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Shopping festivals are evolving from discounting drives into an opportunity for brands to connect with new consumers and build a loyal fan base.
The 11.11 Global Shopping Festival, also known as Single’s Day in China, is the biggest retail event of them all and brands prepare months in advance to perfect their campaigns.
Traditionally conservative luxury brands are embracing online shopping in droves as the user experience improves in strides and e-commerce takes an increasingly larger share of total retail sales. In China, digitally native consumers expect a seamless shopping experience whenever and wherever they want to shop.
Luxury brands, such as Italy’s Brunello Cucinelli and Hungary’s Nanushka, recently made e-commerce in China a core plank of their international expansion.
In this episode of Alicast, Kathy Jiang, Principal & Chief Researcher at global consultancy Roland Berger talks with Alizila’s Managing Editor, Alison Tudor-Ackroyd, about how luxury brands can maximize their investment in 11.11 to attract Chinese consumers.
“11.11 has already become the key moment for Chinese consumers to think about what to add to their shopping cart,” said Shanghai-based Jiang, so brands need a carefully crafted strategy.
Top tips include making best use of virtual and augmented reality – but don’t rush it as too abrupt a rollout could disrupt consumers’ perception of the brand.
Munich-headquartered consultancy Roland Berger has published two white papers on luxury trends in China this year in collaboration with Alibaba Group, China’s largest e-commerce platform.
It believes that luxury brands concluded en masse this year that digitalizing luxury goods will not dilute their DNA. Instead, harnessing advanced technology can promote brand building and further strengthen their image.
The consultancy discovered that in China, only about 4% of luxury consumers complete their purchases through offline channels alone as most choose goods online and then buy them offline. Even this is changing as online infrastructure speeds up the shopping journey.
11.11 has already become the key moment for Chinese consumers to think about what to add to their shopping cart
This podcast covers the growth of the luxury market in China, the rapidly evolving shopping habits of China’s affluent consumers and what brands must do to win their loyalty.
An edited transcript of this episode of Alicast follows. For more tips from China veterans on successfully navigating the world’s second-largest economy, subscribe to the series on Apple Podcasts or Spotify.
Podcast transcript:
You’re listening to Alicast, a deep dive into innovative and emerging trends in e-commerce, online payments and digital entertainment.
Alison Tudor-Ackroyd: Thank you Kathy for joining us today!
Kathy Jiang: Thank you Alison for inviting me to Alicast. It’s a great pleasure.
Alison Tudor-Ackroyd: How would you say the luxury market in China is evolving vis-à-vis the rest of the world?
Kathy Jiang: The luxury market here is evolving rapidly, and China will continue to lead its growth in the future based on our analysis.
Due to the impact of politics, macro environment and post-epidemic [elements], luxury consumption has some turbulence. However, the growth rate of Chinese luxury consumption will remain in a leading position.
It stands out as the benchmark, leading the global luxury industry in business innovation, as represented by Alibaba’s Tmall Luxury Pavilion.
Many of the leading luxury giants here in China set up good practices before the pandemic. For example, digitalization and the direct-to-consumer transformation helped them realize the value of online channels and the complementary nature of online and offline.
So we stay very positive and forward-looking.
Alison Tudor-Ackroyd: You did mention the turbulence created by the pandemic. Could you tell us more about how that impacted luxury spending and how luxury companies are positioning themselves to capture that post-pandemic rebound?
Kathy Jiang: Thanks to digitalization in previous years, we have already seen that many luxury giants utilize digital touchpoints to maintain persistent interactions with clients.
[They] communicated directly through social feeds to stay active, even during the most challenging time.
Now, on the way back to normal, we see that online luxury consumption is growing rapidly. Chinese online sales’ share of luxury in fashion retail is still growing in double-digits, even since the pandemic. The online purchasing channel is diversifying. Our data from 2017 to 2021 shows that luxury goods’ online retail sales share had a CAGR of 13.1%. Looking forward, we can say that online shares will still grow aggressively.
Alison Tudor-Ackroyd: Digging into those figures, other consultants have predicted that online shopping will take a larger share of the pie, up to 40%. Is that right?
Kathy Jiang: Overall, the [online share] number in China markets, especially for general apparel and fashion, is far beyond the global average – up to 35% to 40%. For the luxury [category], there is still some room and some gap versus general consumer goods.
Alison Tudor-Ackroyd: Will digitalizing luxury goods not dilute the DNA of luxury brands? People want to feel that luxury is exclusive, don’t you agree? And is that why traditionally luxury brands have been reluctant to move online?
Kathy Jiang: That’s a very good question. There is fierce debate.
Currently already up to 200 brands are already on Tmall Luxury Pavilion. We think the role of the online [channel] has already changed a lot. Now online is not only the new traffic gate but also a very good platform for brand building.
We still think that luxury clients need to be very clear about their brand message and assets, and sustainably invest in their communications directly to the consumers.
However, we see that consumers are becoming more changeable.
They’re looking for something fresh, even adventure. It means that traditional luxury clients need to be very open-minded to embrace the clients [by] using the correct social interaction. So that’s how to stay agile and echo new consumer trends while staying loyal to their brand genes. In the digital area, luxury goods need to be sustainable, staying true to yourself but trying to interact with your consumers – learn from them and grow with them.
Alison Tudor-Ackroyd: That’s very good advice. Thank you. I read the first white paper you wrote in collaboration with Alibaba, and it had some interesting insights into the shopping habits of luxury consumers in China. Could you briefly tell the audience about these personality archetypes that you have observed active in China?
Kathy Jiang: We have categorized six groups of consumer segments based on our study.
For example, we had the stereotype that luxury clients have a high income. But now, we not only observe some groups like the “trend-setters” who are very focused on taste and style and pursue spiritual pleasure to [pursue] a high-quality lifestyle.
We also figured out some emerging new trends of “active youth”. Those people are young and pursuing health and happiness for a more casual and natural life. Still, they like to investigate what to purchase with a sense of responsibility, cost-effectiveness and comfort. They’re also looking for something sustainable.
Alison Tudor-Ackroyd: Great stuff. I’d like to look closely at the “trend-setters” archetype you discussed. As I understand, that is the fastest growing and has the highest penetration.
Kathy Jiang: Those people have a large age scope ranging from 18 to 39. They are mainly females living in the first and second-tier cities, single, senior, middle class, and [coming from] wealthy families. They are very diversified and proliferated. They spend much of their leisure time on art experiences, sports, eating, advanced technology and fun.
If we look into the shopping cart to [look at] the overall consumption, they usually consume 30 to 50 categories annually. It’s a very wide brand range. [They shop] with high frequency, especially for luxury consumption – twice per year and pay for the total price.
They both look for classic [products] and newly launched ones. So about the touchpoint, it’s also a little bit different from our previous understanding.
Alison Tudor-Ackroyd: Got it. Thank you, Kathy. With 11.11 fast-approaching, the largest shopping event in the global retail calendar, how important would you say 11.11 is for luxury retailers?
Kathy Jiang: Previously there was some bias from luxury clients because 11.11 sounded like a discount-driven [event for] the mass market.
However, we think 11.11 has already become the key moment for Chinese consumers to think about what to add to their shopping cart [for] the next half of the year.
It’s very important for even luxury clients to engage with consumers further, to emphasize the brand image, and to be closer to the consumers when they approach the next key milestone during their entire life cycle.
Alison Tudor-Ackroyd: May I ask a little bit more about 11.11? Are you expecting to see any technical breakthroughs or innovations? Are you expecting more livestreaming from brands or the use of metaverse technology?
Kathy Jiang: Metaverse technology is a very hot topic, [and] it has been discussed a lot among our luxury clients.
The digital form and immersive experiences are very important; we have seen something like the 3D interactive works displayed on the artworks or the SKUs (stock keeping units) provided by the clients, the online fashion show, and virtual reality-themed creation. All have provided a better experience. Personalization is another theme that could be empowered by digital [technology].
For example, the online and offline integration to create a new event makes it more agile.
Also, customize the services to show individuality, like customizing the signature. Localized communications are also very important, especially on social content; no doubt livestreaming is among them.
However, one reminder to luxury clients is that they need to keep a well-balanced mix of formats, so not to disrupt consumers to much and destroy their classical understanding of luxury and its taste, aspiration, and loyalty.
Last but not least, we have seen many online consumers who are usually more open-minded and care about a sustainable lifestyle. So how to engage and convert willingness to do actual business is another topic open to all luxury clients.
Alison Tudor-Ackroyd: In our last few minutes Kathy, may I ask you what are your top three suggestions for luxury houses looking to build an omnichannel presence in China? What should they be looking to achieve?
Kathy Jiang: Brand clients should proactively understand consumers and build effective communication bridges between brand values and consumers. They need to anchor in the minds of the new generation of consumers and pay more attention to the intimate relationship between the consumer and the brand [so that they can] keep a loyal relationship in the long term.
The second point is that the brand clients need to use consumer communication skills to cater to consumer needs. And the brand takes the lead. In the future, both the brand and the customers can co-create.
Last but not least, I think the point would be to interact effortlessly with new digital technologies including VR, AR and the metaverse; that would deliver a more relaxed, pleasant, and immersive experience to customers in the future where consumers can purchase whenever and wherever possible.
Alison Tudor-Ackroyd: Thank you, Kathy. Super informative chat. Really enjoyed it.
Kathy Jiang: Thank you Alison, for having me on the Alicast.
Alison Tudor-Ackroyd: And thank you everybody for tuning into Alicast. If you liked what you heard, please search Alicast on Spotify or Apple Podcasts and hit follow.
Alicast is produced and edited by Yashan Zhao. At Alibaba, we seek to keep you abreast of the innovative and emerging trends in e-commerce, online payments and digital entertainment from Times Square Hong Kong.
Thank you and goodbye for now.
