Boston Consulting Group (BCG) recently joined forces with Tencent Marketing Insight (TMI) to release the 2020 BCG x Tencent Digital Luxury Report, drawing on deep insights into the opportunities for brands in the context of smart retail and consumption habits of Chinese consumers.
Simultaneously, Tencent Advertising unveiled solutions — Full-Chain Evolution for the Digital Upgrading of Luxury Brands — to explain how brands can better fit in the consumer journey in both public and private domain marketing pools to increase their exposure in the WeChat ecosystem.
This year, has been exceptionally challenging for many industries. Due to the COVID-19 crisis, the offline market shrank with falling consumer confidence in Q1 and Q2, and the luxury market was no exception. But as such, luxury brands amid an all-out transformation get to see the light in this turmoil. Their acceleration of digitalization in recent years has also helped brands recover globally, especially in China, where digital infrastructure is at the forefront.
According to the 2020 BCG x Tencent Digital Luxury Report, Chinese consumers have dramatically switched their battlefield for luxury goods since the outbreak. Along with the return of consumers to the local market and brands’ construction in multiple channels, online channels have risen to 33 percent from 12 percent in 2019 (and an increase to 30 percent from 11 percent for pure online approaches). Meanwhile, local offline channels have shown a significant rise.
As one of the largest luxury markets, China shows proved resilience despite the impact of the pandemic. Thanks to the return of domestic transactions and the growing consumption habits of Chinese consumers in the local market, “the entire market for luxury goods in China will grow with leaps and bounds compared to the situation before. It’s a long run. So, what we are facing now is a new and extensive market,” says Lin Liangliang, GM, SMB Sales Head of Tencent Ads, adding that the maturing market has also cultivated more mature consumers.
Along with the continuous improvement of the online ecosystem, luxury brands need to face not only the level of exposure but also attach importance to the quality. That being said, brands must understand how to lead the consumer to the final transaction while fostering brand loyalty to achieve closed-loop marketing.
Taking social networking as the core, Tencent’s mega ecosystem such as WeChat is expanding its full-chain service strategies covering advertising, e-commerce, and CRM. On Sept. 22, Tencent Advertising held a conference titled, “New Luxury Future — 2020 BCG x Tencent Digital Luxury Report,” demonstrating how the luxury industry is leveraging digitalization to connect consumers for accelerating the conversion marketing in the post-pandemic era.
WeChat Builds Omni-coverage
WeChat is more than a social platform. Along with the rise of social retailing, WeChat’s global monthly active accounts have reached 1.206 billion, according to Tencent’s second-quarter financial results, clearly demonstrating the platform’s tremendous business value in conversion marketing. As for the luxury brands’ e-commerce platform based on the WeChat mini-program, their growth of GMV has jumped to the top four. For the early stages in the consumer journey, also known as the “Awareness” and “Interest,” WeChat’s impact remains undiminished. In August, the search volume of luxury brands on WeChat increased by 53 percent compared to April.
The report notes that the proportion of luxury consumers going purely online has risen from 11 percent to 30 percent. Previously, based on the public advertising in the WeChat Moments, brand marketing is now strengthened by private domain marketing pools such as WeChat Service Account, WeComWeChat Work and WeChat mini-program that also functions as an e-commerce platform, to finalize the purchase and ameliorate user management. Therefore, the brand’s existing user stock brought by public exposure will embrace an effective conversion in this ecosystem.
At the same time, the WeChat ecosystem featuring multiple touchpoints responds to the diversity of the consumption path brought about by changing consumer behavior. The journey from “decision” to “purchase” for the same product or the order at the same amount can take very different forms. Thus, what the WeChat ecosystem (the mini-program, WeChat Service Account, WeChat Channels, WeChat WorkWeCom and WeChat Ads) can provide is to meet the different needs of consumers with diverse approaches to achieve differentiated user experience.
Crystal Hao, Partner and Managing Director of BCG, adds that brands can no longer do marketing in a one-size-fits-all way, saying “the market is surely welcoming more segmented and targeted communication and interaction.” That’s just the reason why the WeChat ecosystem is expanding to cater to this increasingly mature market in China.
Be Exposed But Be Smart
Although post-90s users spend an average of 7.4 hours online per month, according to the data, the average number of apps used per month is 24.5. As users become more distracted, brands need to leverage exposure strategy to bear fruit within the limited amount of time that users spend online. Certainly, luxury brands are more than familiar with building strong brand awareness and brand equity. But China’s fast-paced Internet environment is also a challenge for them to create powerful and effective performance-based advertising in the WeChat ecosystem.
Therefore, given the predominantly social nature of WeChat, performance-based advertising needs to be equally social. This year, GUCCI launched the Disney X GUCCI Limited Edition Collection to celebrate the year of the Rat for Chinese consumers. Meanwhile, it placed an advertisement in the WeChat Moments with the brand’s customized WeChat red envelopes, perfectly fitting in the Chinese lifestyle to achieve effective communication. While clicking on the advertisement, it went directly to the brand’s online flagship store on mini-program to simplify the transaction.
The WeChat ads are exposed here and there to targeted consumers on a long-term basis. It not only directs users to the mini-program for making a purchase, but also integrates WeChat Service Account, WeComWeChat Work with registration form for user information, and therefore, communicates with consumers from the beginning to the end. A marketing strategy was early proved by Hermès who creatively placed its campaign in WeChat Moments for its men silk accessories to connect the brand’s products with modern music culture. Thus, it is clear that efforts to personalize the communication across industries and circles shall be made by brands while consumer attributes are becoming more complex.
Discovery of Innovation
WeChat is not an island. Each service powered by Tencent is reaching targeted groups of consumers from various touchpoints.
LOEWE and Modern Sky launched Club Paula’s online concert on QQ Music. By adding rap stars such as TizzyT and Benzo (Li Daben) to their guest list, this event precisely reached out to music lovers while echoing the musical attributes of LOEWE’s latest collection. Similarly, Maserati in a groundbreaking partnership with Tencent Games launched this year a Maserati skin for the Dacia vehicle in Game For Peace, the Chinese version of PUBG Mobile.
As digital advances, the connection between brands and different digital platforms will fracture. This deep marketing practice will help to deepen the brand’s influence in specific circles, based on a brand’s own cultural attributes. The innovative communication will also contribute to updating a brand’s narrative and gain contemporary emotional resonance, given the rising consumption power of today’s younger generation.
The report shows an increase from 48 percent to 50 percent for consumers under 30 and an increase from 42 percent to 47 percent for expenditure. Nowadays, luxury brands prefer to communicate with consumers on their own terms to truly reach out to them, rather than pursuing untargeted exposure.
Smart Retail: From Reality to Sincerity
The concept of smart retail has been on the rise in recent years. Accelerated by AI, it becomes now possible for transaction processes that were once digital to be truly intelligent and in line with consumers’ shopping habits, rather than simply relocating the process to online channels. Recently, however, Burberry and Tencent launched a social retail store that makes the concept of smart retail more vivid, transforming it from reality to sincerity.
By seamlessly integrating Burberry’s in-store experience and products with the WeChat ecosystem, the social retail store features QR codes, one-to-one conversation with guides through WeComWeChat Work, interactive store window and themed fitting rooms to offer a truly interactive experience. More importantly, the self-established community in this ecosystem can further redirect offline traffic back to online, extending the consumer’s lifecycle at the brand. Then the built-in mini-games with a reward system can further cultivate customer stickiness. In this practice of smart retail, the digital experience (or more specifically, the experience powered by WeChat) is not just a lock on the consumer journey, but integration into the consumer’s perception.
If the volatile first half of the year has brought anything to the industry, it’s that luxury brands are becoming more aware of the digital consumer journey. As for luxury brands that want to lead in China, it becomes essential to understand how to expand their footprint on WeChat, China’s most pervasive platform.