APPROACHING CHINESE LUXURY CONSUMERS

Por Victoria Retondaro

 

Today, luxury goods are the strictly required symbols of wealth and social status in China. Chinese wealthy consumers have the cash, and are willing to spend it on what, only some years ago, was well beyond their reach. While many other markets are flat or shrinking,

luxury goods are booming in China. The international advisor and counselor McKinsey expected, in 2010, that by the end of this year China would overtake Japan as the world’s largest luxury market, and they were right: purchases by Chinese both at home and abroad accounts for over one-quarter of the global total.

A rapidly-growing share of Chinese luxury shoppers are doing their purchases overseas – being Europe among the top popular destinations (only in 2014 200,000 Chinese ourists visited London). In the last decade, China was the country that raised the most as a tourist source market, due to an increase of the medium classes incomes, the decrease of the air tickets prices and a bigger flexibility to travel abroad.Thanks to this increase, China went ahead from the seventh position in the ranking of international tourism expense in 2005 to the first in 2012, according to the statistics of UNWTO (World Tourism Organization).

As tempting as it may be for brands to target Chinese consumer as they had always targeted Europeans, it’s quintessential to know them profoundly and have their own characteristics always in mind. One of the most impactful features that differs luxury consumers in China from the Western consumers is their youth: 73% of luxury consumers are under 45, compared to just over a half in the U.S.

China’s love for luxury is rapidly spreading to every level of consumers, even those who by traditional standards would not be considered viable target consumers of luxury goods. This creates new opportunities as well as challenges for luxury goods marketers used to serve only the very wealthy.

Some misconceptions about the Chinese consumers need to be removed from the marketers mindset: there is a generalized stereotype about Chinese consumers’ tastes in luxury, expected to be obsessed with big logos all over and flashy products. This has recently started to change, since their tastes are maturing with surprising speed. Shoppers prefer low-key and understated goods to ones that are embellished with popular logos.

Another common generalization is related to counterfeit, although faux luxury does not seem to be disappeared anytime soon, Chinese consumers are now looking for the real thing, and they are increasingly willing and able to afford it. According to McKinsey, Chinese consumers are expressing an increasing appreciation for authentic luxury products. For instance, the percentage of consumers who said they were willing to buy fake jewelry has dropped 20% in the last five years.

As an example of the relevancy these consumers have in Europe, the 2015 Summit of The Walpole British Luxury Association (the voice of British luxury, with over 180 prestigious members including Mulberry, Burberry and Polo Ralph Lauren) was focused on the Eastern Growth, examining Greater China, Asia-Pacific and the Middle East. During this Summit, where British brands, tourist destinations, and retailers discussed China’s outbound tourism boom and what it means for the Western, some interesting key rules on how to target the average Chinese tourist were exposed.

To start with, differentiation is a must. Speakers noted that more sophisticated Chinese tourist-shoppers are now looking for different brands without a large footprint back home, with a particular focus on quality and craftsmanship.

Speakers cited research indicating that Chinese outbound shoppers make the majority of their purchase decisions pre-travel, making it difficult for brands to influence sales when on the ground. In consequence, it's of highly importance to catch travelers' attention online before they leave China. Numerous presenters at the Summit agree on the indispensability of WeChat nowadays. This Chinese social media is becoming the most relevant tool to reach and influence Chinese tourist-shoppers, it is now the most important Chinese social platform for everything from push-based marketing to CRM. It seems that many Chinese tourists use this app to gather information, comment and share their opinion about services, products, activities and destinations. Since almost every Chinese have a WeChat account is a powerful tool to reach a large number of travelers. WeChat enables brands to offer a personalized treatment to its followers and engage them.

Besides the implementation of WeChat, marketers should be aware of online discussions about them, tracking and reacting with the help of a social media agency. Bloggers have also prominent roles when buying a luxury product, identified influential bloggers should be educated by a brand in order to become a relevant online ambassador.

Finally, the in-store experience is proved to be increasingly important in this market as the key touch point for consumers making decisions about buying luxury. The luxury fashion buyer’s decision is highly influenced by what they experience in person: trying the product on, talking to a salesperson and how products are displayed are essential when purchasing.

Luxury marketers should deploy sales staff that are familiar with the latest fashion trends, exhibit exceptional levels of patience with Chinese shoppers who prefer to linger in the store, and are helpful without rushing customers or applying sales pressure. Louis Vuitton has figured this out, assigning a specialist to spend time educating luxury shoppers about the story of the brand, the company’s deep European roots, and the way they handcraft leather goods.

Many luxury brands are also investing in multi-tiered customer loyalty programs that are often linked to global IT systems so they can create a uniform picture of their customers wherever they shop. With this information they can create tailored marketing campaigns.

A large part of the allure of luxury, particularly in durable product categories which preserve their value over time such as jewelry, is the opportunity to share in the rich cultural heritage that is associated with a brand. This concept is rapidly catching on with Chinese consumers of luxury, and is playing a major role in how marketers assemble their strategies. Many leading brands are promoting their company history and product craftsmanship. Several have organized small “museums” – sharing the history of the brand and showcasing designs from many decades ago.

Along the Summit, CLA (China Luxury Advisors) remarked on three elementary points for brands new to the China market: Timing, Target, and Tag.

- Timing: If a brand is currently unknown in China, it’s probably not a good time to enter the market with a massive marketing and offline retail push.

- Target: Instead of looking to change the consumer culture in China, a brand should take advantage of consumer trends. If Chinese consumers are making their majority of luxury purchases outside of China, sell to them outside of China.

- Tag: A significant number of Chinese shoppers are less concerned with price than they are about value, meaning the brands that offer the best service and products, and whose CRM boosts a loyal relationship, will remain popular regardless of pricing strategy.