Why Now Is The Right Time To Invest In Luxury


Writing my weekly Future of Luxury column for Jing Daily allows me to reflect on some of the most critical and inspiring luxury topics of our time. Today, on my birthday, I’ve taken a moment to reflect on the lessons luxury brands must take away from the past calendar year, and what they might mean for them in the future.

In 2019, as we prepared to move into the last year into the 2020s, the need for luxury brands to make changes was already becoming urgent. Just a few months earlier, the Dolce & Gabbana China PR disaster sent shockwaves across the luxury brand community, and it became clear that “business as usual” wasn’t going to be possible anymore.

The shift to fully global, digital brand management started to reveal challenges. Marketing missteps that would have remained unnoticed in the past were becoming global phenomena. The need to not only develop cultural sensitivity but contextual sensitivity — knowing what is going on worldwide and in real-time — was the skill that took center stage, as brands like Versace and others made crucial errors that threatened their brand equity. Managing KOLs — a task that had previously been delegated to social media managers — suddenly became a CEO’s priority.

The shift to digital also forced brands to acknowledge that the internet isn’t just a marketplace, but rather, a central hub for consumer decision-making. Brands win or lose because of digital. Connecting with customers at a worse rate than the competition online means being irrelevant, since 95 percent of purchase decisions now happen digitally, regardless of whether the purchase takes place online or offline. I’ve seen many recent examples of brands that couldn’t successfully connect through digital channels go on to lose their physical customers at record speeds.

Millennials and Gen Zers are further disrupting the online space and are making many legacy brands obsolete. These brands’ most common shortcoming has been creating basic and indistinct brand positioning statements. Too many existing brands don’t bring the consumers into their conversations, and, therefore, consumers rightfully don’t care about them.

And to Gen Z — the most influential group in luxury today — brand storytelling shortcomings are deadly. Many brands don’t provide any rationale for why consumers should buy them. Relying on a position centered solely around technology or design isn’t enough, especially in China, where consumers pick the brand first and the product second (which makes brand equity even more necessary in China than elsewhere).

When we fast-forward ten years to 2030, it will be in a time when Gen Z will have become the dominant luxury consumer group in terms of spending, and most brands aren’t prepared for that. Brands will have to become digital masters by learning to deploy sophisticated A.I.-based data querying technologies and build comprehensive, digitally-assisted customer journeys. That will necessarily require excellent brand positioning. Without that as a foundation, all other measures are sure to fail or become incredibly costly. In the future, high-level skills in strategizing, brand storytelling, customer journey creation, and implementing advanced digital tools will be the only way to a competitive advantage. These are quite different skills than the ones luxury managers have today.

During a recent luxury investor conference in Asia, I urged some top investors to challenge a brand’s leadership team before they invest in it. I told them to fire a CEO who refuses to make digital leadership and building brand equity their top priorities. The time for patience is over because brands that hibernate and do what they always did will not survive. COVID-19 has acted as an accelerator by brutally exposing brand shortcomings. But make no mistake: Only partially optimizing your brand to survive current challenges isn’t going to guarantee your future. It may even reduce a brand’s competitiveness because many brands will confuse short-term tactics with long-term strategies. The massive disruption shaking up the luxury sector calls for unprecedented action.

Given all of this, why am I optimistic about the future for luxury brands? Why am I an advocate for investing money into the luxury market? Because real luxury — when it’s creating extreme value and isn’t just overpriced objects — will be the big winner after this pandemic. The luxury sector will rebound faster than others, thanks to the best-managed brands. As in all times of disruption, this is the time when the future pecking order will be decided.

There have never been so many exciting and disruptive new brands ready to launch over the next 12-48 months as there are today. The sheer volume of promising entrepreneurs who are combining new thinking and the willingness to aggressively address the current market’s shortcomings is a sure sign — our future market leaders are ready. Now is the time that consumers will see a massive influx of new ideas and new value standards. Gen Z will create their own brands, their own solutions, and their own futures.

For incumbent brands, that means one thing: change or die. Now is the time to invest in the future of luxury. It’s the dawn of a new era when extreme value creation will come into crystal-clear focus. Many brands won’t be able to make the transition. But the brands that can connect strongly with millennial and Gen-Z customers through digital and brand storytelling will gain significant traction. The most exciting times are just beginning.

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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Will Daigou Help Brands Survive COVID-19?


Beijing office worker Cheryl Chen works with at least five different daigou on her WeChat. Some are brand-specific (like one who hunts for unique Chanel collections or niche brands like By Far), and others are country-specific, meaning they specialize in combing the US or Italy for better prices. They are all referrals from her friends in New York City, where she studied for four years to get her undergraduate degree.

Prada's Re-Edition hobo bag is the IT bag in China, netizens already are sharing pricing of it in other part of the world. Photo: Little Red Book.

Prada’s Re-Edition hobo bag is the IT bag in China, netizens already are sharing pricing of it in other part of the world. Photo: Little Red Book.

Lately, she’s been eyeing Prada’s Re-edition 2005 Nylon shoulder bag as a reward for surviving the COVID-19 lockdown, but it’s been so well-received and consequently hard to get in Beijing, so she turned to her daigou for help.

But Chen isn’t the only customer relying on daigou to shop post-COVID-19. “[Demand] in the market is still strong,” said one of Chen’s US-based daigou anonymously. The pandemic has made logistics more difficult, but it still only takes between two and three weeks to ship products to China. Even with added tax and insurance, certain brands’ prices are still lower than can be found domestically. For example, Tiffany is one of her most popular brands in China at the moment, and with luxury brands increasing their prices globally, business has been particularly strong for the daigou.

Chen’s American daigou has been working from the US for over ten years now. She started her business as a way to supplement her living expenses, but it quickly became a full-time job. By connecting with friends who worked at luxury stores, she was able to build a network of suppliers who allowed her to access goods with employee discounts. Daigou excel at bringing in customer volume and sales associates make the purchases worthwhile because of their exclusive discounts. It’s a win-win situation, and these relationships have become essential for both stores and daigou as they try to weather the ongoing COVID-19 storm.

However, not all brands appreciate this kind of rapport. Brands’ headquarters have avoided working directly with daigou for a long time because of legitimate long-term concerns. One is sales accountability, as daigou tend to take sales from staff or local third parties, making it harder for a brand to track sales and formulate regional strategies. Another is the brand image since the pictures and videos Daigou send to their clients aren’t as professional and could hurt a brand’s optics over the long-term.

But with mounting pressure to perform due to COVID-19, brands have slowly warmed up to working side by side with daigou. Tom Griffin, the commercial director of Verb Brands, which is a digital agency that helps luxury brands launch in China, said that more of his clients have recently become interested in developing daigou strategies. According to Griffin, daigou can be an effective way for smaller brands to test the market. While it would take at least six months to see results after launching on Tmall, daigou know more precisely where they can place products.

“Daigou are very good at finding what products work for what region or market, even demographics,” Griffin said. Therefore, brands that are already in the market can use daigou to test products that haven’t received Chinese licensing yet, such as perfume or skincare product lines that refuse animal testing.

Daigou announced their clients that Dior will will increase their price on July 2nd, and that they can still enjoy 15% off Saks discounts. photo: daigou WeChat

Daigou can also act as consultants, as they often have valuable information about popular products and price sensitivities. Like Chen’s daigou, they can usually spot which products sell well and why, and they tailor each sale to suit the client’s needs. Brands could surely use this information to prioritize sought-after, limited-edition products, or consider strategic offers that fall in line with daigou requests.

In some cases, if daigou scale up enough, they can become a brand’s wholesale partner, which allows them to receive 30-percent off the retail price. But regardless, brands should always expect to offer some type of discount to daigou. Several experts we spoke with suggested that brands should treat daigou like VIPs, offering them exclusive discounts. And for brands, building a global customer relationship management (CRM) system would be helpful in tracking and engaging with this powerful, global consumer group.

Griffin suggested that a brand should work with daigou that will maintain the brand’s integrity as much as possible. That is particularly important for new brands, as their first impressions on consumers could come from daigou. But employing too many daigou or only relying on them can be a slippery slope because brands can quickly lose pricing control and cannibalize their high-end branding. The key is to balance the right amount of diagou with other sales channels.

The Chinese government has been cracking down on daigou since 2018 by enforcing them to obtain licenses and register as businesses. Though it didn’t end daigou activities, it did signal that the Chinese government is trying to regulate the practice.

While brands may still be deciding whether or not to work with daigou, this group will remain a vital part of the cross-border luxury business. “As long as a price gap remains in and outside of China, a portion of Chinese consumers will continue to seek daigou, many of whom are still not declaring, despite the e-commerce law,” said Greg Cole, director of the digital agency CDLG Strategic Communications. And most brands seem to be alright with that — thus far. “The legality aspect is not exactly a black and white scenario,” added Renee Hartmann, a co-founder of China Luxury Advisors. “For a lot of brands, once you ship your product, it’s out of your hands, especially with shipping and customs.”





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Brand Value Is More Important Than Ever In The Post COVID-19 Era


For the first time, over 17 Chinese brands made it on the latest BrandZ Top 100 list—ranking the most valuable global brands—which was published on June 30. Alibaba and Tencent ranked 6 and 7 respectively. The lists included a couple new risers, including the technology companies Huawei, TikTok, Meituan, and the luxury spirit brand Moutai, signaling the increasing strength of Chinese homegrown brands. The race among luxury brands is fierce as ever, led by Louis Vuitton, Chanel, Hermès, and Gucci.

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The report gave a holistic view of brand value in the COVID-19 era. Compared to the 2008 financial crisis, BrandZ predicted that it will take two years for luxury brands to fully recover, but many have already proven their resiliency by leveraging the China market.

BrandZ

The Global Top 100 Chinese brands. Photo: Kantar

Doreen Wang, Kantar China CEO and Global Head of BrandZ, suggested that now it’s the time for brands to increase their perceived value, and it’s now also time to digitize business models. 70 percent of brand leaders interviewed believe that brands no longer need to apply “digital lipsticks” anymore, but instead, a revamp of their logistics, supply chain, and entire operations is what’s in order for them to enjoy continued growth and success.

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.





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Why E-Commerce Giants Must Look Out For SMEs


According to a JD press release, JD launched its Spark economic support plan for SMEs, stall owners, and shopkeepers on June 2. The plan consists of three priorities: ensuring supply, assisting operations, and fostering employment.

Under this plan, JD.com will select 50 billion quality goods and provide each small shop with a 100,000-yuan, interest-free credit for purchases. According to initial estimates, this support will be a lifesaving effort for millions of convenience stores and stalls, and it will ensure that 5 million people keep their jobs.

Most of China’s small and medium-sized businesses have been hit hard by the pandemic and its related restrictions. A survey conducted in early February by the Enterprise Survey for Innovation and Entrepreneurship in China (ESIEC) team and led by Peking University showed that 14 percent of the 2,349 surveyed SMEs couldn’t last longer than a month on cash flow and that 50 percent couldn’t last beyond three months.

In short, many SMEs need to overcome serious difficulties to survive, and their failures would surely have a devastating effect on China’s economy. That’s because, according to The International Food Policy Research Institute, SMEs currently account for 90 percent of China’s employment, generate 80 percent of its exports, and account for 70 percent of the country’s GDP.

But Lei Xu, the CEO of JD Retail, stated that JD already has experience in assisting the “stall economy” and that this plan is a continuation of past efforts. JD understands the impact of the crisis on stalls and SMEs, and it is encouraging these businesses to adopt digital innovations and new technologies. “JD has both the ability and the responsibility to use digitization to support and make the economy of small stalls and shops more dynamic, helping to further invigorate the overall economy and stabilize employment,” Lei Xu said.

Alibaba launched its own program to assist export-focused SMEs and help them combat the outcomes of the COVID-19 crisis. Through its 2020 Spring Thunder Initiative, Alibaba will use its technological and commercial capabilities to design new supply chains, create demand, and promote trade. And, according to the Chinese giant, they are prepared to take “every necessary action” to assist SMEs.

“We must band together with the SMEs that need the most help, and convert Alibaba’s resources into strength for the SMEs,” said Alibaba Group Chairman and CEO, Daniel Zhang in a staff memo. “We must turn the ‘danger’ brought about by the pandemic into ‘opportunity’ for SMEs to prepare for the future through digital transformation. Now is the time for Alibaba to give back to our community and to give back to our SMEs.”

It’s important to note that Alibaba was a trusted ally for SMEs even during the 2008 financial crisis when the e-commerce giant launched three assistance programs. Thanks to Dark Cloud, Wild Winds, and Spring Thunder, 40 million SMEs were assisted in their rehabilitation efforts.

Major players like Alibaba and JD.com understand that the country cannot stabilize its market and reboot the economy without a strong strategy for SME recovery, so why isn’t this Alibaba/JD effect being replicated in the West? Mainly because of cultural values and the clash between collectivism and individualism.

Even in today’s modern China, a Confucian ethos prevails, and the national culture encourages that brand of collectivism. But the dominant culture in the West is an individualistic ideology, and Western capitalism has enabled a form of materialism that pushes individuals to opt for financial success and material possessions over altruism, justice, and charity.

Amazon has long been accused of “squeezing” small businesses or “pushing them out of the market,” and various sellers have complained about poor treatment and policies that favor the buyer without protection against copycats. Moreover, the handling of the COVID-19 crisis and the possible violation of the Occupational Safety and Health Act (OSHA) that concerned even the New York Attorney General’s office, shows that Amazon isn’t even prioritizing its own employees.

Conversely, Alibaba has taken a different approach to stakeholders and success. In a 2014 CNBC interview, Jack Ma explained the group’s commitment to all shareholders, saying, “Today, what we’ve got is not money. What we’ve got is the trust of the people. With millions of small businesses and so many shareholders, I am very honored and so excited because when I see them, the responsibility I think about for the next five to ten years is how I can make sure these shareholders are happy,” Ma said.

In 2017, on the show “The Brave Ones,” he said that three things shouldn’t be touched: money, power, and glory. “If you keep the power in your office, you will be in trouble. If you keep the money in your own pocket, you will be in trouble. If you put the glory in your hand, you will be in trouble,” he explained. “So when you have the money, spend the money supporting more people. When you are in power, empower the others. When you get the glory, (make sure) the other people have that. Then you will be happy.”

In the same interview, Ma warned that the age of large businesses is ending and that smaller companies will take center stage over the next century, which is why Ma has dedicated his efforts to empowering SMEs. In fact, in a September 5, 2014 filing with the Securities and Exchange Commission (Washington, D.C. 20549), it states that Alibaba’s founders started the company “to champion small businesses” and the group’s decisions have been driven by a long-term mission and “not by the pursuit of short-term gains.” That completely contradicts the “for-profit and growth” capitalist model promoted in the West (although even big Western companies like Amazon have recently been reevaluating their ideologies in a quest for more ethical virtues).

Considering that younger consumers are demanding meaning and purpose from businesses, this shift in priorities is hardly surprising. Businesses are being challenged to look beyond profits and revenue to address socioeconomic issues and environmental challenges. The COVID-19 pandemic has changed the world permanently and has taught us that everyone has a responsibility in society, including big business. As such, empowering SMEs can be a game-changer for e-commerce giants like Amazon because it allows them to reinvent themselves as purpose-driven brands. In the end, humanistic or “compassionate” capitalism is the only way forward — not only for corporations but also for national economies.





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Chinese Designers: Beware of “Guochao Fatigue”


If you’ve been on the Chinese Internet over the last few years, chances are you’ve come across the term “Guochao.” When the cookie-cutter Chinese sports brand Li Ning debuted a streetwear-infused line of clothing at Paris Fashion Week in 2018, netizens coined the term “Guochao” to describe a rising group of local designers who were making Chinese nationalism trendy. Since then, almost every millennial-savvy brand has rushed to launch Guochao-inspired collabs in support of Chinese culture. But as repetitive China-proud narratives continue to flood the market, consumer fatigue has followed. Now, to obtain serious cultural reach, Chinese designers must go beyond a basic “proudly made in China” concept.

Guochao is linked to the concept of “cultural confidence (文化自信),” which is another buzzword in China that refers to the country’s rising cultural self-esteem. Meanwhile, domestic e-commerce giants like Alibaba, JD.com, and NetEase have quickly produced Guochao shopping festivals to attract younger consumers. Alibaba’s premium branch, Tmall, has even introduced a Guochao incubation center to help support homegrown fashion brands through a related algorithm and other measures.

As a type of “soft power” that encourages young people to take pride in their national identity, the Chinese government has approved of the Guochao movement. In a propaganda video, the state-owned CCTV channel described Guochao by saying that brands are “exporting China’s culture and aesthetic, which is bound to make a lasting difference.” As such, producing Guochao pieces or anything that puts forth a China-proud narrative has become both commercially viable and politically correct.

Xiaojing Huang, a Chinese trend expert and founder of design consultancy Yang Design, said this brand of nationalistic sentiment is likely to prevail over the coming decades. “China has been in a strong nationalist mood since the 2008 Beijing Olympics,” she said, “and this ideology is likely to prevail for the next 30 years as China’s economy grows slowly but steadily.” She also emphasized that the Guochao craze is particularly relevant to the post-90s generation, which was raised during a period of heightened nationalism. Because of this, few of those younger consumers equate “Made in China” with cheap knock offs as their parents do.

But as Guochao grows into a mainstream cultural staple, more discerning millennials have started to call out brands that utilize it superficially and have demanded action rather than empty patriotism. Across social media, videos mocking Guochao have been trending. Consider vlogger @杨子江 made a video lamenting the conventional ways brands now make Guochao collections by either copying traditional Japanese motifs dubbed into Chinese or printing a motivational slogan onto a bland T-shirt. Guochao has also been put on blast for its constant plagiarism, and some of the most renowned local brands like Warrior have repeatedly been accused of copying international designers. Now many millennials see Guochao as a rip off of global streetwear trends that also capitalizes on patriotic sentiment.

While Guochao began as a cultural movement, these days, brands mostly create designs with an algorithm rather than a creative approach. Thanks to how-to Guochao guides, AI services often play a big part in designing today’s Guochao sales hits by compiling trending Chinese motifs like cranes and ceramics via consumer data. And as national pride starts turning into China’s favorite theme, Guochao has become shorthand for political correctness and positive progress. But to elicit real cultural respect inside China, more must be done.

Chinese motifs

Trending traditional Chinese motifs suggested by AI. Photo: CBN Data.

Most Guochao brands present traditional patriotic symbols in a performative way. But Chen Xi, the founder of Fabric Porn, has instead gone against the grain by finding inspiration in China’s contemporary grassroots class. “I see a gap in Chinese fashion that people often overlook,” said Chen. “The beauty in our society’s grassroots class.” With a sharp-edged and modern silhouette, the brand’s clothing line is often emblazoned with China’s forgotten everyday symbols like ads for fake IDs (commonly found in dark urban alleyways) and imagery from 90s children’s books. Although Chinese officials might view these symbols as stains on the image of a powerful, modern China, Chen turns them into a refreshing and thoughtful aesthetic.

Fabric Porn

Fabric Porn seeks inspiration from China’s contemporary grassroots class. Photo:@FabricPorn’s Weibo.

Perhaps one of Fabric Porn’s most representative designs is a hat that says Make China Lit Again, modeled after President Trump’s original “MAGA” hat. But Chen said that irony wasn’t his intention. “It’s an honest declaration that young China wants to be open to foreigners and wants their country to be better,” he told Jing Daily.

Fabric Porn’s “Make China Lit Again” hat. Photo: @FabricPorn’s Weibo.

In thinking about alternative visuals to represent contemporary China, designer Song Ta is looking to social satire. His brand’s Spring/Summer 2020 collection features exaggerated high-waisted, baggy pants meant to mimic the iconic style of former state leader Jiang Zemin. The brand even coined the term “Kanbu style,” which means “leaders’ style,” to refer to the way Chinese boomer politicians typically dress. “The younger generation now has a de-Westernized understanding of fashion and trends,” said Song Ta. “They feel more comfortable to stray from the mainstream and present a sense of otherness.”

Song Ta’s “Kanbu style” is a humorous take on how the boomer politicians typically dress. Photo: Song Ta’s official Weibo

Confronting the limits of mainstream Guochao style has forced designers like Chen Xi and Song Ta to rethink how they approach clothes in a time of surging nationalism. “The fact that Guochao is trending means that the level of cultural confidence is escalating,” said Chen Xi, “but I personally think it lacks depth.” Similarly, Song Ta has called for a calmer take on the Guochao fad. “It feels like we have reached a peaking point, and it’s time to go back to issues that are more design-centric,” he said.

The future of Guochao, or any fashion trend native to China, will be tied to the fundamental question of cultural power. Today, mainstream Guochao presents itself as a pseudo-culture rather than a movement driven by the genuine curiosity of China’s cultural heritage — and that won’t hold the interest of young Chinese consumers. For local brands, creating styles that make Chinese feel lit again isn’t any easier than it was in the past, even though “Made in China” no longer holds the stigma it once did.





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Why Does Beijing Allow Chinese Exporters To Sell Goods Within the Border?


Unusual times call for Unusual measures. After being battered by COVID-19 since late January, China is quickly adapting to a new normal. Chinese local governments are now hosting shopping festivals, officials are attending livestreaming sessions to drive sales of merchants and are also championing “street stall economy” despite it being previously against city regulations. This week, with the aim to help exporters, Beijing has officially allowed them to produce orders to sell within China. 

As Jing Daily previously reported, exporters, including textile suppliers, are suffering losses and the uncertainty of future overseas orders as many have been halted or canceled. To date, China’s economy has already suffered a 6.8 percent decrease in the first quarter of 2020, as its textile and clothing export value dropped 18.7% in January and February 2020, compared with the same period in 2019. And no one knows how long it will take for international trade, which constitutes about 38 percent of the national GDP, according to the World Bank, to resume to pre-COVID-19 levels. 

Allowing exporters to sell existing orders planned for overseas clients has been in the talks on the local level for some time. But there’s a new development this week, as the State Council released supporting measures that back “selling export goods domestically” (出口). The recent guidelines from the chief administrative authority are securing the 31 trillion-industry as of 2019, and the jobs of factory workers and account executives. 

Exporters

The 127th China Import and Exporter Fair (June 15-24), also known as Canton Fair, has been held online. Photo: Facebook

And much the recent pivot on street stalls, “selling export goods domestically” has not always been welcomed in China. During the planned economy era in the 80s, for example, labeling products the above term implied that they were of better quality, as Chinese factories produced higher-quality products for export. The new guidelines address the disparity of qualities by reiterating “Three Same” — same production line, same standard, and same quality. 

The guidelines also aim to improve the intellectual property protection of non-Chinese brands, including: “[All levels of governments and departments] should strengthen the protection of intellectual property, support exporters to negotiate with brands on authorizing intellectual property.”

For exporters who are used to being manufacturers, they might have the production know-how but not the marketing expertise or established sales channels, which could be a roadblock to their success. To address this, Beijing encourages them to go online. “[We] encourage export companies to connect with e-commerce platforms, encourage them to use livestreaming, experience commerce to boost Online-to-Offline.” 

There are already examples that state media outlets love to tout. In late March, China’s coastal city Ningbo inked a deal with the group-buying e-commerce platform Pinduoduo to boost the city’s exporters’ digital marketing strategies and sell Ningbo-made goods to the website’s 481.5 million monthly active users. Orders from the deal are expected to reach 20 billion yuan ($2.8 billion) within a year. 

The official move to encourage exporters to sell to local consumers may not be encouraging news for overseas brands. In a recent editorial by the Chinese economic publication 21st Century Business Herald, it wrote that “selling overseas orders domestically should not just be a contingency measure, it’s the right time to help pivot those exporters for the trade-up of both consumption and industry.” Will the guidelines make the already crowded market only more competitive? 





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How Will L’Oréal’s Elimination of “Whitening” From Skincare Products Impact Its Chinese Beauty Market?


The French cosmetic giant L’Oréal announced they will be removing words like “whitening” and “lightening” from all their skin care products. The move comes on the heels of a backlash that a number of beauty brands received for their skin lightening products amidst ongoing protests for racial equality. Another global cosmetic giant, Uniliver, has already announced similar measures, including for its Indian subsidiary, which will now rename its best-selling skin lightening cream to Fair & Lovely. Unilever’s decision comes after Johnson & Johnson announced last week that its brands Neutrogena and Clean & Clear would discontinue skin-whitening creams favored in Asia and the Middle East.

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Skin whitening products are immensely popular in China, where society describes the ideal woman as “白富美” (fair, rich, pretty), and the traditional beauty standard considers fair skin to be beautiful (以白为美). Marketing research shows that whitening products reached a whopping 440 billion RMB sales in 2019. Given this, initiatives to remove some skin whitening products altogether have received mixed reactions on Chinese social media, with critics arguing that they’re being robbed of choice as brands become “too politically correct.” However, in the past few years, as Western brands like Fenty, Coty, Mented Cosmetics, and NYX Professional Makeup infiltrated into the Chinese market, the concept of “inclusive makeup” is becoming more welcomed by local consumers. These brands advocate the idea that there are various standards of beauty instead of simply having idealized fair skin. Removing words like “fairness” and “whitening” mark a small step forward in a much larger project of chipping away at long-held issues perpetuated by traditional beauty standards in China. The question remains: how many other global beauty brands will follow L’Oréal’s lead?

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.





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A New Crackdown on Livestreaming Content


This post originally appeared on Content Commerce Insider, our sister publication on branded entertainment.

On Tuesday, June 23, the Cyberspace Administration of China named ten livestreaming platforms for disseminating “vulgar content” and directed local authorities to take punitive action against them, including freezing content uploads, suspending the registration of new users, and blacklisting offending livestream hosts.

Among those specifically named for infractions were video streaming platform Bilibili, the gaming platforms Douyu and Huya, and Bytedance’s Xigua Video.

  • In a notice, the CAC said it had reviewed the 31 major livestreaming platforms and found them to be sorely lacking in content supervision. Among the problems cited were vulgar language, scantily clad female hosts, poor management of user comments by the platforms, and the spread of “unhealthy” values. E-commerce livestreaming practices were not specifically mentioned, but are the subject of other ongoing regulatory efforts.

  • Internet regulators have sought to tackle these issues before. After amateur entertainment-oriented livestreaming took off in the mid-2010s, a lengthy campaign that ran from 2016 to 2017 sought to impose strict controls on the freewheeling sector. Dozens of platforms were shut down and thousands of livestream hosts were banned or sanctioned.

  • This time around, the targets are bigger companies that already have sophisticated content-moderation mechanisms in place, so it should be easier for them to fall in line.

  • More recently, Douyu and Huya, both of which are controlled by Tencent, came under fire for inserting gaming ads in their online education channels. Both platforms have now suspended content updates on their main channels following the CAC’s notice.





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The Clock Is Ticking For Luxury Brands Post-COVID-19


We are living in an ever-accelerating business world, and that applies to brands, competitors, technology shifts, consumer preferences, insights, and demands. Yet many brands are not prepared to address these challenges, and roughly half of them will simply vanish over the next few years.

Complacency and underestimating the growing speed of changing consumer perception left many brands in an incredibly vulnerable position — one that they were in before the coronavirus. I’ve seen this new level of desperation in the numerous conversations I’ve had with luxury brand CEOs over the last few months. Their revenues are plummeting — by up to 90 percent in some cases. They’ll use the virus as their official reason, but it’s not the real one. For many, it will be too late. But with aggressive, targeted measures, brands can still turn their situations around.

These brands need to be brutally honest and address their gaps head-on. In all brand categories — jewelry, fashion, automotive, hospitality, and services — all over the world, I’ve observed how businesses are unprepared to address younger target groups (millennials and Gen Zers). That is made worse by their lack of brand storytelling, customer journey strategies, and digital readiness.

Some brands think they can survive despite not being relevant to young target groups since many sell primarily to consumers over 40. But these young consumers are behavior role models for mature core buyers. In other words: If you can’t reach young consumers, you won’t reach older consumers. And these brands don’t have much time. One brand I know lost over 30 percent of its core sales in just two years because they couldn’t reach millennials. Change or die: those are a brand’s options now.

For many brands, a catastrophic shortcoming is digital. That doesn’t just mean setting up a webstore. Brands must achieve an overall competitive advantage through digital. Why is this critical? Because over 95 percent of consumers decide to buy your brand during their digital journeys. So if you aren’t convincing them during that journey — on social media, through influencers, in digital content and SEO, or on your website — they will not buy you. That’s why I have little patience for brands that still don’t think they need to focus on winning the digital journey.

One leading fashion brand recently lost a dramatic number of in-store customers because their main competitors intercepted them along the brand’s digital journey. As a result, its store traffic quickly dried up because the competitor stole its customers at the source (the digital arena). That is the reality in 2020. Malls all over the world lack store traffic. To blame it all on the virus is myopic.

The COVID-19 crisis has compounded these challenges for brands in a dramatic way. As the largest country to emerge from the crisis, companies now have to focus on opportunities in China. While there, they will have to adapt to a new reality: The coronavirus has drastically accelerated the consumer shift to digital, which will further increase the pressure on companies to act quickly and decisively online. But very few companies are even close to China-ready.

Most companies prefer not to talk about it, and many will lose significant amounts of money trying to conquer China. Many Western brands think that a presence on Tmall or JD.com and some basic social media tactics will be enough. But China is by far the most digital country, and brands will need some of the most sophisticated digital tools and strategies to succeed there. Social selling, local content, local KOLs, and comprehensive CRM systems aren’t optional today — they’re a must for success. And all decisions have to be data-driven because gut feelings can’t be trusted. Sadly, few brands will get it right, which will risk their futures.

To meet these challenges, brands need to radically shift their thinking and focus on these critical pillars for success:

  • Rigorous brand equity building with purpose. That means intriguing storytelling for a millennial-driven, digital world.

  • A different focus on digital leadership. They need to play to win in digital instead of just showing up.

  • Drastic optimization of the customer journey to provide extreme value for sophisticated young consumers.

For luxury brands, urgent aggressive, uncompromising actions have never been more crucial. The world will continue to move faster and faster. Is your brand nimble, humble, and decisive enough to survive?

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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What Are China’s New Market Demands After COVID-19?


On June 18, JD.com celebrated a milestone of 17 years in business with its Grand Promotion sales event. According to the e-commerce giant, the occasion represents a “pulse check on consumption in China” over the first six months of 2020. Since the first half of the year was defined by unexpected turbulence, investors and retailers are turning to JD.com to help them understand the direction of the market for these upcoming months. Considering the significance of the date, JD.com organized a media event on June 12, where the company’s top executives discussed future market trends and current outcomes post-COVID-19.

JD’s consumer knowledge reinforced the belief that shoppers now have different needs within their distinct consumption phases. For instance, a report by JD Big Data (a market research body of JD.com), shows that during the lockdown in January of this year, sales of fresh food increased by 215 percent, vegetables by 450 percent, and pork/beef/poultry/eggs by 400 percent year-over-year.

During February, consumers turned toward baking supplies, investing in baking tools (up 332 percent year-over-year), food containers (332 percent year-over-year), and chopping blocks (139 percent year-over-year). And during China’s work-from-home phase, sales of audio/video-related equipment increased nearly 20 times over the same period during 2019.

But the month of March brought new changes in consumption patterns because of the nationwide resumption of work (the demand for office supplies increased by 57 percent, month-on-month, for instance.)

With a national holiday and the cancelation of the country’s strictest travel-controls, May started on a positive note, offering ideal conditions for retail spending. These favorable conditions supported a domestic consumption boom, and online consumption increased by 45 percent year-over-year. Some sectors registered stellar records for this period. For example, sales of outdoor items grew by 210 percent, home devices by 140 percent, and appliances by 100 percent month-over-month.

Meanwhile, it’s worth noting that the “consumption upgrade” trend that emerged a couple of years ago is still going strong. But the COVID-19 pandemic has forced shoppers to transition more quickly to online buying, and e-commerce has further improved its dominant position. Now, China’s “return to work” phase has propelled this sustained consumption recovery.
 But can Western businesses take advantage of these changes — and how?

Western brands that want to extend their footprints in China need to pay attention to these trends and develop products and services that the market is demanding. For example, JD.com’s Yuchuan Wang highlighted how sales of disinfection and sterilization products surged during China’s “return to work” phase. Sales of hand sanitizers and disinfectants grew by 112 percent year-over-year and 254 percent month-over-month. And because of the COVID-19 epidemic, hand sanitizer sales increased 2.3 times, and disinfectant sales increased over 8 times year-over-year.

Sales of hand sanitizers and disinfectants grew by 112 percent year-over-year and 254 percent month-over-month. Source: JD.com

Some brands will understand the shopper’s fear of contamination, so they’ll propose unique solutions to safeguard the wellbeing of the consumer. In the US, fashion brands manufactured face masks from cloth textiles for healthcare workers. In the European Union, LVMH and Bulgari produced hand sanitizer, and Kering announced a donation of $1 million to the Centers for Disease Control and Prevention (CDC) Foundation to support healthcare workers in  America.

Many other industry players have also engaged in COVID-19 relief campaigns. These initiatives humanize the brand image and boost positive customer engagement, but they can also turn into a lucrative business model that offers a surprising revenue stream. “The economic benefit this has brought to brands has helped weather the very uncertain storm that has been this pandemic, providing some with uninterrupted cash flow,” said Forbes contributor Rebecca Suhrawardi.

The pandemic fears have also helped industry leaders that boast products and services with minimal human-to-human contact. For instance, JD.com reported that sales of electric bikes increased by 638 percent year-on-year, and sales of adult hoverboard scooters increased 147 percent in that same period.

The acceleration of online education is another byproduct of this pandemic. Students were isolated at home for months since most educational institutions closed their doors. The transition to online wasn’t a smooth process, but China was better equipped to deal with it than the rest of the world. With the rise of online learning, brands had a unique opportunity to build meaningful relationships with consumers and create new and more relevant identities.

Lastly, the “consumption upgrade” trend can be seen in growing sales for products such as high-end home gym equipment, luxury items, and large home appliances. The JD Big Data Research Institute highlights how the transaction volume of large exercise machines like rowers, elliptical trainers, and treadmills increased more than 133, 91, and 96 percent, respectively, between April 1-6 year-over-year.

No longer content having only small and portable exercise equipment like pullers, dumbbells, yoga gear, and jump ropes, “consumers are gradually tending towards buying more professional, large-scale fitness equipment with unit prices of several thousand yuan, and even as high as nearly 10,000 yuan,” according to JD.com’s Ella Kidron.

And during the period between April 13-18, the transaction volume of large home appliances increased to over 200 percent as compared to 2019.

The COVID-19 pandemic has disrupted consumption by shifting consumer priorities toward new product lines and services. However, some industries have moved fast to overcome the negative shock and have transformed this disruption into a unique opportunity. With consumer confidence running high, the “return to work” phase is recalibrating the demand for various products. But businesses shouldn’t look at this pent-up demand as their full-blown market salvation. Yes, consumers are returning to spending, but they are only buying products that fit into their current reality. And that, unfortunately, means some products just aren’t going to be viable in the post-COVID-19 era.





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