Chinese consumers evolve fast. Since 2015, The primary driver of luxury spending has changed, from new luxury consumers making their first purchase, to sophisticated luxury consumers who have purchased many luxury products. With this familiarity with luxury purchases comes a desire for more authentic purchases that are not about showing off “bling bling”, but about the intrinsic benefits of feeling good about owning products of high quality. Greater sophistication leads to greater awareness and emphasis on ethics and sustainability. In many ways, the Chinese consumer consciousness is evolving right before our eyes.
Luxury Search Terms Becoming More Sophisticated
In the past year, Baidu has found Chinese consumers using increasingly sophisticated and discerning search terms, with an eye for industry knowledge.
Luxury Consumers Purchase Luxury Products for Themselves
Previously, purchasing a luxury product was about “showing off” or “bling bling”. This attitude is no longer prevalent. It is replaced by a respect for the products quality, and an increase in self-esteem related to the individual’s experience.
Willing to Pay a Premium for Sustainability and Ethics
Chinese consumers put a higher value on brand sustainability and ethics than other countries. This is a result of becoming more discerning about their luxury purchases and can be a result of how much research Chinese do before they buy.
Following the online backlash of a series of culturally-themed ads by the Italian luxury brand, screenshots of purported anti-China comments by brand co-founder Stefano Gabbana were widely circulated. This resulted in the cancellation of the brand’s Great Show fashion event in Shanghai as well as the removal of Dolce & Gabbana from China’s leading e-commerce sites.
Can Dolce & Gabbana Weather Its Chinese Social Media Storm?
In the article, Jerry compares the current crisis with recent boycotts of foreign brands and products in China. He suggests that this time, the backlash has been more organic, as opposed to the result of wider encouragement from political forces.
International brands in China need to be extra cautious when engaging with Chinese culture, ensuring the tone is positive and never judgmental.
Sadly, this recent (and arguably avoidable) crisis, is likely to have severe implications for the brand over the short- and long-term in China.
On Tuesday, November 20th, the World Federation of Advertiser’s held their final meeting of the year. The World Federation of Advertisers (WFA) is a global trade association for multi-national advertisers and national advertiser associations. Its membership is made up of around 85 of the world’s top 500 advertisers and a number of national associations in 60 markets.
Resonance’s Paul McNeill speaking at the World Federation of Advertisers
Resonance’s Paul McNeill was invited to host a very interactive session on how the latest developments in the WeChat eco-system. After the sharing of some mind-boggling numbers, a deep-dive was shared on the versatility of WeChat as it has morphed from a communications tool into a fully-fledged business tool.
Particular emphasis was on how best to leverage on the Social-CRM opportunities within the WeChat universe, the diversity, and flexibility of mini-programs and how this deeper communication can lead to direct sales, through Social-Commerce. With top marketers from INFINITI Motor Co., Hong Kong Disneyland, Cathay Pacific, Nespresso, Estée Lauder, Hasbro, and others, the dialogue was fun, probing and engaging, just what you want from social engagements.
Paul McNeill breaks down the WeChat consumer journey
Critical perspectives and discussions from the talk included:
WeChat has now an apparent dichotomy between business use and personal use
The business tools currently available through WeChat and associated API’s allow for a mind-boggling array of services to be accessed directly through the WeChat platform
With over 170 million people engaging daily with over 1 million mini-programs, it is essential to stand out from the crowd with services that add value to a consumer’s daily life
Social CRM now allows for a very granular and highly targeted approach to communication
Social commerce accessed through WeChat is on the ascendancy and will continue to grow as more and more marketers get to grips with the power that they can retain in the customer buying journey
Due to the proliferation of fake products and products of dubious quality, China’s netizens are wary of new products they aren’t familiar with. Therefore, brand loyalty among Chinese millennials is still high compared to other mature markets. As the Chinese market matures, product quality improves, product genuineness becomes common, and purchase options increase, fully capturing and keeping millennial brand loyalty will be increasingly critically important.
Brand Loyalty is High in China vs. Other Markets
As the Chinese market matures, we expect to see a shift away from brand loyalty, similar to the US, UK and Italian markets. Since the Chinese market goes so fast, brands should prepare early for this shift.
Chinese are Influenced More by Celebrities
Trusted celebrities and KOLs are indications of product credibility and remain an important channel of influence when netizens are deciding which brand and product to purchase. Continued investment in influencers is important.
Quality Products Tops the Reasons Why Chinese Buy
Quality products dominates, but as quality becomes a commodity, brands should also pay attention to Brand Story and the Brand Heritage as points of unique differentiation with competitors. Story shows netizens an aspirational lifestyle, and heritage shows credibility and trust.
Perhaps due to the One Child Policy creating many single child families, Millennials grew up with a lot of family support and attention. Pooling together all of the family’s resources make Millennials feel wealthier than they actually are, leading to more spending, without necessarily the same earnings as previous generations. Where do they go to spend their money? Digital is a large part of their buying process, with search and brand website being the top destinations.
Millennials Monthly Household Income is Lower
Millennials tend to make less income than non-millennials.
Millennials Spending Similar to Non-Millennials
Perhaps due to the fact many Millennials have family support, their disposable income is closer to that of non-millennials. The constant presence of things to buy via online channels could also contribute to Millennials spending more than their older counterparts.
Millennials Use Digital to Decide What to Buy
Search and brand website remains the most important entry point for Millennials when they first start learning about a brand. Much of Chinese Millennial buying behavior takes place online.
Last week, to coincide with CIIE being hosted in Shanghai, AustCham hosted a discussion and panel on the future of New Retail at the Westin Bund Centre – New Retail: Making Retail Great Again.
Invited speakers included Resonance’s Jerry Clode, alongside Alibaba’s Hector Zhang (Operations Advisor – Tmall Business Unit) and Ogilvy’s Olivia Plotnick (Marketing & Communications Manager).
Jerry lead out the session by discussing how China is leading the New Retail ‘revolution’; then Zhang shared Alibaba’s vision for retail in China; with Plotnick discussing how brands can best leverage new developments in this area.
Jerry Clode speaking at AustCham’s New Retail Event
After each speaker shared their perspectives, there was a lively panel discussion with questions from an enthusiastic crowd who joined the event.
Key perspectives and discussions from the event included:
That New Retail, while more advanced in China than elsewhere, is still in its infancy
New Retail represents a response to the limits of traditional retail. Now retailers have the opportunity to leverage data to provide consumers a deeper consumer experience
Due to the local reality that large tech companies can now combine e-commerce and payment assets to access SKU-level data, means New Retail is advancing faster here in China than elsewhere
New Retail is being embraced more readily by Chinese consumers due to the reality that traditional retail was not delivering on locals’ increasing expectations
Alibaba is championing New Retail as it represents the best way to optimize revenue yield from retail space, an increasingly rare and expensive commodity in China
New Retail offers marketers a more intuitive way to sell to consumers due to a wider set of data they can now access, meaning they can be less reliant on intrusive and disruptive mediums such as pop-up ads
Ecommerce is big in China, but not nessessarily amnong luxury brands. This is perhaps mostly due to the nature of luxury brand products which are generally very expensive than the average ecommerce purchase, and difficult to fully appreciate from viewing pictures online. However, while investment and growth in ecommerce has been slower than other industries, luxury brands are steadily increasing their investment into ecommerce over time as the sheer size of China and the limited reach of retail stores demands new strategies for the modern marketplace.
Luxury Brands’ Slow But Steady Growth in Ecommerce
Growth in ecommerce for luxury brands has plateaued since 2015. However its projected to grow as competition and demand increases.
Luxury Brands Host Ecommerce on their Websites
Brand’s tend to use their own websites for ecommerce transactions. This is likely due to the number of fake products being sold in China. Customers can trust they’ve purchased real goods when buying from a luxury brand’s official website. Due to the popularity of WeChat, WeChat Shops have seen a recent huge jump in adoption. Though this is usually for sale of limited availability items during special campaigns, WeShops may eventually become more permantent ecommerce destinations for many brands.