Chinese shoppers are arguably even more tech savvy and digital than their western counterparts

A crucial part of luxury marketing is creating a feeling of scarcity, so it may seem counterintuitive for luxury brands to speak to consumers through online channels. But in Asia — especially China — it’s essential for luxury brands to have an attuned digital strategy.

With immense spending power, consumers under 40 are driving luxury consumption in China, and globally, Chinese consumers are driving growth for luxury brands. According to UBS, young Chinese consumers allocate around 20 percent of their discretionary spending on luxury items. Boston Consulting Group and Altagamma note that Chinese consumers have a deeper knowledge of luxury brands and rely more heavily on social media and e-commerce than their western counterparts.

White Glove Online

Buying luxury items online may also seem counterintuitive since the attentive VIP treatment that one receives at a luxury maison is part of the joy of the purchasing experience. In China, where 40 percent of the world’s e-commerce sales happen, one online retailer has already figured out a way to replicate this superlative service. JD.com, the country’s second-largest e-commerce platform, offers its “White Glove Delivery” service for purchases made on its Toplife luxury sales platform.

The service includes elegant gift packaging to add to the unboxing thrill, plus the package will be delivered by a deliveryman wearing a suit and white gloves. The service has been so popular that the company says 41.5 percent of their customers want the white glove delivery experience, according to a survey. For an additional fee, JD.com has now expanded the service to include select items bought outside of Toplife.

Global Competitors

China’s largest e-commerce companies are in fierce competition to try to secure exclusive deals with global luxury brands for their platforms. JD.com’s biggest rival, Alibaba Group, just announced a joint venture with Swiss luxury goods group Richemont that will see the two companies launch a luxury retail platform for Chinese consumers. This platform will include two mobile apps for Net-a-porter and Mr Porter as well as online stores for both on Alibaba’s Tmall Luxury Pavilion.

Luxury brands themselves are also connecting directly to Chinese consumers. An important marketing channel in China is WeChat, the popular all-in-one mobile platform owned by Chinese Internet giant Tencent. It began as a simple mobile messaging app but can now be used for almost every kind of daily activity including mobile payment, hailing a taxi, renting a shared bike, ordering food delivery, buying movie tickets or paying the electricity bill. WeChat also allows brands to create “mini programs” to directly connect with consumers. They are a cross between a Facebook page and a mobile app, and can offer product information, competitions, promotions and loyalty programs. Brands can use WeChat to sell their products through the mini programs.

Burberry was among the first global luxury brands to establish a WeChat presence, and analysts credited its WeChat marketing efforts with helping to increase sales in China last year. This year, Burberry is using the platform to hold exclusive one-day flash sales to simulate a physical pop-up shop or merchandise “drop.” In September, it used WeChat for what it described as its first “bespoke digital selling experience for social channels,” which offered some limited-edition items for 24 hours after they had debuted at its runway show.

After JD.com and Alibaba, the third largest e-commerce platform in China by market share is VIP.com, and it is also a key sales channel for global luxury brands in the region. The company’s 2017 net revenue was $11.2 billion, and it handled more than 335 million orders. The concept of Millennials has no direct equivalent in China, but they do refer to the “post-Nineties” generation (90後). For VIP.com, this post-Nineties generation accounted for the majority of its customers.

Micro-Targeting Subgroups, Cities

I should also note that this age data highlights another important point about marketing to young Chinese people. China’s rapid development means that these consumers can be further divided into subgroups: the older batch (1990-1994) and the younger batch (1995-1999), which is important to understand for marketing. The younger segment is even more tech-savvy and grew up in an even more affluent society than those just five years older. And they respond to different message styles and different celebrity brand ambassadors than those born at the dawn of the Nineties.

Another interesting data point from VIP.com’s sales results is that 40 percent of its customers reside in second-tier cities — that is, outside major metropolises such as Shanghai and Beijing. This underscores that marketers must keep in mind that China is a big country, and consumer behaviors and preferences can vary widely between Shanghai and smaller cities like Chengdu or Changsha. These differences make micro-targeting even more important and useful to luxury brands who are looking to reach young, affluent Chinese.

A strong digital presence is absolutely essential for luxury brands to succeed in China. Chinese shoppers are arguably even more tech-savvy and digital than their western counterparts, and western brands urgently need to tailor their marketing strategies accordingly. With so many distinct subgroups featuring large differences in consumer behavior, micro-targeting through programmatic advertising lends itself particularly well to the Chinese market. For luxury brands, the right message to the right consumers is the way to win the China marketing game.

Matt Harty is senior vice president, Asia-Pacific, at The Trade Desk.

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