How Luxury Retail can Become a Tech Accelerator


  • Can tech startup and luxury brand partnerships be mutually beneficial?
  • China’s government plays a large role in incubating tech companies
  • Tech has helped the retail industry become more sustainable, which appeals to younger consumers

In the past, technology and luxury rarely mixed. High-tech culture has a futuristic connotation, while luxury has always had a reputation for being conservative and traditional, but today, revolutionary luxury conglomerates like LVMH and Kering have reconsidered their approach to tech and are now revolutionizing the market. This has helped transform a dormant industry by making it an accelerator for sustainability — something that supporting not only business profitability but also important social goals.

Over the last few years, sustainability in business practices have become part of the bottom line, and programs connecting fashion-tech startups and luxury retailers are now the new norm. The New York Fashion Tech Lab, for instance, is a program that links a handpicked group of women-led, b2b, fashion-focused tech businesses with leading fashion companies. This is not the only initiative of its kind and is a reflection of our times. L’Oréal entered into a strategic partnership with the digital accelerator and incubator Founders Factory, Kering chose to work with tech investor Plug and Play, and LVMH and Farfetch have each created their own labs.

In China, Alibaba teamed up with the Chinese AI company SenseTime and the government-backed Hong Kong Science and Technology Parks Corporation to create an accelerator program that supports young entrepreneurs and researchers in the field of AI. According to Alizila, the participants accepted in the HKAI Lab receive “up to $100,000 in funding from the Alibaba Entrepreneurs Fund, as well as deep-learning resources from SenseTime, cloud-computing, machine-learning and other technical support from Alibaba Cloud and technologies developed by Alibaba DAMO Academy.” Alibaba also entered into a joint venture with tech investment firm InnoSpring to launch an Innovation Center to support US and international startups that want to expand to China. Meanwhile, the other Chinese tech titan, Tencent, has its very own AI accelerator. Through Tencent‘s program, AI startups receive financial support and mentorship in marketing, management, and technology during a six-month acceleration period.

Today’s fashion and beauty retailers are turning to startups for an injection of innovation, which isn’t surprising given that new technologies help retailers achieve greater customer experience, sustainability, high-speed personalization, and rapid delivery. For instance, Johnson & Johnson and Mars Inc. turned to Alibaba’s Tmall Innovation Center (TMIC) to create country-specific products. TMIC uses consumer insights gathered from its large e-commerce ecosystem and different media sites to help brands develop fresh products aimed at different Chinese consumers.

Meanwhile, joint ventures with a seasoned partner like Alibaba, LVMH, or Kering offer startups tremendous exposure, access to a global market, and the capital to finance their R&D activities.

How are China and the retail industry benefiting from the startup ecosystem?

According to data from Torch High Technology Industry Development Center of the Ministry of Science and Technology, China’s 7,500-plus incubators and maker spaces have helped cultivate more than 223,000 businesses as of 2016, which is why many now look to China for the world’s next big tech innovations. However, in an ecosystem where the government is the biggest tech incubator, it’s easy to forget that not everyone benefited equally from China’s ambitions.

In the beginning, Chinese startup and luxury retail infrastructures were built in tier-1 cities, but that situation has recently changed, and smaller cities are now seeing advantages from a sort of trickle-down effect. As businesses grew, entrepreneurs expanded and diversified their objectives, bringing various divisions to lower-tier cities. Big, urban centers still have an overconcentration of talent, but by relocating support services, distribution centers, marketing, product development, or communications services to lower-tier cities, these businesses have created a new and more equitable economic geography.

But it’s the retail industry that’s been the biggest winner because of the growth of innovation. Processes were simplified, critical problems found solutions, and key challenges were overcome. Some of the most innovative ideas coming from Chinese incubators and accelerators transformed operating-systems into a holistic package where AI technology predicts regional demand for certain goodswhile VR helps create engaging consumer experiences.

Hema Supermarkets, for example, now has the technology to analyze the purchasing frequency and shopping habits of consumers, and now, the company can respond better and faster to their consumer demands. By implementing a highly-tailored approach, innovative Chinese companies like Alibaba’s Hema are creating the blueprint for a retail revolution.

Likewise, disruptive retailers who stay ahead of the curve create services and products that buyers prefer. Instead of constantly creating new products and boosting levels of overstock, brands can cut down on carbon emissions and encourage sustainable production. This genuine engagement in sustainability reduces damage to the environment and attracts younger consumers who are passionate about environmental stewardship.





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Could Opening Ceremony’s Second Coming Be in China?


The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

What happened:

The Farfetch-owned New Guards Group (NGG), which also owns “It” streetwear brands Off-White and Palm Angles, has acquired the American clothing brand and retailer Opening Ceremony on January 13, as reported by BoF.

Opening Ceremony cofounders, Humberto Leon and Carol Lim, will remain as co-creative directors, focusing on collaborations and will continue to create their in-house label, while NGG will take over the production of Opening Ceremony’s in-house line and e-commerce development. The goal, according to BoF, is to release products at a faster pace and expand product categories.

On January 14, Lim and Leon took to Instagram in a series of posts to announce that all physical Opening Ceremony stores would be closing. According to the posts, the store’s New York, Los Angeles, and Tokyo outposts will all shutter in 2020.

Background:

Opening Ceremony is an NYC staple and for Chinese millennials, Opening Ceremony is regarded as a leading NYC streetwear brand. On Little Red Book, for example, users continue to post “It” items from the brand, from tote bags to Opening Ceremony’s iconic black box-logo T-shirts. The majority of the posts are from Chinese international students, who are considered trendsetters for mainland shoppers. However, due to the lack of direct distribution in China, young consumers access the label via Daigou or from friends overseas. The brand’s physical presence in China is limited to pop-up shops, for example, Opening Ceremony first held with Adidas in Shanghai in 2013, and most recently with Chinese sports brand Anta.

Opening Ceremony’s acquisition by the New Guards Group verified its cool status, as NGG has been snapping up hot brands since the beginning of the year. Just last week, it’s also acquired the jewelry brand Ambush. NGG was founded in 2015 and was acquired by Farfetch four years later for $675 million, now has become the hype machine for the dominant fashion e-commerce player.

Photo: ‘Opening Ceremony’ search results on Little Red Book.

Our Take:

What’s driving Farfetch to make so many acquisitions? “NGG’s growth comes from a gut feeling and understanding where a trend was going or what the talent is out there,” explained Giorgio Belloli, Chief Commercial and Sustainability Officer at Farfetch to Jing Daily. “But through our data analysis, we can spot new trends or new brands that may be coming up, validating some feelings that a brand could be the ‘brand of the future.’”

As the company’s portfolio expands, it seems that the New Guard Group itself may be the conglomerate of the future. However, the company could only earn this title with substantial inroads in China. And while China’s aspirations for Opening Ceremony and other NGG brands like Ambush have not been made clear, Farfetch and NGG’s China play seems ready to fire. The parent company’s arsenal of China-ready brands is steadily growing, while Farfetch itself is strengthening its digital presence in the region.

Overall, legacy conglomerates and brands find themselves racing to re-align their approach in China, but NGG holds an advantage in its key to “cool” brands and first-to-market opportunity. While leading brands introduced themselves to China 20 years ago, NGG’s brands are coming of age in China today and can adopt strategies accordingly. As the Chinese market matures, up-and-coming brands that represent new luxury only stand to grow, bolstered by a following of Chinese millennials and Gen-Zs who hold different definitions of luxury when compared to their older counterparts.

Farfetch’s know-how ensures NGG’s fresh brands with a digital leg up if they aim to grow in China. However, physical retail remains key in the region, particularly for new players. While multi-brand retailers in the West are facing Armageddon, the retail opportunity for multi-brand in China is still fresh. And while NGG holds digital strength, there is an opportunity for a physical leg in its China playbook. Although unlikely, a reimagined Opening Ceremony in a leading city like Shanghai could be the perfect fit to fill this gap and position New Guards Group to drive the rise of  new luxury in China.





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Perfect Diary’s Virtual Influencer Gets Her Own Mini Program Store, Product Line


It’s been about three months since we first wrote about Xiao Wanzi, a virtual influencer that the Chinese cosmetics brand Perfect Diary created to help it develop a closer relationship with consumers. First, it encourages customers to join one of its hundreds of private WeChat groups led by the fictional Xiao Wanzi. Then, once consumers are in the groups, Xiao Wanzi shares special offers, new product launches, and beauty and skincare advice with them.

This virtual influencer-led strategy for gaining private traffic appears to be going well for Perfect Diary. Since our last article, Xiao Wanzi has adopted an English name — Abby — as well as an eponymous product line sold exclusively on her own e-commerce and makeup tutorial Mini Program on WeChat.

Xiaowanzi

Xiaowanzi, or Abby, now has her own product line and commerce Mini Program.

Abby’s Choice

The product line is called Abby’s Choice 完子心选 and mostly consists of skincare products. Abby’s Choice products can only be purchased through the Abby’s Choice Mini Program, which she frequently shares in her WeChat groups.

This Mini Program is separate from Perfect Diary’s main e-commerce Mini Program and even features a wider range of products than what’s available in the brand’s WeChat flagship store. The Abby’s Choice Mini Program does not appear in the menu of Perfect Diary’s Official Account, and users can only access it by joining one of Abby’s WeChat groups or from a friend who has shared the Mini Program.

In fact, the Abby’s Choice sub-brand is only available through WeChat private traffic, as its products aren’t available either on Tmall or Xiaohongshu.

Educating Consumers

In addition to selling products, the Abby’s Choice Mini Program also features a page for beauty and skincare educational content. The outer page resembles a Xiaohongshu format, while the inner page content looks just like a WeChat article. There are also videos.

Although this Mini Program is somewhat hidden, it appears to have a large user base. Many articles have 30-40K views with some reaching 70-80K. Several of the more popular articles have between 200-400 comments.

Abby and her friends Minmin and Susu also regularly hold e-commerce livestreams through the WeChat Mini Program that average 60-70K viewers per stream.

Additional Personas

That’s right: Perfect Diary has begun developing two other personas — Minmin 敏敏 and Susu 苏苏 — who also share beauty advice and have their own styles catering to different consumer types. For example, many of the Abby’s Choice product descriptions show each of the three influencers, while showing which shade or scent they prefer and why.

Three fictional influencers Abby, Minmin, and Susu share their favorite products.

Believe it or not, Xiao Wanzi (Abby), Minmin, and Susu are all actual people, but those aren’t their real names or personalities. They are merely Perfect Diary employees who have essentially lent their faces to these fictional characters. While the faces may come from real people, I define them as virtual influencers — as opposed to homegrown or in-house influencers — because, aside from their faces, nothing else is real. Everything they do or say, all the content they put out, and their entire personas, are created by Perfect Diary’s marketing team.

Perfect Diary has proven time and again to be a fearless leader in China’s marketing industry, pushing old boundaries with new creative tactics that are winning over young Chinese consumers. Abby’s Choice has taken private traffic to a whole new level, not only by offering special sales to loyal consumers or early access to product launches but also by rolling out an entirely new sub-brand.

While Perfect Diary is far from a luxury brand, this strategy could easily be used by luxury brands to bring back a true sense of exclusivity in a day and age where the word “exclusive” often lacks real meaning.





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What Mo&Co.’s New Ambassador Says about the Rise of Chinese Brands


Last year, the popular Chinese actress Yang Mi frequently placed among the top 10 in R3’s Celebrity Ranking list thanks to her growing commercial value. And now, with her appointment as the new brand ambassador for the Chinese fashion brand, Mo&Co., it’s no surprise to find her at the number 2 spot for December’s ranking.

R3 December celebrity list. Courtesy photo.

Yang Mi has already been the face for many US affordable luxury brands like Michael Kors and Stuart Weitzman. Her success, in part, has been guided by her ability to promote brands in her public as well as private life. For example, as the brand ambassador for Michael Kors, she’s been seen in the brand’s clothing at glamorous events such as the Met Gala and various film premieres but has also been seen sporting the brand while making her way through an airport.

With her appointment to be the face of Mo&Co. this past December, Yang Mi has aligned herself with a well-liked female fashion label that belongs to the parent group of EPO, which also owns other high-end lines: Edition 10, the children’s line Little Mo&Co, the makeup brand REC, and the male fashion brand Common Gender. By signing Yang Mi, however, Mo&Co. has signaled a key change in their China celebrity strategy.

At first, the Guangzhou-based Mo&Co. acted like Western brands entering China. It was based out of Paris and originally had the tag line Mo&Co de Paris. Its first brand ambassador was the Danish supermodel, Freja Beha Erichsen, who was unknown to most Chinese consumers. Fast forward to today, with many Western brands struggling to remain relevant to Chinese consumers, Yang Mi appears to be a good choice for China’s changing luxury market. She has a large and dedicated audience via her social channels to communicate the brand’s values, while also regularly getting picked up by established media, which has the potential for viral opportunities.

Moreover, like Mo&Co., many Chinese fashion labels are increasingly choosing local celebrities as brand ambassadors to better connect with mainstream Chinese consumers. For example, NEIWAI, a Chinese intimate wear brand, appointed the Chinese supermodel Du Juan as their brand ambassador, and another well-known supermodel, Liu Wen, was appointed to the Chinese fashion brand Dazzle, and Erdos. The trend speaks about the rising confidence of Chinese fashion makers, of them no longer needing a Western face to legitimatize their business.

Last year also saw the power dimension between Western luxury brands and China shifting as well. Among the many missteps for Western luxury brands in China, the T-shirt controversy episode caused a number of Chinese brand ambassadors to cancel their contracts with the offending brands. Yang Mi, herself, canceled her contract with Versace, despite the fact that she had just signed with them. For Chinese celebrities, this shows one of the potential risks of working with a Western brand, whereas local brands are more aware of the political sensitivity in China.

And as the rise of national sentiment among Chinese millennials continues to increase, homegrown Chinese brands may no longer need a Western face to validate their brands. Instead, like Mo&Co., the change to a local face to leverage their understanding of local consumers will continue to serve as an advantage to differentiate themselves from their Western counterparts.





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What NGG’s Acquisition of Opening Ceremony Tell About the Future of Luxury E-com?


What happened:

The Farfetch-owned New Guards Group (NGG), which also owns “It” streetwear brands Off-White and Palm Angles, has acquired the American clothing brand and retailer Opening Ceremony on January 13, as reported by BoF.

Opening Ceremony cofounders, Humberto Leon and Carol Lim, will remain as co-creative directors, focusing on collaborations and will continue to create their in-house label, while NGG will take over the production of Opening Ceremony’s in-house line and e-commerce development. The goal, according to BoF, is to release products at a faster pace and expand product categories.

Background:

For Chinese millennials, Opening Ceremony is still regarded as a NYC streetwear brand. On Little Red Book, for example, users continue to post “It” items from the brand, from tote bags to Opening Ceremony’s iconic black box-logo T-shirts. The majority of the posts are from Chinese international students, who are considered trendsetters for mainland shoppers.

Photo: ‘Opening Ceremony’ search results on Little Red Book.

Opening Ceremony’s acquisition by the New Guards Group verified its cool status, as NGG has been snapping up hot brands since the beginning of the year. Just last week, it’s also acquired the jewelry brand Ambush. The hype machine NGG was founded in 2015 and was acquired by Farfetch four years later for $675 million.

What’s driving Farfetch to make so many acquisitions? “NGG’s growth comes from a gut feeling and understanding where a trend was going or what the talent is out there,” explained Giorgio Belloli, Chief Commercial and Sustainability Officer at Farfetch to Jing Daily. “But through our data analysis we can spot new trends or new brands that may be coming up, validating some feelings that a brand could be the ‘brand of the future.’”

Analysis:

Farfetch, and consequently NGG, is proving to be a key player beyond helping brands to sell online. It’s now transitioning from relying on other brands for revenue and instead building and empowering some of today’s most-hyped brands with the help of data. In parallel, we saw another e-commerce giant in China, Alibaba’s Tmall, launch Little Black Box program, which is also dedicated to helping launch new brands.

All in all, as brands increasingly go to D2C for their distribution channels, third party e-commerce may struggle to survive unless they revamp their role — otherwise, they will also be soon rid of facing competition coming from brands themselves.





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Should European Luxury Houses Focus on China More than the US?


Key Takeaways:

  • Will a new trade war between the US and the EU push European countries to seek more economic deals in China?
  • China can be a good surrogate trade partner for the luxury industry.
  • Chinese capital flowing into European countries to help mend crumbling infrastructures might be the biggest coup from more “Belt and Road” trade.

December 2019 brought with it the possibility of a trade war between the European Union and the United States, and shares of European companies dropped after President Trump announced heavy tariffs on French and EU products. “Under the new tariffs, which may begin in late January, the US Trade Representative could add levies up to 100 percent on around $2.4 billion in imports from France,” says CNBC.

The development comes in retaliation to France’s implementation of a Digital Services Tax, which imposes a three percent levy on revenues earned by multinational tech companies in France — a tax that doesn’t aim to punish the US, but rather, tax-dodging companies in low-tax EU countries. CBS News reports that the tax specifically targets companies with at least €750 million ($830 million) in annual global revenue on their digital activities. Aside from Facebook, Google, and Amazon, various German, U.K., and Chinese companies were targeted.

French Economy Minister, Bruno Le Maire, promised a “strong” European response to Trump’s threats, while German Chancellor, Angela Merkel, voiced her concerns regarding the global order and the US-EU partnership. In an interview with the German newspaper Süddeutsche Zeitung, Merkel said that “the old certainties of the postwar order no longer apply,” and, consequently, “Europe needs to reposition itself in a changed world.” Until the Trump presidency, seldom have we seen such cries of autonomy from the EU front, and public clashes with the US were rare. But those taboos, it seems, have now been broken, and analysts warn that this transatlantic tit-for-tat will have catastrophic outcomes for the global economy.

“EU-US trade matters most. It is by far the biggest single bilateral trade flow in the world,” said Florian Hense, an economist at Berenberg, to CNBC. “Counting exports and imports of goods and services, US-EU bilateral trade exceeded that between the U.S. and China in 2018 by more than 70 percent.”

Who will benefit the most from Trump’s trade war against the EU?

If the EU-US trade war escalates further, China and Russia will be the biggest beneficiaries. Since the EU has been backed into a corner, it’s being forced to look for allies in the most unexpected places, and both China and Russia are eager to recruit the EU into a united front against the US. Both China and the EU are currently engaged in a trade war with the US, yet the partnership between the EU and China has been thriving.

As stated by Al Jazeera, Macron and Xi Jinping signed mutually beneficial contracts worth $15 billion and helped forge a new age of cooperation between the two countries. Moreover, in a press release on its website, the French government announced that the “relations between France and China are entering a new era.”

The leaders signed a memorandum of understanding for a €10 billion construction deal for a nuclear waste reprocessing plant, and deals were reached in aeronautics, energy, agriculture, and “climate change.” On top of that, China pledged to buy 184 Airbus A320 jets from France and assured the country it would lift a 2001 ban on French beef. Additionally, a joint venture between France’s Total and China’s Shenergy Group to distribute liquefied natural gas by truck in the Yangtze River Delta has been green-lighted. These bilateral deals suggest that China is ready and able to create business opportunities and effectively take Washington’s place at the table.

How should the European luxury sector react to this new world order?

Faced with the perspective of an ongoing trade war with the US, the EU should consider scaling down its operations there while recalibrating their efforts with China. Let’s analyze the reasons why a focus on China — instead of the US — would benefit the European luxury sector:

  1. China is the closest surrogate for the US market

Thanks to the size and potential of the market, advancements in technology, mobile innovations, the spending power of local consumers, and the country’s appetite for foreign goods, China has become an appealing partner for the EU. And as it’s set to become the world’s biggest retail market, China has impressive consumption potential.

A comparison between China and the US reveals that although China still falls behind the US in luxury consumption, it has a lot of room to grow. According to Bain and Co, in 2018, luxury sales grew 20 percent to €23 billion in mainland China, while they reached €80 billion in the Americas, which was only a growth rate of 5 percent. The significant change, however, comes in spending. While affluent Americans are losing their enthusiasm for luxury spending, the Chinese appetite for luxury remains unrivaled.

“Chinese consumers are expected to contribute 41 percent to the global luxury goods market by 2025,” says China Daily. What’s even more interesting is the finding of the Boston Consulting Group that showed around 48 percent of luxury buyers in China are younger than 30. This is a country where young, wealthy, and brand-conscious luxury buyers are engaging in Western-style consumerism. And, fueled by Chinese consumption, European luxury companies have unsurprisingly reported strong performances in China. France’s leading luxury groups LVMH, Kering, and L’Oreal had strong revenues there, and Hermes and Lancome both brought in strong results in the second quarter of 2019. According to China Daily, L’Oreal’s revenues from the Asia-Pacific region grew 30.4 percent to reach over €4.6 billion between January and June, while Hermes reported growth in the Asia-Pacific region of 20.7 percent.

  1. Trump’s protectionism vs. Xi Jinping coherent and straightforward approach

China’s emergence as a global economic power happened in the shadow of perceived American decline, so it’s hardly surprising that the EU has adjusted its course and moved toward a more restraint trade partner. On one side, the EU found protectionism and isolationism, and on the other side, a country that’s actively trying to boost foreign business. Naturally, China’s newly found openness comes with restrictions, but they are far less harmful than Trump’s tariffs and protectionist rhetoric, and Lester Ross, chair of the policy committee of the American Chamber of Commerce in China, told CNBC that he expects foreign companies to gain 10 to 20 percent of the Chinese market.

  1. Capital inflow

According to Reuters, “China is the EU’s biggest source of imports and its second-biggest export market after the United States, with trade between the two worth more than $1 billion per day.” In other words, it’s in Europe’s interest to work with China, as its member states have benefitted immensely from deals with it, particularly countries like Italy and Greece who haven’t achieved remarkable economic progress in past years and are eager to embrace the “Belt and Road” Initiative and China’s pragmatic approach.

As stated by China Daily, the Sino-Italian partnership has brought significant benefits to the European nation, and China now accounts for about 2.7 percent of Italy’s exports, valued at just over €11 billion ($12.3 billion) and more than 600 Italian companies have benefited from Chinese investments, for a total value of €13.7 billion ($15.4 billion). But stronger ties between the two countries could mean an additional inflow of capital.

Likewise, Western Europe’s gains come at a time when the Sino-European relation feels revitalized. Chinese foreign direct investment (FDI) in the European Union has increased by almost 50 times in only eight years, from less than $840 million in 2008 to a record high of $42 billion (€35 billion) in 2016, according to Rhodium Group statistics and The Diplomat.

  1. Investments in infrastructure 

Assuming that the only major positive outcome of the Sino-EU cooperation is the “Belt and Road” Initiative, the European luxury industry will still win big. Isolated countries in Southern, Central, and Eastern Europe desperately need infrastructure funding to restore their crumbling roads, ports, and bridges, but their budgets don’t have room for infrastructure spending. So it’s not surprising that EU member states have found value in China’s “Belt and Road” Initiative.”





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Louis Vuitton to Close Down Hong Kong Store and More


In “Headlines from China,” we share the biggest news stories about the luxury industry in China that have yet to make it into the English language. In this week’s edition, we discuss:

  • Louis Vuitton to Close Down Hong Kong Store
  • Cartier Opens Flagship Store On Alibaba’s Tmall
  • Amazon to Launch Luxury Portal Internationally

Louis Vuitton to Close Down Hong Kong Store – winshang.com
Louis Vuitton decided to shut down its store in Hong Kong Times Square mall after its landlord, Wharf Real Estate Investment Corporation, refused to lower the rent. The brand still has 7 stores in Hong Kong. It’s also planning to open a new store at the Hong Kong international airport in 2021. However, analysts stressed that the store closing would still have a negative impact, with parent group LVMH accounting for about 6% of its €46.8 billion in revenue in 2018 from greater China.

Photo: brand courtesy.

Photo: brand courtesy.

Cartier Opens Flagship Store On Alibaba’s Tmall — Cartier China
Cartier, of Swiss luxury goods group Richemont, debuted their flagship store on Tmall. Consumers can not only purchase the entire line of Cartier, including jewelry, watch and accessories, they can also pre-order two new items — the new Juste un Clou bracelets and Guirlande de Cartier chain handbag ahead of other global markets. As an add-on service, consumers can enjoy engraving service and shop with interest-free installments. This is a step forward into the joint venture set between Alibaba and Richemont. In addition to Richemont, many brands from major luxury groups like Kering and LVMH have entered Tmall.

The new platform will be launched first in the United States and then to international markets. Photo: Shutterstock.

Amazon to Launch Luxury Portal Internationally – Jiemian News 
E-commerce platform Amazon plans to launch its own luxury fashion portal in the first half of 2020. It will first roll out in the United States and then to international markets. Brands can pay a certain percentage of sales to run their own mini-shops online. According to WWD, brands can fully control the appearance of their online space on the new platform. They can also use Amazon’s vast logistics network for product distribution services. About 12 brands have already signed on.

This is not Amazon’s first attempt to enter the luxury fashion sphere. In December 2018, Amazon Global Stores announced the launch of the “Fashion +” project in China, further assisting Chinese fashion sellers to explore overseas fashion businesses and build their own brands through cross-border e-commerce exports. If Amazon can successfully enter the luxury market, this will undoubtedly be an important change. The e-commerce giant said previously that it has never given up on the category of high-end fashion brands.





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Luxury 2030: The Rise of the Personal Luxury Experiences


In the first three parts of this series, we discussed the major changes the luxury market will see over the next decade. It’s important to note that luxury’s main principles won’t change, but the rise of Generation Z as the most important customer group — along with rapidly changing consumer preferences towards individuality — will make the expression of luxury look very different in the future.

In 2020, the consumer’s perspective is often left out when brands create luxury experiences. Decisions on which experience to offer are often made in the boardroom without real consumer insights. As a result, many brands make assumptions about what consumers want instead of knowing what they want. Very few brands are excellent in putting the consumer’s needs at the center of their actions. “Consumer-centric” is still very much a buzzword, and a decade from now, brands that don’t provide a relevant luxury experience for customers simply won’t survive.

I often hear that what sets luxury brands apart is the personal experience consumers have in the store, assuming it’s a fashion or lifestyle brand, a hotel or restaurant, or a car dealership. When I audit those brand experiences and benchmark them against their competitors in the same space, there’s often a recurring pattern: The experiences hardly differ at all. One space may be a bit nicer than another or the architecture may be more spectacular, but that isn’t enough to create an authentic, relevant, unique, or memorable luxury experience.

If a brand story isn’t clear, sharply-defined, and highly-different in its positioning elements, then turning the brand expression into an experience will never work.

For this to happen, brands need to start gathering data long before they come up with experiences. To be distinct means creating experiences that are perceivably different from those that other luxury brands create, and this starts by defining the brand. If a brand story isn’t clear, sharply-defined, and highly-different in its positioning elements, then turning the brand expression into an experience will never work. It also won’t feel authentic because authenticity requires a strong connection to a brand’s purpose and values. Not enough clarity or definition in brand equity and brand storytelling is a major shortcoming for most luxury brands.

The other issue is creating memorable experiences. When I think about the times that brands have created a memorable experience for me, they are few and far between (yes, even in the luxury industry). When scrutinizing an array of stores belonging to leading luxury fashion and leather goods brands, their stores reminded me more of a department store than a refined, high-class, luxury experience. Not once was I offered something that made my shopping experience feel special, and in all cases, interactions with store staff felt rushed. None of the experiences were convincing, memorable (in a positive way), or created any sort of brand equity. It was quite the opposite: I would never return to most of those brand stores if I had been on a real-world shopping experience.

The same happened during my recent audits of luxury sports car brands in Asia. In one case, the experience of visiting one of the most admired European luxury car brands in the world was so negative (due to the arrogant behavior of a salesperson), I left the dealership in a state of shock. Meanwhile, during a recent stay at a luxury hotel, I had an important question that needed clarifying before I arrived but wasn’t able to get ahold of any on staff for hours. In the end, the hotel made a typical error for a luxury brand by forcing a guest to move from one place (check-in) to another (concierge) because the staff couldn’t perform certain duties. From a customer perspective, this creates burden and frustration instead of a luxurious experience. This is the unfortunate reality for many luxury brands in 2020, as their experiences are still too transactional, too beholden to industry standards, and not nearly personal or memorable enough.

This won’t be acceptable by 2030 because the youngest generation has higher expectations than any before it, and young millennials and Gen Zers will force brands to think, act, and behave very differently. In China, where luxury consumers are now, on average, about 15 to 20 years younger than they are in Europe and the US, this effect can already be seen. Many Western brands are already seeing that what’s accepted in other parts of the world isn’t sufficient for young, highly-demanding Chinese customers, and a large number of brands are struggling in China because they can’t create brand equity and loyalty over time. Yet, what they’re seeing in China now is just a preview of what they’ll experience everywhere else in the world in the future after today’s youngest consumers assume control of the market.

One important aspect of Gen Zers is that luxury, in both expression and expectation, is a much more personal and unique affair for them than it was for previous generations. Hyper-competition will be a big driver of this market. The number of brands in every segment will double, or even triple, and more and better Asia-born luxury brands will emerge to focus on more specific aspects of luxury than we find with today’s brands. Altogether, there will be much more for consumers to choose from, which will lead to even more individual expressions of luxury. The principles of luxury will remain, but the expressions and expectations will multiply.

What will brands have to do? Closeness to consumers will become much more critical. Digital is a huge enabler for luxury brands, and, in the future, they must have a digital infrastructure with sophisticated CRM systems and advanced data querying technologies. Most importantly, their data needs to be readily available for decision-makers on every level. If someone checks in to a hotel, for instance, the front desk staff should know the guest’s preferences beforehand, and they should have a relevant, tailored experience strategy prepared for them when they arrive. If a guest has a day packed full of meetings, the hotel should offer an evening of a workout with a personal trainer followed by a light meal to help create a “luxury” experience. For a vacationing guest, they should offer luxury in the form of memorable local experiences. Each person and situation is different. The future of luxury will be about creating experiences that consider those differences — in a memorable, shareable, and consumer-centric way.

Daniel Langer is CEO of the luxury, lifestyle and consumer brand strategy firm Équité, and the professor of luxury strategy and extreme value creation at Pepperdine University in Malibu, California. He consults some of the leading luxury brands in the world, is the author of several luxury management books, a global keynote speaker, and holds luxury masterclasses in Europe, the USA, and Asia. Follow @drlanger





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Why Are Sneakers Cooler Than Luxury Shoes to Millennials?


It was two in the afternoon in Shanghai, and the hip, young crowd at China’s biggest street-culture convention, Innersect, was humming with energy. Much of the crowd were waving their phones in the air to scan a QR code on a massive screen — the only way to access exclusive product drops at the fair. Steven Wang, a 20-something student from Hangzhou, said he took a three-hour flight to win the Clot shoe drops, and he was stressed out. He’d been there since early that morning but still hadn’t won.

Sneakerheads at Innersect waiting for the drop. Photo: Ruonan/Zheng

“Sneakerheads” like Steven lust over edgy footwear in much the same way a Hermès fan craves a new Birkin bag, but for millennial sneakerheads, traditionally prestigious names like Hermes, Dior, and Chanel are the old establishment. The social currency of today is streetwear and sneakers. Yet, interestingly enough, hot sneakers brands have a similar business profile to those storied luxury brands, offering exclusivity, high quality, and craftsmanship, but today’s young consumers clearly prefer the cool attitude of streetwear shoes. Jing Daily was at the show and interviewed some sneakerheads to figure out exactly why they prefer streetwear sneakers to luxury shoes.

Edison Chen. Photo: Courtesy of Innersect

Edison Chen. Photo: Courtesy of Innersect

Founder halo

Like many sneakerheads, Steven became a fan of Clot because of its founder, Edison Chen. Streetwear brand founders often have a compelling — and rebellious — personal backstory that helps fuel the brand value, whether it’s college dropout-cum-rap superstar Kanye West building a music and sneaker empire (Yeezy) or Off-White founder/artist/DJ, Virgil Abhol, conquering the world of high fashion. In China, Chen is recognized as ‘The Godfather’ of streetwear. He began his career in China as a successful actor and singer only to have it derailed by a sex scandal 2018. Ten years later, he started to build his streetwear brand, which went on to earn an annual turnover of $10 million by 2016. Chen’s comeback story helped give shape to the emerging spirit of Chinese hip-hop, showing that, despite obstacles, an underdog can rise up and gain success. Though hip-hop is still shunned by mainstream Chinese society, sneakers continue to thrive as a rebellious fashion statement.

Meanwhile, hyped luxury designers like Maison Margiela or Raf Simons attract equally obsessed fans, and brands have been trying to tap into their personal stories through online content and art exhibitions, but their influence isn’t as widespread as that of streetwear entrepreneurs.

Nike iD service. Photo: Nike

Level of customization

For sneakerheads, the spirit of sneakers comes from their freedom of expression, and this concept has changed the nature of the product. Today, sneakers have evolved to include multiple layers of customization. Sherry Lin, a self-professed sneakerhead since high school, pointed out the latest sneaker to take Chinese social media by storm: the ‘Para-Noise’ from Korean singer G-Dragon’s collaboration with Nike. “Every shoe is special,” Lin explained because it features a black, painted overlay that’s designed to slowly wear away over time and reveal a personal artwork by G-Dragon himself. But this customization idea is already deeply ingrained in Nike‘s DNA. NIKE iD by Nike is a service that allows customers to design their own Nike shoes and recognizes customization as an important part of its direct to consumer (DTC) strategy.

Nike’s first generation of waffle shoes. In July 2019, a pair of 1972 waffle-sole Nike running shoes became the most expensive sneakers ever sold at auction, fetching $475,500 at Sotheby’s. Image: Sohu fashion

Amount of anecdotal information

Yang Zheng, a basketball player who is also a Nike fan, recalled one of his favorite anecdotes about Nike: Their most expensive auctioned sneaker, the Waffle Shoe, was made by Bill Bowerman, who used his wife’s waffle iron to create a new kind of running shoe with waffle-patterned soles. “This is interesting to me and reflects Nike’s innovative spirit,” he said. Sometimes, a brand can use this organic information as a marketing strategy. Vans fans, for instance, created videos of how their Vans shoes always land on their soles, no matter how many times they’re flipped (if they don’t, they’re clearly fake.) A heavier sole design might explain why Vans always land top-side up, as they are designed for cushioning the impact of skateboarding. The sneaker company smartly used this information for its #vanschallenge on Douyin, which generated tons of organic interactions with fans.

Design elements like these are what real sneaker fans obsess over. Just as vintage collectors of luxury brands can trace the production year of a Chanel bag by its design, so too can sneaker collectors offer an oral history of their collections. And as each collector progresses, they grow specialized in their favored area, becoming brand historians. These stories run through thousands of online forums and fan groups, fueling the sneaker subculture even more and helping to sustain the brand’s lifeline.

What can luxury brands learn?

  • Initiate collaborations with sneaker brands via an authentic approach. Instead of hyping a joint-logoed, one-off collaboration like Prada x Adidas or Dior x Nike, dive deep into the brand history to create a compelling story.
  • Dare to give consumers control. Brands can consider making the products a blank canvas for fans to create meaningful pieces.
  • Co-create with a KOC (key opinion consumer). As consumers increasingly treat their vintage buys as collectible goods, co-create with them to share the brand history.





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What Luxury Brands Need to Know About Nanjing


Iconic Chinese cities like Beijing and Shanghai have become focal points for luxury brands hoping to reach Chinese consumers. But as the market continues to mature, China’s lesser-known cities are becoming fashion epicenters in their own right and are now meriting closer attention.

China is home to over 600 cities that are classified as tier-3 or below, and the people living in these cities account for 70 percent of the country’s total population and 59 percent of its GDP. The residents of these lower-tier cities (otherwise known as China’s less-developed urban centers) are less burdened by the high living costs that plague residents of first tier-cities like Shanghai, Beijing, and Guangzhou, and most of them haven’t been overexposed to luxury and fashion the way citizens in tier-1 cities have. This limited access motivates High Net Worth Individuals (HNWIs) living in lower-tier cities to travel to the nearest shopping capital for luxury goods. As China’s middle class continues to grow and its spending power strengthens, a whole new subset of the Chinese community has emerged that’s eager to spend on luxury and gain knowledge about brands.

But, in a country as large as China, consumer behaviors differ drastically from city to city and region to region. By combining our China expertise with first-hand conversations from local retailers and consumers, the new Jing Daily City Guide unlocks the consumption trends of the most buzzed-about second- and third-tier cities in China. We’ll evaluate each city’s current luxury presence as well as shed light on the intricacies of its retail market — from consumer spending habits to high-end retail spots.

Illustration: Haitong Zheng/Jing Daily.

For our inaugural city guide, we dive into Nanjing, the capital of Jiangsu province and the second-largest city in the East China region after Shanghai. A three-hour bullet train away from Shanghai, Nanjing is situated in the Yangtze River Delta region and has established itself as a prominent business center for regional headquarters like JD.com and Starbucks.

Notably, Nanjing is home to the retail center Deji, which was recently ranked the second-best performing luxury mall in China in 2018. How exactly did a shopping mall in a second-tier city outperform malls in first-tier cities? Who’s shopping in Nanjing? Below, we evaluate the presence of luxury and fashion in Nanjing while also highlighting opportunities for new contenders:

Nanjing’s key statistics

GDP

Population

  • Nearly 8.5 million (2019)
  • 30th largest population among China’s cities
  • Nanjing is the second-largest commercial center in the East China region after Shanghai

Yearly tourists

Wealthy population

  • Nanjing ranked No.16 in the nation in producing rich people (Hurun Wealth Report 2018)
  • Nanjing’s province, Jiangsu, placed No. 2 in GDP in 2018, according to data provided by the National Bureau of Statistics of China

Average disposable income

  • 52,000 RMB yearly or 7,000 USD (2018)
  • Average disposable income has increased steadily since 2013
  • Ranks 7th among the nation

Luxury Presence

  • The majority of top luxury brands have only one store in Nanjing, located at Deji Plaza (notable exceptions include Rolex, which has three locations)

Who is the Nanjing luxury shopper?

High Net Worth Individuals

Nanjing is a top shopping destination for High Net Worth Individuals from both Nanjing and neighboring cities, particularly lower-tier cities in Jiangsu and Anhui Province.

Rapid economic development over the past several decades has resulted in a “new money” class in many lower-tier cities, and as the first generation to accumulate a fortune, this group of people is eager to purchase a large number of luxury goods to impress others. Due to limited access to luxury brands, most in this class still need time to be educated about luxury and cultivate their tastes. Their interest in certain luxury brands or products usually follows that of other members in their local wealthy community, and big-name brands like Louis Vuitton, Hermès, and Gucci — which they consider “badges of success” or symbols of affluence — tend to be their top choices.

Rising middle class

Well-educated, post-70s-, 80s-, and 90s-born people with high incomes make up the rising middle class that’s shaping current consumption trends in China. As the administrative capital of Jiangsu Province, Nanjing draws many government departments, institutions, and leading companies’ headquarters to the city. Therefore, many middle-class Nanjing consumers work in government offices, the financial industry, and the technology sector. This group of consumers is quite diverse in terms of brand preferences, but they have shown a growing willingness to treat themselves and pay for high-end experiences. Compared with top cities like Beijing or Shanghai, the rising middle class in Nanjing feels less pressure to outfit themselves with luxury for social needs.

Students

College students — and even younger kids — keep fueling the local luxury consumption in Nanjing. As they’re often the only children in their families, Gen Zers tend to grow up in an affluent and open environment. They’re also better informed about fashion and beauty trends than older generations. For normal college students with limited living expenses, Taobao is the main shopping destination. Aside from colleges and universities, some exclusive private high schools in Nanjing feature elite educations. Students at these schools are fascinated with high-end streetwear, luxury sneakers, and handbags and are generously supported by their parents. Nanjing has many high-quality universities and research institutes (including Nanjing University) and ranks third in the number of universities on the list of 100 National Key Universities. Nanjing’s ratio of college students to the total population ranks No.1 among large cities nationwide, and the city provides talent to the entire Yangtze River Delta Region.

Retail snapshot

Illustration: Haitong Zheng/Jing Daily.

Deji Plaza
Opened in 2006, Deji Plaza is Nanjing’s ultimate luxury shopping destination and features big-name luxury stores, premium fashion labels, and niche designer brands. Affluent consumers from Nanjing and the surrounding area — including northern Jiangsu Province and Anhui Province — shop in Nanjing, as there’s a lack of domestic, high-end shopping destinations anywhere nearby.

But, at the same time, the high density of Central Business Districts near Deji Plaza offers it some advantages. Like other Tier-2 cities, emerging districts like the Hexi area have been on the city map for a long time, but downtown Nanjing’s Xinjiekou area is still the most vibrant CBD in the city. Known as “the No.1 Business Circle in China,” Xinjiukou has six shopping malls within a half-mile radius of its center — an entirely walkable distance for consumers.

This cluster of shopping malls presented a challenge to Deji in its early years, since they’ve been around for a long time and have earned the trust of local consumers. To distinguish itself from these existing malls, Deji focuses on presenting luxury brands and experiences primarily to high-end consumers. The first phase of Deji’s project was similar to traditional luxury shopping malls in that it featured premium luxury brands like Louis Vitton, Dior, Gucci, and others. But the mall’s modern interior design, diverse entertainment facilities, and world-renowned dining options have attracted young consumers and torn loyal consumers away from neighboring malls. While Deji showed a climbing trend, it still ranked after some other high-end shopping malls in Tier-2 cities such as Hangzhou’s Tower Shopping Mall. But it was the second phase of Deji’s project development that generated its extraordinary business performance.

Six years after its grand opening, Deji Plaza intended to expand to enrich and upshift its profile. With its large sales volume, Nanjing’s enormous potential for luxury consumption was now being recognized by luxury brands. The plaza reserved key two-floor flagship stores for brands like Chanel, Cartier, Tiffany, and others, and while those luxury brands already had presences in the nearby Suzhou and Wuxi malls, their flagship stores in Nanjing were now superior and better-positioned because of their more diverse inventories and limited editions.

Deji is also favored by established luxury beauty brands like La Mer and La Prairie as well as niche perfume labels like Atelier Cologne and Diptyque. Located in the plaza’s underground level, the beauty department features a similar boutique feel to the luxury houses upstairs. And instead of being displayed at counters like in a typical shopping mall, beauty brands in Deji own separate storefronts and highlight their personal beauty advising services and special VIP advantages.

Golden Eagle International Shopping Center
Nanjing Golden Eagle International Shopping Center is one of the major commercial complexes owned by the Nanjing-headquartered retail giant Golden Eagle Retail Group. The department store chain has positioned itself as a fashion and luxury goods provider. It regularly releases internal fashion magazines called GE MODE to clients, and examples of luxury brands it works with are Givenchy, Lancome, Dior, Valentino, Hugo Boss, Balenciaga, Guerlain, Clarins, Folli Follie, Furla, and more.

Ai Shang Tian Di Shopping Center
Having opened in 2012, Ai Shang Tian Di is a shopping center aimed at a young generation of consumers who want a fashionable and creative lifestyle. With this target, Ai Shang Tian Di decided to host the Apple Nanjing flagship store and various restaurants that are popular among young Chinese, such as Elementfresh, Wagas, and others. Aside from showcasing fast-fashion brands like Hollister and GAP, the mall is also a favored destination for local streetwear lovers. China’s influential streetwear platform YOHO opened its first offline boutique, YOHO!STORE, at Ai Shang Tian Di. With its curated brand selections (including Western and domestic streetwear labels) and interactive store merchandising, YOHO!STORE drives a good deal of traffic to the mall.

What Nanjing residents say about luxury shopping

Deji Plaza’s dedication to maximizing shopping experiences drives consumer stickiness to its brand. To understand why the mall is appealing to consumers, Jing Daily interviewed two locals and asked them about their go-to shopping destinations in the city.

“Deji Plaza is my top choice due to its modern and vibrant vibe. I enjoy randomly hanging around the plaza, even though I don’t have a specific shopping plan. There are so many fun things that consumers can engage with, such as art exhibitions at Deji Art Museum, pop-up stores, and campaigns. Also, while Deji updates the layout of storefronts and brands frequently, the organized interior structure of the plaza is very consumer-friendly.” — Miss Zhang, an art industry worker in her mid-20s

“I would say Golden Eagle International Shopping Center and Deji Plaza. Golden Eagle is among the earliest batch of shopping malls in Nanjing, and I have shopped there for many years, so I am quite familiar with it and can easily find what I am looking for. But at Deji, which is always crowded with young faces, I can identify and catch up with the latest trends. At the same time, its brand profile and in-store facilities are inclusive, so different generations can find places that excite them in the plaza.” —Ms. Wu, a college professor in her mid-50s

What retailers say about Nanjing

Nanjing is proving to be a unique luxury consumption hotspot, but what are some pros and cons that brands should be aware of? Jing Daily interviewed three experts who have retail planning experience in Nanjing to get a better idea:

“Even though Nanjing is a close distance from Shanghai, it captures the nearby wealthy [shoppers] in Jiang Su (especially north of Jiang Su) and An Hui (Maanshan city). There is no other nearby city that has such wide coverage.” —Amanda Wang, Former Montblanc Asian Commercial Director

“Brands should do it with confidence. Nanjing is a strong retail town, which is now at the level of a tier-one city. But they also need to look at the whole picture [because] Nanjing is just a drop in the ocean. There are many cities where brands can achieve successful results.” —Miquel Cardona, Managing Partner at Oriental Retail Ventures

“Popular trade zones in Nanjing are very obvious locations for brands to launch stores at. However, they should proceed with caution. For example, in Nanjing, Hexi is a young emerging trade zone. Its maturity doesn’t compare to Xin Jiekou, and two out of five projects in Hexi will turn out to be a good option. Second, localization is increasingly important in China, and brands need to build a China-specific strategy down to the city level. For example, brands can invite local Nanjing KOLs and partner with up-and-coming Nanjing brands. Third, local consumers are well-traveled, and they would go to New York or Paris for a better deal. Brands ought to offer a good reason for them to purchase at home, releasing tailor-made products and marketing strategies to stay on top of local consumers’ minds.” —Matt Shapiro, Associate Director of Retail Tenant Representation in China at Savills

Key takeaways for brands

As Nanjing residents’ disposable capital and local tourist consumption both grow, the city’s current shopping areas, the business center Xinjiekou and luxury destination Deji Plaza, cannot meet rising demand. Hexi District is seen as the next promising CBD, but its land retail and residential property prices have skyrocketed over the past five years. Crowded by upscale apartments and office buildings, Hexi would be the ultimate opportunity for retailers targeting the new middle class and HNWIs.

Deji Group and the International Finance Centre (IFC) have validated the potential of Hexi by expanding into the area. Echoing the successful business model of Deji Plaza, a new project — the Deji World Trade Center — aims at building a new landmark in Nanjing, while the city will be the IFC project’s third settlement after finding roots in Hong Kong and Shanghai. Owned by the prestigious Sun Hung Kai Properties, Nanjing IFC mall will house top-notch international brands and hot newcomers, creating a brand new one-stop shopping destination.

Currently, luxury houses such as Louis Vuitton, Chanel, and Dior only have one location in the city (at Deji Plaza), but expansions into the Nanjing IFC are foreseeable. As the upscale commercial center projects are due for completion in three to five years, the luxury shopping landscape of the city is sure to be upgraded and diversified quite soon.

Reported by Ruonan Zheng, Wenzhuo Wu, and Zheyu Chen.





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