Covid-19’s second wave made China’s economy the world’s largest – here’s what that means for luxury brands in 2021, according to experts
With the West currently living through the nightmare of a second wave of Covid-19, luxury brands are focusing on 2021 and how to win in what has become the world’s largest economy: China.
China has now overtaken the US as the world’s economic powerhouse, according to figures released by the International Monetary Fund (IMF) this month, which predicts that the Chinese economy will grow 1.9 per cent this year while the US economy will shrink by 4.3 per cent, and the Eurozone by 8.3 per cent. This news makes China strategies more important than ever for luxury players as they head into 2021.
Make a digital transformation
Establish brand relevance in China
Chinese shoppers heading overseas once looked to a brand’s reputation in other fashionable markets like Paris. Yet Tom Griffiths, the commercial director at Verb China, a performance marketing agency focusing on luxury with clients such as Alexa Chung and Jimmy Choo, opines that focusing on a brand’s relevance in China rather than overseas will be vital for success in 2021. “For those brands that have relied on being cool outside of China to get consumers’ attention from inside China, it is not going to be as easy as that any more,” he states.
Embrace China higher up
Griffiths also says brands that remain blasé about China will not succeed in what has become a more competitive market. Domestic brands have been gaining popularity since the pandemic began, and overseas travel shopping has been curtailed, which means getting China right is crucial.
“Interesting how little is known about China outside of the China bubble,” he notices. “There is almost a blind spot at the top levels of brands that trade with China. They will not have a clue about what their brands look like on WeChat, for example. Brands must be willing to embrace China higher up the ladder.
“It was the same with digital. At first, it was given to a couple of juniors until it became too big to ignore. The global shift towards China has accelerated. No one had predicted how fast it would change. It means a lot more competition in 2021. It has become too big to ignore.”
Anticipate global Chinese luxury brands
“It might not arrive by 2021, but by 2023, I predict the first global Chinese luxury brand will be here,” adds Griffiths. “Chinese brands are going to compete on a global level. We see it in beauty with companies like Perfect Diary. I have noticed a lot of China tech brands are looking overseas now. Luxury will follow. It goes back to relevance. International luxury brands will need to make themselves a lot more relevant next year in China. It is a big country with linguistic differences. Being ignorant will not work when 5,000 local brands are rising up. Get ready.”
Use lower level influencers
Vanessa Wu, director of Europe at Gusto Luxe, states that “the trend has begun toward KOCs [Key Opinion Consumers]. In addition to some of the most coveted KOLs with huge social followings, brands are also looking at working with KOCs, or real-life tastemakers with less, but loyal, like-minded followers. To achieve word of mouth impact, use lower level influencers.”
Leverage disruptive e-commerce
“‘New retail’ will be a key growth area in 2021,” Wu suggests, referring to emerging initiatives currently being created by online marketplaces. “For example, the huge e-commerce site is looking to sell pop-up physical spaces to brands as a way to complement their online Tmall marketplaces. Big e-commerce players like Tmall are looking at new retail and combining the offline components with technology. Just Imagine the way Farfetch’s store of the future works.”
“Brands also need to pay attention to potential disruptive e-commerce channels coming from popular social media platforms,” Wu adds. “One example is Douyin, which is launching its e-commerce [offering], and a lot of top-tier KOLs also have e-commerce businesses. Overall, it is key to ensure a smooth conversion from content to commerce.”
Create selfie-worthy moments
“Now more than ever, everything needs to be selfie-worthy,” says Reuter, using Burberry’s new social-retail store in Shenzhen as an example. “I see cool local concepts really resonating, young people taking those pictures. Are you building out a strategy that is selfie-worthy? Yet offline is very important, too. Just because online is huge now, it doesn’t mean you should forget real shops.”
“During 2021, brands need to focus closely on consumers and the market,” says Yuwan Hu, research director at Daxue Consulting, a China-focused market research and management firm. “Our market can change every six months. They should pay 360-degree attention. They need to create new emotional connections and innovative designs that fit their target consumers. They need to find their target consumer’s new touchpoints, triggers and aesthetic sense.”
Transition and transform
Serge Carreira, head of the Emerging Brands Initiative at the Fédération de la Haute Couture et de la Mode in Paris, added: “Global luxury brands have been hit hard by the crisis. The main cause is the fall of tourism, which was one of the drivers of growth. Despite the uncertainties remaining, 2021 shall be a year of transition and transformation. Global luxury brands will adapt to the new context: digitalisation, authenticity, creativity, inclusivity and sustainability.”
“Brands will be themselves but adapt to radical new behaviours and lifestyles,” said Carreira. “They have to expand without losing their scarcity and their desirability. Growth in China is driven by a new generation of shoppers, presenting another challenge to old-school brands. Luxury offers a lifestyle rooted in long-run values, but the paradox is that the younger generation looks for heritage and immediacy. Digital is a strategic tool for catching these new shoppers. However, it has to be manipulated carefully. Luxury remains a business of offers, not a business of demand. The focus for brands is to embrace the global changes generated by the crisis by integrating them in their core business.”
Move customers offline
Sophie Cheng, general manager at FutureBrand, a strategy agency in Shanghai, said: “For 2021, online is, of course, critical, and the market share has grown from 11 to 33 per cent. But you need to find a way to move consumers offline. Create a digital and marketing strategy that covers both online and offline business.”
Dedicate enough resources to what’s needed
“A trend for 2021 should be to dedicate enough resources [to what’s needed],” adds Griffiths. “If a brand is good outside China, they will do OK in 2021. But being a new brand can be challenging. It can require huge resources. China is an expensive market. Teams also need to collaborate. Often the on the ground and foreign team do not connect, and it leads to disasters.”
This article originally appeared on Jing Daily.
Burberry launched its social retail store in Shenzhen, but that’s just a start – here are 12 things luxury brands should do to win in the competitive Chinese market