China’s luxury industry is already a complex market with consumer demographics and shopping behaviors unlike any other in the world. Then COVID-19 hit, and everything you thought you knew, everything you planned for… has changed, leaving luxury brands wondering “what next?”
During the peak of COVID-19, purchases dramatically decreased, offline stores were closed, logistics shut down, and many brands paused product launches and campaigns. Now that things are recovering, should your brand simply pick up where you left off in January? Or have consumer behaviours and preferences changed so much that you need to rethink your strategies and messaging?
During our recent webinar, Luxury in China in the Wake of COVID-19, we received an overwhelming number of questions from attendees. Here, speakers Emmanuel Stralka, Strategy Director at Qumin, and Lauren Hallanan, Head of Marketing at Chatly attempt to answer 11 of the top questions asked.
Q: Is Douyin still growing in China? How are luxury brands using short video platforms like Douyin? Is it mainly for brand awareness or is there a way to monetize?
ES: In China, short videos are particularly appealing to young Chinese luxury shoppers and campaigns on these platforms are not only a great way to build a brand image, but can also drive engagement that leads to sales. Brands have begun starting to monetize these platforms as people are getting more comfortable with purchasing through these platforms.
LH: I agree with Em, however I think that many of the successful case studies for driving sales through short video platforms have been for lower price point items. I think right now luxury brands should continue focusing on using these platforms for brand awareness, especially since I still haven’t seen many luxury brands do that well.
These are my two tips for brands using short video platforms:
Consistency: a lot of luxury brands only do one-off videos, but you have to put out videos consistently if you would like to actually build a presence, drive brand awareness, and sales. You should be publishing at least 1-3 videos a week, if not more.
Customization: don’t just take videos from other platforms like Weibo, Youtube or Bilibili and slap them up there, but make sure the videos you put on Douyin actually fit the specific style of content that resonates with Douyin users. The one place you might be able to repurpose content from those other platforms would be on the newly introduced WeChat Channels, but that is a pretty new feature so it's still too soon to tell.
Q: Do you think we will see HNWI (High Net Worth Individuals) across all age groups shift their spending more towards health and wellness post COVID-19?
LH: Yes, this was a trend that was already occurring prior to COVID-19 and since the pandemic reports have come out saying the Chinese consumers across all social classes are more willing to spend time and money on health and wellness related activities and products post COVID-19.
I do think that this enthusiasm for health and wellness will die down a bit as life goes back to normal so now is a crucial time for brands in this space to latch onto consumer demand.
ES: The behavior of affluent Chinese has evolved over these past 2-3 years, especially for young Chinese luxury shoppers who have a higher level of sustainability consciousness. They are more inclined to choose sustainable products, consider the impact it will have on the ecosystem, and think whether the company has strong governance rules when it comes to their suppliers. Choosing products and services with considerations of luxury and wealth vs health and sustainability will be a strong trend going forward.
Q: Do you think the concept of “revenge buying” is something that resonates with consumers in China and therefore something that brands should embrace, or is it seen as a negative behavior for ostentatious consumers only?
ES: “Revenge buying” is the concept that people are really looking forward to buying very aggressively after the recovery phase. I think a key area where we will see that occur is in the outbound travel industry. Revenge traveling has already begun to occur domestically, for example, China lifted travel restrictions to Hunan in early March and people rushed there, so brands should expect a huge rebound in terms of traveling to take place after the restrictions have been lifted in the West as well.
Chinese travelers are characterized by their diligence in pre-planning 2-3 months in advance. Therefore, western brands should begin expanding their presence now to capture the attention of Chinese travelers who most likely have started planning for summer and even fall travel.
LH: I think HNWI will display revenge buying behaviors, particularly once international travel opens back up since they often purchase luxury products while traveling abroad, but for upper-middle class consumers we might actually see a reduction in luxury purchases. Affordable luxury and lower price point items may not sell as well because many people lost their jobs or were out of work for several months and may not have as much disposable income right now.
I would say it's safe to run campaigns around the theme of ‘treating yourself’, especially with luxury services and travel. For physical products such as cosmetics, apparel and accessories the angle of ‘looking your best now that you’re not confined to your home’ would resonate. But I would avoid directly using the concept of revenge buying in campaigns.
Q: Would you say exogenous factors like the trade war and COVID-19 have made Chinese consumers more nationalistic? What are the implications of that for the trajectory of home-grown luxury brands in China?
ES: There is a great generational divide in current sentiment towards foreign brands.
The younger luxury consumers tend to be very nationalistic with a strong affinity towards China-based brands. They grew up seeing the rise of Chinese tech companies watching China become the world’s second-largest economy.
On the other hand, older Chinese generations prioritize value consciousness in terms of the functionality the product provides and whether it is worth their time and money.
The impact of COVID-19 on this sentiment, I think consumers across the board have become even more nationalistic because China handled this crisis much better when compared to other countries, which reinforces their preference towards local brands.
LH: I would agree, however, while more and more Chinese luxury brands are emerging, the strongest domestic brands are still not yet in the luxury category and tend to have a lower, more accessible price point. Western luxury brands still have the upper hand when it comes to luxury products.
Q: Any food for thought on how to efficiently integrate WeChat data into the brand’s CRM system?
LH: Yes! Actually this is a key feature of our Chatly software. Chatly can be used as your brand’s CRM or can integrate the data with Western CRM platforms such as Salesforce. If you’d like more information, please get in touch and we’d be glad to arrange a demo.
Q: You mentioned localized targeting by extracting WeChat IDs - how do you suggest luxury brands who are still at the early stages of building their WeChat database approach this?
LH: In the early stages of growing your WeChat Account, it is important to immediately begin tracking and segmenting your users in order to build out their customer profile and be able to retarget them with relevant content, notifications and offers.
A key step would be to bind users’ WeChat accounts by collecting their PII (personal identification information) such as phone number or email. Some of the main ways to conduct data binding include:
- At POS with a dynamic QR code
- Offering incentives in your WeChat welcome message or as part of the initial 48-hour journey
- Featuring your membership/loyalty program in the menu bar
- Event registration HTML5 page
- Any mini program with one-click authorization to collect user phone number
Q: Besides in-store QR codes, what are some other best tactics for luxury brands with a new WeChat presence to build a quality database?
LH: Growing your WeChat following will require some paid campaigns. Running Moments ads and working with WeChat KOLs are two of the best options for driving users to your account, especially right now when offline retail and events have still not completely returned to normal.
Once they have and consumers are comfortable going out, holding offline experiential events or pop-up shops that incorporate your QR code is another great method.
Your first few Moments ads campaigns may need to go out to a broader audience, however, once you have started to grow a following and bound their PII, you will have collected enough consumer data to conduct a lookalike ad campaign that targets users with similar interests. So the more users you have, the better results you should be able to get from your ad campaigns.
Q: How can brands use WeChat to track and engage with affluent Chinese travellers? Any good case studies of affluent Chinese customer purchase journeys on WeChat for hospitality or travel retail brands?
LH: Place QR codes around all your international retail and travel retail locations and set up a program incentivizing sales associates to drive travelers to follow your Official Account.
Be sure to use dynamic QR codes that trigger customer journeys that are customized to the location where the user scanned the code. Within the journeys you can provide content and promotional offers specific to that location. This will also allow your brand to track user location and segment them to send targeted info and provide personalized service.
If your brand has a very strong international presence, consider opening several WeChat Service accounts for each country with content specific to that location such as travel guides and shopping tips that will attract travelers to follow the account even during the trip planning stage.
Q: If you were a Western hotel brand, how would you set yourself apart to attract Chinese guests in the wake of Covid-19?
LH: Don’t go silent and continue to create content that engages your followers while being sensitive to the situation. Maintaining a personalized relationship is key to setting yourself apart from other brands. Some Chinese hospitality brands have started offering discounted purchase-now travel-later packages to capture “revenge travelers”.
Q: Selling perfume and cosmetics is very different from selling Hermes bags ... are the consumer trends you mentioned applicable to both product categories? How would your WeChat strategy change for these different segments?
ES: No matter what the product category is, social distancing installed a new normal. Before COVID-19, consumers going into a luxury store and store associates going into their personal space to introduce a product was perfectly ok, but now with COVID-19 and social distancing, it’s not acceptable. Brands will need to figure out how they can bring that personal experience online.
LH: As for the weChat portion of the question, because the audience for these two types of products are very different and the degree of personal touch needed to sell these products is very different, different tactics need to be used.
For lower price point items such as perfume and cosmetics, an automated semi-personalized shopping experience on your WeChat Official Account or mini program with targeted content and offers should be sufficient. whereas high-ticket items tend to require sales associate’s intimate attention. For these shoppers, adopting a one-to-one clienteling strategy using WeChat Work would be best.
Q: We are seeing significant growth in the use of live streaming on Instagram here in the West due to COVID-19. Did the same happen in China during the lockdown? And is this a trend that luxury brands should tap into?
LH: Yes, definitely. Live streaming has been one of the biggest China marketing stories of COVID-19. Unlike with Instagram, in China live streaming platforms have e-commerce functions, allowing brands to actually sell products through their streams. Honestly it has been a huge wasted opportunity for Instagram not to have these features!
E-commerce live streaming was already a growing trend in China pre COVID-19 and then saw explosive growth during China’s quarantine period. Taobao live streaming, the biggest player, reported a 110% increase in live streaming sessions YoY.
WeChat and Xiaohongshu (Little Red Book) had been testing ecommerce live streaming functions since the Spring of 2019. As soon as these platforms saw how live streaming was taking off during COVID-19, they immediately launched these features to the public.
I think the use of e-commerce live streaming will continue well after offline stores re-open because many consumers became accustomed to this medium and will continue to use it more in the future.
There have been many case studies of luxury brands running live streaming campaigns, particularly for cosmetics. Recently there was a live stream campaign from Louis Vuitton that went poorly and has caused a lot of brands to question whether live streaming is the right medium. I think it can work very well as long as the brand makes sure the stream setting and content stays consistent with the brand’s image.