The Chinese Luxury Market is now one of the biggest in the world. With burgeoning levels of wealth and disposable income, expectations from Chinese consumers are diversifying.
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The Definitive Guide to Entering the Chinese Luxury Market
Over the course of 2016, total Chinese consumer expenditure rose by 7%, far higher than global average levels of 2.3% for the same year. In 2017 Luxury Goods in China are forecast to be the seventh fastest-spending category. Despite this sizeable market, unless you are already an established brand in China you have some work to do in terms of carving out a unique brand image and increasing your reputation.
International Goods Reflect Luxury
The Chinese backlash against local fakes and counterfeits is one of the reasons international luxury offerings are thriving in China. To be a ‘foreign brand’ has become a byword for quality, thus lending itself to such luxury branding and marketing. It’s important to be aware of this context as it also heightens the importance of an intelligent branding strategy on the most effective, targeted platforms to high-net-worth individuals.
Targeted Visibility & Reputation are a Luxury brands greatest asset
Brands need to build Visibility & Reputation online
Targeted Visibility & Reputation are a Luxury brands greatest asset in a ‘digital-centric’ market. As a luxury brand, you need to build this strong brand reputation by focusing on particular platforms and communities.
The discerning Chinese fashionista spends on average 2 hours per day browsing online. For high-value products, the level & degree of research by the consumer is typically higher. Anyone who’s spent time in China will instantly notice how digitally orientated this modern society has become across their social media and e-commerce platforms. From WeChat to Cross Border Commerce, Shopping Forums & PR you need to make an impact on your target demographic in the online sphere if you are going to drive sales.
Millennials and the Luxury Sector
This is often a case of the famous ‘Little Emperors Syndrome’, where increasing family wealth coupled with the One Child Policy led to whole family units catering for a single child. As a result, more funds have been available to Millennials from wealthy backgrounds coupled with insatiable consumer demand for quality brands. With such a huge surge of luxury enamored youths across China, tapping into this market and building brand loyalty can pay dividends for years to come with individuals so early in their consumption life cycle.
Online Branding and Sales support a Quality Distribution Network
This is a conundrum for many brands. Do they approach expensive Chinese distributors and get their products stocked on shelves or is there a more cost-effective method? Chinese distributors are notoriously selective about which products they promote; they are looking for pre-existing sales, do not engage in branding (this component cannot be ignored!) and can be ruthless with a reputation for ‘racing to the bottom’ on price and service.
For luxury products, these are scenario’s you’d certainly want to avoid as a serious market entrant. The better approach is to build your brand, generate sales through cross border platforms & drive qualified prospects through digital efforts.
Once a brand is more established and has sales figures, higher quality distributors are keen to take on the product that works with other well-known luxury names.
Particularly in Luxury, no part of the image and service can be compromised. Validate your concept online first, generate sales and then develop your distribution.
Cross Border E-Commerce For Luxury Brands
Alibaba’s flagship platform Tmall is reserved only the for most successful players, 85% of brands are rejected from Tmall, Why? Because Tmall tends to select brands that already have a large following, a strong image, reputation and significant sales evidence from China. Jingdong (JD) is not dissimilar with a strict application procedure. If applicable setting up on Tmall can be huge exposure for Luxury.
The end goal for Luxury is to open stores on Tmall & JD as these are the most reputable cross border platforms. The budget must also be in place for the more expensive setup and associated costs.
The alternative route for new luxury products in China is to build up to these largest e-commerce displays on more niche, yet highly valued platforms such as WeChat Stores, Little Red Book, Hupu, T Global E-Luxury & more.
In addition, you can follow the following steps to start selling online without such a huge outlay that still yields a significant return on investment. Validation of your luxury concept in this market-place should be a priority.
A Quality Website in Mandarin Visible on Baidu
It’s not as simple as it sounds to build a great website in China. Avoid the typical Chinese web formats and opt for a sleek, clean-cut aesthetic akin to your pre-existing site. You cannot simply just create a bi-lingual Chinese add-on as it is best to host the site on a local server with a .cn domain. This involves building the site locally, in addition when it comes to visibility on Baidu (China’s Google), the sites need to be a ‘vehicle for visibility’, that is optimized for Mandarin keyword searches. 75% of all online research is conducted via Baidu.
Content should also be re-adapted for this market with local search terms and keywords in mind, this allows you to place your content in front of the most qualified search traffic in the luxury sphere.
Visibility is achieved through Pay Per Click ads (forget Banner Display in China) as well as SEO, increasing the site ranking in the natural search results on Baidu, this typically drives the highest quality traffic in terms of sales conversion rates. Consumers are already searching for Luxury products, appearing on a search ranking beneath a well-established brand can be a powerful method for generating traffic and sales.
Key Opinion Leaders (KOL’s)
KOL’s are all the rage currently, and for good reason. They offer a powerful infrastructure for luxury to reach Chinese consumers. The key is to target the right KOL’s that reach the high-net-worth demographic, it’s a case of focused exposure.
KOL’s with their existing reputation transfer this when they back a quality product. Posts need to be curated and crafted by your brand itself, KOL’s just post to their following. The best approach to is to treat KOLs as an ‘echo chamber’, have a range of different KOL posts launched at the same time on different sources to support each individual post effort.
The next point to consider is that the KOL post by itself is not enough. The post needs to be actively monitored, questions answered and conversation promoted. You can pick up new followers by engaging in conversation. This type of ‘social marketing’ is vital on all Chinese social media where consumers engage with brands as like individuals, rather than typical business entities.
Daigous – Chinese Selling to their Community
Let’s talk about ‘Daigous’, these are ‘personal re-sellers’ that are far more active than KOLs (although do not typically have the same huge followings). Despite this, tapping to ‘Daigou Networks’ remains a very effective approach for the new luxury. You will need to be selective about which Daigous to approach, but by selling at a wholesale or discounted price to entrepreneurial individuals you can watch product lines spread throughout their networks as they re-sell to their social circles and wider groups.
Why is this effective? First off, personal recommendations carry a lot of weight. Secondly, it’s great to achieve sales at an early stage of market launch. Finally, it’s a branding tool, if you select the right individuals they will act as a living advertisement for the product lines.
Chinese Forums: Taking the Pulse of Consumer Sentiment
Chinese consumers are extraordinarily active on forums. In western digital markets they are old news, but in China remain a powerful way of influencing sentiment & building a positive reputation. There a host of platforms to consider, with the most important being Baidu Zhidao, Baidu Tieba, Zhihu, & Tianya. Consumers are active in threads devoted to luxury products, they will share recommendations, images, shopping experiences and thoughts on brands.
Here you can adopt a ‘covert strategy’ where user accounts can be created to engage in user to user discussion, external links referenced and positive brand testimonials posted. In this setting, a consumer’s recommendation is very powerful.
In addition to this, from exposure on such forums links to those on Baidu, forums rank highly in the search results so it’s vital to cultivate a positive reputation here. Comments, posts & discussions will be seen.
WeChat Accounts & Mini-Sites
WeChat now boasts over 877 million daily active users, a new record for China’s number one social tool. WeChat is a ‘swiss army knife’ for brands when it comes to pushing content, branding and engaging with followers.
The first step is to create a quality account when it comes to Luxury the best bet is to create a ‘mini-site’ hosted within WeChat itself and built in HTML5. This is then optimized for smooth user experience. These mini-sites are highly customizable, only limited by a brands imagination, you can really build your identity here.
Next you need to drive traffic to your WeChat account, linking your WeChat QR code (link) with your website allows for users to scan through, otherwise, you need to be active, sharing quality content in groups & incentivizing followers to re-post content to their community.
WeChat is a content-led and content-rich platform, sometimes even referred to as the ‘WeChat Times’, for a luxury aesthetic HTML5 content is always preferable.
You can attract followers through re-posts (WeChat has a strong sharing culture), special offers for those that comment on / share content as well as building user interactivity into your mini-site.
Use Weibo: “China’s Twitter”
Weibo is China’s most ‘open social network’, users can see posts from anyone and do not have to be connected first. In this sense, it promotes content sharing with many KOL’s, Influencers and Daigous sharing with their communities here. Weibo is akin to Twitter, it’s a microblog so focus on short posts, pages can once again be customized with branded content as a backdrop.
On Weibo, you can promote sales through re-posting consumers comments, relevant updates and ‘purchase images’. In China, it’s a very popular part of purchasing to share images on social media, particularly in luxury as it connotes social status and prestige.
Alibaba (China’s e-commerce giants) now own a large stake in Weibo so expect this nifty platform to become more e-commerce friendly for brands as time goes on. Most Brands in this Chinese Luxury Market are using Weibo.
WeChat Stores = Social Commerce
Luxury brands need to adapt to the most startling and unique Chinese e-commerce feature, the predominance of social media & its fusion with e-retail. China leads the world in what has been termed ‘social commerce’. WeChat stores are the best and most effective example. These are stores hosted within this app that is linked to an official account.
Stores on WeChat are static, they are not promotional vehicles themselves, you, therefore, have to actively drive traffic to your store however they lead themselves to desirable purchases.
Payment is made extremely convenient via WeChat Pay (linked to a users banking). At the swipe of a screen, payment is made instantly. Stores are highly customizable and feature 10-15 SKU (product pages).
WeChat Mini programs are a new feature introduced by the platform Wechat in 2017. A mini-program is a kind of small version of an app embedded in the WeChat platform. A very useful feature that allows companies to share their app without having to force users to download a native app.
Many luxuries companies have leveraged this feature by offering special e-commerce service as well as exclusive products.
Gucci (hereinabove), used it to create its e-shop for WeChat and create a platform for customers to buy their product from. It’s a pretty basic shop but still making their products a lot more accessible than having to download an independent app.
Dior cosmetics and fragrance created an exclusive mini-program with a gift box that can be personalized with a little note (“我爱你“：I love you, “谢谢你”: thank you, “生日快乐”: happy birthday) and the choice of a product. This is exactly the kind of services that Chinese users love.
WeChat mini-programs are a perfect tool for a luxury brand to offer their products and/or exclusive services.
Xiaohongshu – Little Red Book
Xiaohongshu is a social e-commerce platform, originally created to allow users to share experience about products/services bought abroad. The service expands as an e-commerce platform in 2014. Now the app gathers 150 million users including about 30 million daily active users.
Xiaohongshu targets millennials women from first to third tiers cities, interested in luxury foreign brands. It is, therefore, a very useful platform for a high-end/luxury brand that is willing to launch on their products on the Chinese market. Moreover, the main advantage of it is that it lays on UGC (user generated content) meaning that this platform is considered as a very reliable platform for getting information prior to purchasing a product.
Another important point of this app is the content, other than the fact that it is 100% user-generated, Xiaohongshu isn’t displaying ad on the platform and the commercial content is very limited. The users’ posts are frequently in-depth reviews of the products which makes the overall aspect very authentic and trustworthy.
Luxury Market Research
When it comes to the luxury demographic comparing your product and brand concept with other competitors is an important part of the research process. It’s good to study brands that have made huge in-roads into China, local competitors as well as failed examples to learn from. The road to brand success is paved with lessons to learn from others in China. Many fashion labels now conduct market surveys prior to entry to establish their positioning and strategy.
It’s also important to understand your target consumer and how they behave online in a very different digital sphere. Online sales are the priority however click-through rates, impressions and views all amount to establishing a brand that can sell well to local consumers, this does not happen over-night & requires intelligent strategy.
Les Georgettes: high-end and creative jewelry
D’Auchel: Luxury leather goods from France to Hong Kong
Jean Rousseau: Authentic French leather work
Do you want to be accompanied to launch your brand in China? Contact us!
We help companies wishing to sell on the Chinese market. We are specialists in:
E-REPUTATION: Primordial before launching, we work together on your unique selling point, then on the social networks and with the help of PR, we make sure that your image on the networks is totally clean and reliable for the Chinese users.
SEO: The optimization of your referencing will be essential, our team of specialists will take care of your e-reputation, the management of your social networks while setting up an SEO / SEM campaign allowing you to gain places in the ranking of the Baidu Chinese search engine.
LEAD GENERATION: Our teams are professionals in lead generation. To optimize it, your e-reputation must be irreproachable. Investing in online advertising and creating quality content will help you develop your e-reputation. Finally, the evaluation of the results will be important to guide us in the next stages of your development.
DIGITAL SOLUTIONS: Website creation, development and audit; social media marketing (including WeChat & Weibo); PR; monthly reports and analyzes by our team of experts.