests to promote its products and engage with consumers:

LG and 'The Social Network'

Last year, LG invited 400 people to a premiere party for the blockbuster hit ‘The Social Network.’ At the premiere, LG also introduced the Plus -- its latest touch screen and social networking enabled mobile phone.



The movie premiere not only afforded LG with the opportunity to host a great event, but also allowed them to get invaluable feedback from attendees on LG, its latest products, and its widespread use of social networks, specifically Facebook.

Although LG has a number of country specific Facebook sites, most only have a few thousand fans. However, the official LG Facebook site in Chile is enormously popular with close to half a million fans. Among the top Facebook pages in Chile, LG ranks 21 and is the only product line in the top 25, which is made up of sport teams and entertainers.

LG & Copa America Argentina 2011

Copa America, what is considered the most important sporting event in Latin America in which national soccer clubs compete, is currently being held in Argentina with LG serving as the main sponsor. As a way to promote its brand and get the public engaged with the tournament, LG announced a contest where consumers can enter to win its latest mobile devices and a 3D TV by using Facebook and QR codes to participate. Although this contest is being held across Central and South America, the campaign is being heavily promoted in Chile because of LG's popularity there.

Social media is increasingly used by businesses of all sizes for effective marketing campaigns, but the success of a campaign on social networks not only lies in good planning and adequate resources, but having creativity as a fundamental element. When you’re a tech brand like LG that has new products to constantly introduce to the market, it can be challenging to be creative, break through clutter and reach consumers without seeming overbearing.

LG has been incredibly successful in engaging a large portion of Chilean consumers by asking for feedback on the company's product range; as consumers, we tend to value companies more that are willing to hear what we have to say -- especially when they take our thoughts and ideas into consideration. Likewise, LG has been successful in getting Chileans involved in company-related activities and events because they're willing to pay attention to their interests and meet them where they already are or, better yet, where they're headed. Rule #1 in understanding consumers: pay attention to their behavior.