Surely a collection of primate-themed goodies–in red and gold, of course–would drive Chinese consumers wild in the run-up to the Lunar New Year, right? Maybe not. After a year of sluggish sales, global luxury brands have set their sights on China’s most shopping-frenzied season armed with a slew of localized products.
But their efforts to please the world’s top buyers of luxury goods is collecting more laughs than ‘likes’ on local social media platforms. One viral Weibo post mocking the pricey exclusives collected over 30,000 views and a trail of micro-bloggers’ comments that range from amused to personally offended:
These designers didn’t understand the true value of Chinese culture. They’re defrauding Chinese customers by selling their so-called ‘Chinese style’.”
“These foreigners are trying extra hard to earn our money.”
“All of them look like knock-offs.”
“There’s a line of thinking that you have to localize to do well in China,” said James Roy, an associate principal at China Market Research Group. But he considers this a misreading of what local customers want.
“Consumers want brands to be guiding them in terms of fashion, rather than feeling that they’re being tended to. Especially if you’re spending a certain amount, you want to get something that is authentic and doesn’t feel like it’s a ploy.”
According to Roy, many big-name brands have not been doing enough to understand Chinese customers and their changing preferences.
China’s economic slowdown: a wake-up call
“Up until now, you could literally shoot darts in the dark and you would still hit the target because the economy was growing so quickly,” said Min Yoo, China and Korea managing director for Yougov, an online consumer market research firm.
Between the years 2000 and 2015, Chinese consumers went from representing 1% of the global market for personal luxury goods to taking up one-third of it–more than both American or European buyers–according to a recently released study from Bain & Company. Yoo argues that the success of global brands in luring Chinese consumers during this period was a result of the country’s socioeconomic development rather than of adequate marketing strategies.
With China’s economic growth falling to 6.9% in 2015, the lowest in 25 years, consumers are bound to become more selective and companies will have to “wake up,” and develop a more nuanced understanding of the diverse consumer profiles within the Chinese market, and reach out to them with the right communications and value propositions, he explains.
The current economic slowdown has in fact come to exacerbate an already challenging environment for high-end retailers in the country. They faced the first “wake up” call in 2012, when President Xi Jinping launched a campaign against conspicuous spending that continues in place to this date.
Personal luxury sales in Greater China–which includes Hong Kong, Taiwan and Macau, some of mainland consumers’ favorite shopping destinations–grew at an estimated 30% in 2011, and only by 7% in 2012 and 2% in 2013, according to a PricewaterhouseCoopers report.
The maturing of the luxury market, particularly in Tier 1 cities, such as Shanghai and Beijing, has also added to top brands’ worries. Consumers’ tastes are becoming more sophisticated, certain logos have become too ubiquitous to convey exclusiveness and a wider variety of second-tier brands have raised the competition bar.
As James Roy explains, a customer who would have saved a month’s salary to buy aLouis Vuitton bag in the past would now probably go for a less pricey Kate Spade or aMichael Kors bag, which perform “the same role” in terms of projection and would still leave them some spending room for travelling or leisure.
But after more than five years of unfavorable trends, certain brands have already spotted new opportunities and innovative ways of adjusting to the changing tides.
Burberry took a particularly hard blow last year because almost 40% of its sales revenues come from the Asia-Pacific region, compared to the 30% average in the sector, according to Bloomberg.
In spite of its higher-than-average exposure to China’s woes–or perhaps precisely because of it–Burberry has been leading the way in the use of local digital platforms to deepen engagement with consumers.
Sina Weibo named Burberry its most influential brand account in 2012, and business think-tank L2 gave it the top spot on their ‘digital IQ’ ranking in China. The brand’s 2016 Chinese New Year campaign in WeChat involved an interactive game and a collection of scarves with a limited-edition palette, rather than resorting to seasonal clichés.
This shows a marked and conscious evolution from last year’s Spring Festival special, which featured a trademark Burberry scarf with a large red Chinese character for ‘fortune’ embroidered on one corner. As the Wall Street Journal reported, it was greeted with a loud social media backlash.
As McKinsey & Company concludes in a 2015 publication, China’s e-commerce and digital media platforms are an opportunity-rich field for global retailers.
The fact that China’s annual online-retail sales surpassed those of the U.S. in 2013, and are expected to reach $610 billion by 2018, makes online sales channels an obvious strategy focus. But beyond that, brands should learn to “work with platforms to understand China’s consumers.”
Perhaps netizens’ reactions to this year’s monkey collectibles hold, behind the mockery, valuable lessons for global luxury brands.
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Article & Image: Forbes