Neither catwalks nor large product presentation events were on the agenda last year. In 2020, luxury physical retailers had to convert their store windows into a remote and digital blended environment. Brand news was launched in mixed events and streamed across the globe, reaching an increased number of people.
Some examples of this trend are the actions of prestigious luxury retail brands.
• Lexus promoted its IS 2021 model through augmented reality application “Lexus AR Play”, which allowed customers to view the characteristics and variations of the product’
• Gucci established a collaboration with Wildlife Studios, a mobile game developer, creating digital gamification that requires the use of the brand’s clothing to participate.
• Chanel launched an avatar platform, allowing users to virtually try on digital clothing created by cutting-edge designers.
• Yves Saint Laurent Beauty organised a virtual room through Zoom for 1,000 VIP guests.
• Dior has focused its marketing efforts on the development of virtual shows, webinars, and exclusive sales.
Consumers may not have been able to travel specifically to shop at luxury brands last year, but the demand for high-end products still grew. According to a Deloitte report, global luxury sales have grown by 9 per cent since the beginning of the pandemic and the turnover of the luxury retail sector has remained.
China, the place to be
According to a 2019 McKinsey study, young Chinese consumers were expected to drive growth in the luxury fashion and accessories sector by 65 per cent globally. And while Europe and the United States remain largely out of reach for this high-value customer segment, smart luxury brands should bring their products to them.
According to Sylvain Jauze, director of worldwide sales and international operations at Cegid, some European retail brands are facing store closures in Europe and the United States. Meanwhile, they are looking to develop their businesses in Asia and mainland China. Jauze points out that physical stores are vital for the establishment of new brands in the Chinese market. In fact, last year, China had the most number of luxury store openings around the world.
But a single store is not enough to establish a reputation in a country the size of China and investing in social media and the right influencers – people who know the market and how to sell luxury in that market – is just as important.
In terms of business practices, operating in China is very different to operating in Europe or the United States. Online-to-offline (otherwise known as ‘O2O’) is a major trend in China, and retailers understand that large online marketplaces such as TMall (formerly Alibaba-owned Taobao Mall) are a vital part of the sales ecosystem. Although Chinese consumers like to shop in-store, they also rely on fast, easy-to-use platforms.
Several exclusive luxury platforms, such as TMall’s Luxury Pavilion, JD.com, and even WeChat, offer e-commerce storefronts for hundreds of luxury brands, to connect mainly with young and digitally-focused Chinese consumers.
Global becomes local
A powerful example of the opportunity in the Chinese market is the acquisition of luxury Hermès-founded brand Shang Xia by Exor, which has invested €80 million into the company.
Shang Xia was established by Chinese designer Jiang Qiong Er and Hermès 10 years ago, offering luxury fashion, accessories, homewares and leather goods. Although Hermès itself has been established in China since 1996, the company saw an opportunity to take advantage of local crafts, techniques, traditions, and materials.
According to Jauze, even though many Chinese consumers are focused on value, they also appreciate quality, which is why the Hermès brand works so well in China, as it uses premium leather and employs the best artisans. The Hermès flagship store in Guangzhou’s Taikoo Hui Mall was very successful, raking in $2.7 million in sales the day it reopened after the first lockdown in 2020.
Businesses looking to expand into China should invest heavily into social networks and influencers to develop the right brand positioning. The fact that a luxury brand has a reputation in Europe does not mean that it can easily enter the Chinese market as an unknown brand. Ensuring that locally relevant advocates understand your brand and know your target consumer requires a clear strategy and sustainable investment.
The Chinese market is self-sufficient and with its growing economy, it could become the new headquarters of luxury.