There was a time when simply launching a new range in China was enough for European and US premium brands to sell out a seasons stock. But that was a long time ago. The pendulum has travelled full swing, and favouritism is now towards indigenous counterparts, and Western makers are struggling to respond.
Consumer sentiment has increasingly moved in favour of Chinese luxury culminating in ‘Quochao’, a development that has changed ‘Made in China’ to ‘Designed in China’. This is not about patriotism, but there is certainly a patriotic element to it. It is more about recognising the high quality and design of Chinese products. These attributes are played upon by marketers that ad culture and nostalgia to the mix. It creates a powerful and effective message to buyers.
The challenges
Brands from Europe and US can be seen to have brought a lot of their current problems on themselves, and the majority still seem to be unaware of it. The fact is, marketing has been a major blind spot for them. Instead of wanting to develop a deep understanding of Chinese markets, and adopting appropriate localised marketing, Western brands have blindly implemented practices that have been successful in other markets. In particular, sticking with the key proposition of the brand as the hero of marketing.
Chinese consumers are not interested in being told a product is more important than they are. What they want to know is what a product will do for them, how it will reinforce their needs, their values, and how they perceive themselves.
Few luxury marketers coming from outside China have learned to let go of what they know from home. Their persistence in continuing with flawed strategy is often reinforced by the global advertising agency groups they hire. The big network agencies may have offices in China, but senior managers nearly always come from the global headquarters in Europe or US, and they carry with them the same false beliefs as their clients. The inevitable result is added impetus to mistaken thinking. The results are predictable.
A symptom of poor strategy is the idea that localisation of brand can be achieved through working with celebrities and leading Chinese social media influencers (Key Opinion Leaders – KOLs). Chinese luxury buyers are acutely aware KOLs are paid to message them, and treat content accordingly. It is telling that the Chinese brands that universally outperform Western marketing departments rarely use well known KOLs or big name celebrities.
The use of high profile KOLs and celebrities is undisputedly convenient. Sometimes follower audiences run to tens of millions, and there are plenty of examples of KOLs being used to sell products direct on behalf Western luxury brands leading very quickly to sell out situations. But this is tactics, not brand building strategy. KOLs will usually be working with another label before long. Just as important, consumers are becoming cynical about being treated as a commodity in the relationship between influencer and brand.
Chinese marketers constantly research markets and use social media monitoring. As a result, they have much more knowledge on which to build compelling connections and content. They also have the added benefit of having an intrinsic understanding of markets that outsiders find very difficult to acquire.
Chinese brands do use KOLs to improve reach and brand awareness, but they deploy a more varied mix of communications options. Increasingly they use Key Opinion Consumers (KOCs) that have smaller audiences than KOLs, but bring with them a very high degree of authenticity, and ability to generate positive conversations.
The Impact of Covid
Covid made what was already a difficult situation worse for European and US luxury producers. When the virus struck in China, most simply decided the best policy was to do nothing. The counterpoint to this were Chinese rivals that quickly identified and implemented new ways to sell. In particular, they used live stream selling. Although it was used prior to Covid, lockdown created the catalyst for wholesale adoption. It went on to generate £140 billion in sales last year, according to McKinsey.
A high proportion of livestream spending was on luxury, with womenswear, skincare and colour cosmetics being the most popular categories. In addition, social media engagement rates were huge during covid, yet many Western brands were uninvolved. Some European luxury houses even lost control of brand owner status to individual members of the public who became officially recognised brand representatives on key luxury and lifestyle social platform, Little Red Book.
Chinese brands were acutely aware of the changing mood of the market, and how to respond. The result for many was a substantial increase in sales and awareness. It added more impetus to their ascendency.
The solution to luxury brand problems in China
The most pressing need for most Western luxury brands in China is to understand exactly where they currently stand in terms of consumer perception and fulfilment of brand promise. It is only by knowing their true situation that appropriate action can be taken. Therefore, an audit is needed – third party evaluation to undertake detailed objective analysis of assets and liabilities. This should incorporate product range, markets, consumer demographics and psychographics, marketing, media development, operational fulfilment and competitor activity. These factors need assessing to enable an effective strategic plan to be produced.
The compromise on full analysis that will still provide much of the required information is social media monitoring. It will reveal what consumer are saying about a brand, what its problems are and how it features in the market. From a consumer perspective it will provide more or less all the information needed. Without this essential knowledge brands operate blind.
It is advisable to work with experienced Chinese strategists when implementing an audit to decide future direction, if only to help create a roadmap that can be used as a guide by others. It will make a major difference to brand performance.
Building a successful future for Western brands in China is far from impossible, but it is not easy. It has to be based on a genuine desire for constant learning, localising properly, and focusing on strategy as well as tactics. This requires honesty about how much brand guardians really know, and a preparedness to abandon familiar practices. Doing this is the first step to a positive future.
By Rocky Chi, Head of Planning, Emerging Communications https://www.emergingcomms.com