Will Post-Pandemic Markdowns Hurt Luxury Brands Long-Term?

In today’s new normal, luxury houses face a dilemma: Should they make cost-saving, short-term business decisions by discounting goods or defend their brand images for long-term sustainability? The answer is complicated.

When screenshots of offerings from the Belgian luxury brand Delvaux priced at 60-percent off — as seen on the French flash sales site Veepee — began circulating on Chinese fashion accounts in late July, an avalanche of complaints flooded comment sections like “Isn’t this the Belgium version of Hermès?” and “Do they know this flash sale is going to hurt all their clients here?”

Over the years, Delvaux stood for exclusivity and prestige in wealthy Chinese circles, with many believing that the brand was the discreet luxury choice of European royalty. It wasn’t uncommon to hear stories about people spending tens of thousands of dollars on leather accessories just to earn the right to acquire the brand’s IT bag: the Brilliant.

But then, Delvaux held a heavily-discounted flash sale on Veepee, with its logo placed right next to a mass-market beauty brand known as NYX. Although the event was only available on that one French site, it has had a ripple effect among China’s luxury buyer community. This incident begs the question: Will the luxury market face a post-COVID markdown crisis?


Delvaux’s flash sales on the French site Veepee were heavily-circulated on Chinese fashion accounts on Little Red Book and Weibo. Photo: Post screenshot.

Thus far in 2020, a series of radical moves from established luxury houses meant to entice China’s mass-market audience has raised eyebrows amongst the country’s high-end spenders. In April, Louis Vuitton became the first Western luxury brand to hold a livestreaming sale on Little Red Book, but most who viewed it said the show looked “cheap.” In June, Dior surprised many by opening an official account on the Chinese Gen-Z site Bilibili after opening one on Douyin (the Chinese version of TikTok). Over just a few months, almost all of luxury’s big names from Chloé to Coach have attempted to cash in from China’s livestreaming opportunities — although most found a lackluster response from their core audiences.

Are luxury brands risking their names by dipping too far into the mass market, which allows them to make immediate sales but forfeits their long-term brand appeal? Now, let’s take a look at some of the most pressing issues to emerge during this luxury identity crisis via China’s online fashion voices.

First of all, context matters. To an industry that sells dreams — not just products — aspirational image-making and narratives are what inspire top-end shoppers in the first place. So when Louis Vuitton’s livestream was broadcasted in front of a bland, tradeshow-style background, it was an instant blow to the brand’s true admirers. The ensuing problem for Louis Vuitton is twofold. Not only did its set look inexpensive, but it also reminded Chinese shoppers that the legacy brand’s livestreaming sales did not differ much from livestreams that sell cheap, non-branded products.

“For a long time, we were used to aspirational brands that invested heavily in communication channels and used the world’s top resources to make us say ‘wow.,’” wrote influential fashion blogger @Gigi的时尚现场 in a WeChat post. “Whether it’s through TV, magazines, or online, fashion never fails to deliver aspirational beauty. But now, one bad livestreaming session could drag [Louis Vuitton’s] image off the cliff.”


Louis Vuitton

Louis Vuitton’s first livestream on Little Red Book was accused of looking cheap. Photo: Platform screenshots.

Next, an inconsistent pricing strategy in the digital age is bound to provoke consumer complaints. When Chinese shoppers spotted Delvaux’s discounts one Veepee, they also found that the brand was selling those same items at their full listed prices on its Chinese flagship store on JD.com.

Deal-savvy Chinese shoppers diligently conduct price comparisons across sites and even countries. So if one brand puts an item on sale on one site, this community knows to ask daigous to find them the best bargain. But to seasoned luxury consumers who buy for the sake of exclusivity, any discount is an act of betrayal.

One explanation for luxury brands’ increase in discounts can be attributed to their excess inventories. According to a June report from the consulting firm BCG, total sales in the jewelry, watch, and ready-to-wear categories are expected to drop between 35-50 percent this year and likely won’t reach pre-crisis levels until 2023. This grim sales forecast means that excess inventory, which has led to reckless discounts as a way to salvage margins and survive this moment, is causing long-term brand damage.

Denis Morisset, professor of luxury marketing at Essec Business school, told Jing Daily that “in the case of Delvaux [employing big discounts], we are talking about two different online channels. One is a full-price channel, while the other one is a flash-sales channel. Luxury brands shouldn’t make flash sales regularly, but in times of crisis, brands and retailers need to face the excess inventory problem.” To the majority of brands that don’t have the image power to hike up prices the way that Chanel and Gucci do during a pandemic, discounting is a more-than-understandable business strategy. “At this very moment, many brands have excess inventory in the West and clients in China,” Morisset said. Similar issues, he added, were also prevalent after the 2008-9 market crisis.

But lastly, it is a loss of prestige that could ultimately kill a brand’s future. When it comes to ultimate luxury, the public perception and mainstream narrative of the brand’s status still rule in China.


In the TV series “Nothing But Thirty,” the protagonist, Gu Jia, found herself cropped out of a group photo simply because she was carrying a Chanel bag and not an Hermès. Photo: Weibo

In the now-trending TV series “Nothing But Thirty,” the episode where the protagonist, Gu Jia, was cropped out of a group photo because she was carrying a Chanel bag instead of an Hermès became an online sensation because this scenario resonates with many fashion fans. In the series, Gu Jia’s Chanel bag, despite its status as a limited-edition piece, doesn’t conform to the norm of a wealthy wives’ club, which is a Hermès bag. The protagonist is excluded until she eventually gets a limited-edition Hermès bag. Although this is a fictional account, the episode realistically reflects that, when it comes to top luxury, public perception trumps personal preference.

The same psychology applies to crisis discounting. “I was enraged when I saw the same Delvaux bright pink mini bag I bought in the store with a 40-percent off sign on Veepee,” said Jilin Zhang, a Hong Kong-based finance analyst and luxury aficionado. “I will not buy that brand again. From now on, it is Hermès or nothing.”

“Exclusivity will be even more paramount than before,” said Kering’s CFO, Jean-Marc Duplaix, to analysts in April. As pre-crisis level consumer confidence and in-boutique interaction still feel unlikely for the duration of 2020, brands must again consider how to approach a digital format, so they can balance their short-term business needs with their long-term image concerns.

Morisset had a few bits of advice on what these brands could do differently. First, refocus on existing clients. “The real, existing clients are looking for exclusive, one-to-one relationships,” he said. “To them, these digital moves focused on sales are not relevant.” But on the other hand, brands should use digital formats like livestreaming to engage with the occasional client or newcomers to the brand.

Next, they should avoid obvious and superficial sales practices. On Moriset’s Bilibili luxury business channel, he mentioned that luxury livestreaming sales events have yet to find a way to differentiate from the mass-market sales in China because they’re too sales-oriented. Maintaining a certain quality of engagement is the key. “Turning the brand’s best staff, who have the most knowledge and skills, into internal KOLs rather than using third-party KOLs, could be a way to create inspiring livestreaming sessions,” he added.

Source link

Mulberry’s New Marketing Approach in China Might Not Be Enough

Weibo, too, has lost cachet in the luxury realm in recent years as digitally savvy brands have experimented with newer apps that appeal to the millennial and Gen Z demographics, among them Douyin (TikTok), Kuaishou, Little Red Book (Xiaohongshu), and Bilibili. Like its closest Western counterpart, Twitter, Weibo is fraught with bots, fake followers, and illusory influencers, making positive ROI increasingly difficult for brands. And in terms of catching the consumer where they live, livestreaming (often e-commerce-enabled) has become the hot topic for luxury in China, with even traditional, hard luxury brands getting in on the game.

What all of this means is that the concept of a marketing mix for China has become immeasurably more complicated over the past few years, with some luxury brands trying a little bit of everything to see what works — a touch of livestreaming by key executives, celebrities, and sales staff, some content-focused collaborations with an “it-brand” local partner, and a brand integration or two on a short video series.

Mulberry, having pivoted away from ready-to-wear and footwear in favor of its leather goods collections, may find it difficult to move the needle in China even with its agency-led efforts if too much emphasis is placed on Weibo and WeChat (if no other reason, because they are two relatively old, very busy platforms jam-packed with leather goods brands). If too little focus is placed on exploring which platforms are being used for luxury discovery, education, and ultimately purchase by the target Mulberry consumer in China, the brand may get lost in the noise.

What has also become increasingly clear in the Covid-19 era of luxury marketing in China is that the consumer now demands a content-commerce approach by brands that entertains as well as shows off new collections or drives to e-commerce. As we have seen time and time again in 2020, marketing avenues such as livestreaming work best for luxury brands when they incorporate the entertainment roots of livestreaming into the mix. Based on what we have seen from recent creative luxury brand films in China, entertainment is generally becoming indispensable in the luxury marketing toolbox.

If Mulberry’s new approach to China can go beyond the standard approach of getting Weibo or WeChat influencers or celebrities to hawk their leather goods, and take a more deliberate (and entertaining) approach that considers newer platforms and content-commerce marketing strategies that are working for other brands, Mulberry may see a more sustained bump in interest that could translate to real sales.

That is, if current U.K.-China tensions don’t lead to Mulberry being included on some kind of boycott list.

Source link

What Would a Possible Antitrust Investigation into Alipay and WeChat Pay Reveal?

What Happened: As reported by ReutersChina’s top antitrust agency is looking carefully into whether to launch a probe into the country’s largest online payment platforms, Alipay and WeChat Pay. The central bank argues that the two players have used their dominant position in the market to stamp out the competition.

Jing Take: Reuters rightfully highlights that an investigation into possible anti-competitive behaviors would moderate the fervor for Ant Group’s planned dual listing in Hong Kong and Shanghai. Furthermore, if the State Council antitrust committee goes ahead with a probe into Alipay and WeChat Pay, it will send shock waves through the landscape of digital payments. And this is an especially dangerous move in a time when the COVID-19 pandemic has hit SMEs the hardest, and individuals are bracing for a recession. In a cashless economy, digital payments have become a financial lifeline for many traditional actors, and they helped intensify competition in various industries. In retail, this healthy rivalry has translated into creating greater value for the customer with competitive pricing. However, regulating digital payments could also curb online shopping. Considering that this move would come at a time when brick-and-mortar sales are declining because of ongoing concerns over the virus, retail could to take a double hit. Plus, the timing for the probe could have been better. The Trump administration could take advantage of this move and target Chinese digital wallets under US antitrust laws.

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.

Source link

How To Win Over China’s New Investor Class

For the first time in a decade, foreign investment in China has surpassed outbound investments. Compared to previous years, the first five months of 2020 saw Chinese M&A activity collapse, according to data from the law firm Baker McKenzie. Chinese entities, once eager to snap up what McKinsey & Company termed in a recent article as “rare gems,” have been mostly quiet on the acquisition front.

Living and working with the uncertainty of COVID-19 is now a strange fact of daily life, and just as our lives have had to rapidly adapt, so too have industries, economies, and countries. Yet it is China, where the pandemic first hit and forced companies to stop production, that’s now relatively back on track. And now, it’s clear that this period has only accelerated China’s already advanced digital landscape.

Mark Galasiewski, chief equity analyst for Asia and emerging markets at Elliott Wave International, agreed, saying, “The surge to new 52-week highs in June 2020 in shares of Chinese consumer companies suggests that [China’s] setback will be short-lived. We think the upturn in confidence represents the early stages of a secular trend that should continue for many years.”

Furthermore, China’s GDP is up, and its domestic companies’ shares are stable, proving that the country is bucking the negative pandemic trend. Meanwhile, the government issued guidelines earlier this year to encourage and stabilize foreign investment, even though tensions between China and the UK and the US are still escalating. And as more local companies continue to delist while IPOing at home, China appears to be on a reverse globalization trend.

But China’s consolidation efforts isn’t good news for the international fashion companies and brands that have benefited from Chinese support over the last decade. Wendy Yu, the Founder of Yu Holdings (which has invested in brands like Mary Katrantzou), has been approached by various companies and organizations in distress due to COVID-19, but all deals are currently on hold.

Yu told Jing Daily that her company has had to make a universal decision not to step in and get involved, as “it would be very difficult to choose between helping one business over another in these challenging times.” And now, with investments on hold, companies hoping to court funders should know that impact-focused deals are pushing China investment requirements to new heights.

Sustainability: a brand’s new saleability

Aside from the pandemic, Yu cited issues surrounding corporate responsibility (including the seismic shifts in the fashion world) as one of her main reasons for caution. In fact, many investors interviewed by Jing Daily expressed an interest in addressing corporate social responsibility and making companies more environmentally accountable.

Responsible investments are on the rise in China, as well. A research report from UBS titled Return on Values suggested that, along with Brazil and the UAE, investors in China are more likely to have sustainable investments, and the pandemic has only reinforced this trend.

Patricia Chu, a co-founder of Mana Impact Partners, always looks for a social and environmental impact as well as a financial return when making investment choices, both inside and outside of China. Chu explained how the outbreak is forcing people to be more conscious of operations in certain sectors, product waste, growing traction on B2B platforms, direct-to-consumer concepts (especially for food), and e-commerce. “It’s still very early, and COVID-19 has many people thinking about what is valuable and important in life: being more conscious about their carbon footprints by doing things online as much as possible.”

Aside from business speculations in circular and regenerative systems, the climate, and aquaculture, Mana Impact Partners has also recently turned its eye toward the fashion world. It currently invests in the German company Alga Life, which produces textiles from microorganisms, and it’s eyeing Pinatex in the Philippines and a Microtech company that uses mushrooms to make leather-like fabrics. “There is definitely a responsible-consumption angle here in China, and while I don’t know of too many existing VCs that are specifically looking at sustainable fashion or consumption, it’s a new area, and it’s definitely picking up,” Chu added.

In its report, Managing the Next Decade of Women’s Wealth, the 2020 Boston Consulting Group (BCG) found that female investors, in particular, will push this to the fore. “Women do not just want to boost the bottom line,” it states, “they also want to help develop the communities we live in by investing in education, health care, and our planet.” Yu’s upcycling brand, Bottletop, is a good case in point: It produces artisanal products designed in the UK and handcrafted by workers in Brazil who receive over 45-percent more than Brazil’s average industry wage.

How investors evaluate tech in a tech-flooded market

Despite some recent virus outbreaks in Hong Kong and on the mainland, China is still poised to emerge from the virus in better shape than other countries, and investors are undoubtedly looking for brands that can weather the storm. From cash flow and corporate governance to community ownership, there are many ways in which brands can look to become more investable.

According to Angelino Yao, a disruptive investor and the founder and CEO of Heels & Yield, China’s pioneering tech sector is where a lot of future investments will go. “Brands can have creativity and content, but in China, the platforms make money,” he said. “They have to adapt to keep up, and the ones that have the best user experience will make the most money. China’s tech shares have been some of the best-performing all year, with many of these powering China’s digital advancement.”

Considering how tech has enabled brands to defend themselves against fashion’s weaknesses during COVID-19, investors are now actively seeking out brands with either tech already embedded or in the works. Yao continued, saying, “From an investor point of view, we look for companies that are staying ahead and have invested in tech already. China has accelerated trends in e-commerce quickly during this time. Take livestreaming, for example, where we can see people and try on clothes, so it’s about being ahead of the curve.”

In fact, we’ve seen the downfall of many brands during the pandemic who weren’t early tech adopters in China as well as missteps from luxury brands trying to tackle new tech, such as Louis Vuitton’s failure with livestreaming. But aside from shaping these fashion trends, China’s local tech companies are also drawing investors’ eyes. Mana Impact Partners’ Chu watches international interests but is also eyeing local tech opportunities. But that doesn’t mean they are necessarily attractive.

“There’s a lot of technology that can be leveraged [in China], but the problem is mainly with the valuation of the companies,” Chu explained. “Is it good value? The market, in general, is at a very early stage with high valuation when compared to Southeast Asia. The other [problem] is around finding them since we aren’t physically based there. It’s about finding the right partners who can be on the ground and share similar values and provide ongoing support.”

There are still fundamental requirements, even for new investors

Despite the current situation, the younger generation in China is looking to invest, the brands that survive this crisis will benefit in the long term. A new wave of millennial investors are looking to make their mark outside of what their parents have done, and they want to nurture their passions.

And, while it might take a miracle to secure investments right now, there are ways that brands can help their situations. Even though investor profiles are always evolving and seemingly getting younger, the basic business requirements for brands haven’t changed.

Janice Yau Garton, a senior associate at DLA Piper who has equity in the sustainable Hong-Kong brand R-Collective, said that both pre- and post-pandemic success is about “coming across as organized… and proving the business case.” Companies that can show they’re making impactful choices in their supply chains and materials and can slow down the consumption cycle to avoid overproduction will make for more viable and impactful investments.

Garton’s advice was to “start as you mean to go on — think 15 years down the line from the get-go.” These words are especially relevant to young startups and creatives who are struggling right now, both inside and outside of China. And despite the uncertainty, Garton is sure there are investments to be had. It’s about “networking and getting introductions, and it’s a slow burn,” she added.

Until then, Yu said that fashion companies that “are digital and agile, have a strong identity and purpose, own cash reserves, and have a good operational team will be the most relevant ones.” But sometimes, it simply comes down to luck. And, as Yu stated, “The right time and right place can be very defining in the fund-raising process.”

Source link

How JD.com Leveraged New Technologies To Overcome COVID-19

Over the past few years, China’s e-commerce juggernaut JD.com has become the quintessence of the smart supply chain. From its multi-million dollar Global Supply Chain Innovation Center and fully automated warehouse in Shanghai, through to its 5G-powered smart logistics park (the first in China), the e-commerce platform has ensured that its 360 million active users have direct access to hundreds of millions of items.

According to Supply Chain Digital, JD.com actually has the largest fulfillment infrastructure of any e-commerce company in the world, operating an extensive warehouse-network of around 600 warehouses, with a total of 15mn sq.m. Equally important, because of JD.com’s smart supply chain capabilities, the group has achieved a number of reductions. 

A recent company press release outlined a trimming 37 day off inventory turnover days, cuts of 23% to invalid runs in picking areas and a 10% depletion in long and short-haul transportation costs which has been combined with a 25% improvement in delivery performance. Furthermore, the press release stated that brands which partnered with JD.com have also seen a jump in operational efficiencies. 

Swiss multinational food and drink company Nestlé is a case in point — who improved the demand forecast accuracy from 45% to 85% for products sold on the Chinese e-commerce, increased in-stock service level from 73% to 95%, shortened order lead time by 50% and shrank delivery lead time from 5-8 days to 2-3 days.

While these figures are impressive, the COVID-19 outbreak triggered a new reality. According to the Harvard Business Review, “The pandemic has exposed one of the major weaknesses of many supply chains: the inability to react to sudden, large-scale disruptions.” And the resulting turmoil has generated “calls for companies that had offshored production to Asia (and China, in particular) to bring it back home.”

Indeed, the COVID-19 pandemic has wreaked havoc on global supply chains. In times of crisis, optimizing operations to ensure that workers respond in real-time is the ultimate prerogative. The World Economic Forum said that, “Digitizing records will make supply chains more resilient to future shocks.” Based on this premise of a major disease outbreak ravaging the global supply chain, JD.com’s performance is a strong benchmark to scrutinize. 

During the pandemic it pushed the limits of its business optimization solutions by delivering 120 million products including 160,000 tons of rice, grains, meat and vegetables to its consumers. In addition, by March, the e-commerce company had transported over 6,000 tons of medical supplies and daily necessities to Hubei.  

In fact, thanks to its digital capabilities and advanced technologies, JD.com quickly moved critical medical supplies from their production facilities to distribution centers: it developed a supply chain management platform which made emergency supplies such as masks, goggles, and protective clothing easier to manage, distribute and trace

JD.com has always been a talent factory. According to its corporate blog, as of December 31, 2018, the company employed 16,380 research and development professionals to “design, develop and operate its technology platform, develop and post content, and improve the AI, big data and cloud technologies.” 

During the pandemic, the company turned to autonomous delivery robots and drones to address the last-mile delivery needs of consumers in Wuhan — meaning it shipped crucial medical supplies without risking the health of delivery staff. This also lessened the blow of the pandemic on the company’s operations. 

The automated warehouse that integrates AI, deep learning, and image recognition, with over 70 varying degrees of automation, allows for an uninterrupted flow of goods even in challenging times and given the lack of physical content required, the entire process also reduces the risk of infection.

But JD.com also ensured that thousands of offline stores in hundreds of cities could deliver during the pandemic. Marketing powerhouse WARC reported that it’s Omnichannel Fulfillment supply chain innovation program proved a lifeline for SMEs. WARC explained it as follows: “A consumer places an order online, the platform matches the order with offline supply closest to the customer in real-time, and then arranges for a courier to deliver to the consumer along the most efficient route.”

To sum up, there’s been a notable difference between the group’s capacity during the SARS outbreak and now. “When SARS occurred 17 years ago, JD.com was a very small company and we personally experienced then just how devastating an epidemic situation can be to both businesses and the people’s lives,” company CFO Sydney Huang told the media outlet Supply Chain Dive. “That’s why today, JD will do everything we can within our power to serve our customers and as well as society.”

What China’s second largest e-commerce giant has shown at this time is its ability to continuously innovate. Dramatic events such as these can bankrupt even the most successful businesses and bring entire economies to a standstill. While several multinational corporations have seen their profits and sales cut during the pandemic, JD.com has transformed this challenge into a business opportunity — safeguarding the health and safety of its employees and customers in the process.

Source link

China Gets Closer to Supply Chain of the Future

What happened: China is inching further forward in the battle to create the supply chain of the future. The latest advancement comes with the announcement that e-commerce giant JD.com has made a strategic investment of $100 million in one of Asia’s oldest supply chain management companies, Li & Fung. This news follows the delisting of Li & Fung from the Hong Kong stock exchange in May. The latest speculation is based on fresh shares issued at $0.16 each and the Fung’s will continue to hold 60 percent of the voting shares, thus retaining control of the company they founded in 1906.

The Jing Take: As one of the earliest companies financed solely by Chinese capital to export Chinese manufacturing to the west, Li & Fung made its fortune as the middleman between the two. However, even before the outbreak of COVID-19, the company was showing signs of difficulty as it adapted to China’s rise in e-commerce platforms and speed of digitization. The coronavirus has reinforced even more clearly how inflated the global retail supply chain has become. Simply put, now it must streamline, becoming more demand-driven, customer-centric, and automated. Despite rising US tensions and the pandemic’s impact on an already disrupted retail sector, the execution of this latest coterie by Li & Fung is a perfect example of why China is winning right now: traditional companies are unafraid to seamlessly integrate digital into their core infrastructure.

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.

Source link

Next-Level Livestreaming: How Luxury Brands Can Profit From China’s Top E-Commerce Trend

Introducing the inaugural Jing Daily x Content Commerce Insider white paper

E-commerce livestreaming has taken off over the past year, and China’s recent coronavirus experience has cemented its importance as a critical tool for brands to stay connected to consumers.

But in an increasingly crowded marketplace, how can high-end and luxury brands distinguish themselves from the scores of others? With engaging content that gives audiences more to look forward to than a host describing items in details and urging sales through discounts. 

Download Jing Daily and Content Commerce Insider (CCI)’s white paper Next-Level Livestreaming: How Luxury Brands Can Stand Out to Drive E-Commerce Sales to discover the evolution of e-commerce livestreaming in the Chinese market.

In the report, we break down the major Chinese platforms and their prospects for growth, and present luxury brand case studies and best practices. 

For access to the full report, “Next-Level Livestreaming: How Luxury Brands Can Profit From China’s Top E-Commerce Trend,” please click here.

Source link

LVMH, Kering, and The New Luxury Strategy Post-COVID-19

Both of the leading luxury groups, LVMH and Kering, released their half-year results last week. In both cases, the numbers were bleak, with revenues and profits falling by double digits.

According to Vogue Business, François-Henri Pinault, the chairman and CEO of Kering, stated, “Our results today underscore the extent of the disruption exacted by the pandemic on our operations.” Kering reported a profit decline of 58 percent year-on-year, and LVMH’s operating profit fell by 68 percent as its operating margin fell to 9 percent, which is exceptionally low for a luxury company.

Yet, these numbers come despite both brands showing dramatic growth in China. LVMH’s fashion and leather goods division grew in the country by 65 percent in Q2, and Kering did 40-percent better there while trending upwards in June. These numbers underscore how the luxury market is going through a tectonic shift, with few markets thriving and many in freefall.

China is outperforming all other regions by far, with an overall second-quarter GDP growth of 3.2 percent, which can be attributed to strong consumer spending after lockdowns ended. Meanwhile, the US and Europe had historically low GDP performances during the same period. The exceptional growth numbers for these two leading luxury groups in China — particularly for their fashion divisions — indicates how luxury fashion and leather goods have become important growth drivers for the Chinese economy, even outperforming the automobile sector (10.2-percent growth) during Q2.

Despite the positive growth in China, the global numbers for LVMH and Kering show that there has been an unprecedented decline in the European and North American markets. Luxury is accelerating a geographical shift toward China that was already underway. Travel retail, a critical revenue source for the luxury industry, has practically come to a standstill, and its recovery may take years. The absence of international travel between the continents has shelved all luxury purchases by Chinese residents in Europe and North America. The return of spending from outside China is part of what led to the market to shift, and this change will have a lasting effect as these consumer habits solidify over time.

But the lockdowns and the collapse of travel retail both have had other serious implications for luxury brands’ revenue and profitability. Many luxury brands had relied on entry-level items (often licensed) such as sunglasses, beauty care products, and perfumes as critical cash flow and profit generators. They had depended on these on-the-go buyers who were traveling for business and pleasure. The pandemic has shown us how fragile these dependencies can be and how quickly these cash flow generators can dry up.

Lastly, many luxury stores and boutiques all over the world remain closed, operate curbside only, or are experiencing significantly less foot traffic. A leading luxury mall operator in Asia told me recently about some new consumer behaviors across Asia. Instead of browsing in stores for hours, consumers now quickly go in and out, minimizing the time they spend in stores to reduce potential virus exposure. This change has led to fewer purchase occasions and fewer items bought per shopping trip. Since most brands are still overly dependent on physical stores, digital growth has yet to compensate for the loss of physical sales. And no one is sure when consumers will feel safe again.

Many of these first half impacts are temporary. I’m still positive about my forecast that the luxury sector will lead market rebounds post-pandemic. However, the shifts that we saw over the first half of 2020 will change the playbook for most luxury brands.

First, luxury brands must now be able to pivot fluidly between the physical and the digital realms. They need to be where the customers are and serve them in a way that provides a consistent brand experience, regardless of the touchpoint. While many brands have much better digital infrastructures now, the ability to operate at the same level across all touchpoints and tell a brand story consistently are major weaknesses that have accelerated many brands’ downfalls during this crisis and impacted their chances of rebounding after it. These are the top issues  I recommend that brands focus on immediately, and they must play to win. Just being somewhat digital is a waste of resources and a growth opportunity.

Second, luxury brands must reduce their dependencies on travel retail and licensed, entry-level items. In many cases, these licenses will erode brand equity if they aren’t managed properly, even in good times. But in bad times, they become a double negative.

Third, China will continue to outpace all other regions for luxury. I’ve reported in my Future of Luxury columns on Jing Daily that many brands don’t have a comprehensive China strategy, and even more lack the expertise, systems, and tools to be successful in China. A surprisingly high number of luxury brands burn cash in China, only to realize later that they won’t succeed. Success in China requires a meticulous go-to marketing strategy, mastery of local social media and social selling channels, a deep connection with key opinion leaders, and a relevant brand message for the Chinese market. If your brand doesn’t have a luxury value creation system that’s suitable for China, there’s no way to build a profitable and lasting business there. Far too many managers still underestimate how crucial these challenges are in the world’s most important luxury market.

LVMH and Kering are two of the best-managed and most experienced luxury groups, and both are home to some of the most admired leaders, designers, and talents in the luxury industry. Each group has demonstrated that they can manage their brands more successfully over time than most others. Therefore, the signals we’ve seen in their short-term performances thus far in 2020 are important for the rest of the industry. The disruption of the luxury industry doesn’t just continue — it accelerates. Brands that read to these signals with more precision and can anticipate changes with rigorous action will emerge stronger. Standing still, on the other hand, isn’t an option.

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

Source link

Will Virtual Livestreamers Replace Humans In China?

Virtual Livestreamer is the next highlight in Jing Daily’s new series, What Gen- Z Wants, which reports on the booming Gen-Z luxury consumer in China. The series analyzes microtrends and styles that are contributing to the empowerment of young Chinese fashion communities.

On April 20, virtual singer Luo Tianyi became the co-host of a campaign alongside China’s top livestreamer Li Jiaqi. Source: Youtube.com


Virtual Livestreamer

About the trend:

On video-sharing websites like Bilibili.com, content involving anime and virtual idols is proving particularly popular with Gen-Z audiences. Now, the trend is spilling over to mainstream livestreaming sites such as Douyin and Taobao Live. Over the last couple of months, e-commerce players seeking new ways to tackle COVID-19 have been tapping into this trend by collaborating with new and pre-existing virtual idols on these platforms.

In April, the virtual singer Luo Tianyi co-hosted a campaign alongside China’s top livestreamer, Li Jiaqi. By May, their second combined session generated almost 3 million viewers at its peak. The following month, a Japanese virtual idol and “vocaloid” — a virtual anime character that utilizes a synthesizer software for their voice — named Miku, who is arguably the most global and popular of her kind, joined Taobao’s live-streaming platform. During the 618 festival, Miku’s popularity surpassed even top celebrities like Wang Yibo on Alibaba’s platform, attracting over 10 million page visits and virtual gifts.

Additional context:

This isn’t the first time virtual livestreamers have made headlines in China’s mainstream news. The Chinese anime idol Luo Tianyi promoted the Huawei Nova 7 phone alongside actress Guan Xiaotong, and the Chinese video-sharing platform Douyin released its first virtual livestreamer, Momo Chan (默默酱), this past April.

Rooted in anime and Japanese idol culture, the first virtual idol, Lynn Minmay, dates back to the 1980s. She was a fictional singer from the animated film adaptation Macross: Do You Remember Love? and the first fictional idol to garner major real-world success. As holography and sound-related technology advanced, even more “fictional celebrities” were brought to life. They are largely popular with Gen Zers and have inspired Chinese interpretations of Japan’s original virtual idols. According to a report by iResearch, there are now 490 million Chinese netizens interested in ACG (anime, comics, and gaming) and 390 million with a targeted interest in virtual idols.

In 2018, CCTV recognized the impact of the creative medium of virtual idols and invited Luo Tianyi to perform a traditional Chinese song with famous Peking Opera artist Wang Peiyu. Source: 163.com

Why Gen-Z consumers like it: 

The fast pace of social media has made Generation Z highly beauty conscious, and the idealized appearances of virtual idols tend to fare well with younger audiences. 21-year-old Jerry Sun, an avid virtual idol fan, told Jing Daily, “Anime fans love the images of virtual livestreamers. Human livestreamers might have appearance issues once in a while, but ACG idols are designed to be flawless.” Sun noted that people over the age of 30 tend to hold negative attitudes towards ACG content, while Gen Zers often have a more diverse interest range and greater acceptance towards creative media.

What makes this trend significant to China’s Gen Zers is the combination of ACG culture and traditional Chinese art forms. Vocaloids such as Luo Tianyi own sound databases that tech-savvy Gen Zers can freely access, inspiring them to create content on websites like Bilibili.com. In 2018, China’s central television network CCTV recognized the impact of this creative medium and invited Luo Tianyi to perform a traditional song with famous Peking Opera artist Wang Peiyu. The collaboration sparked heated discussions, particularly among younger netizens. The post-90s generation, which was raised during a period of heightened nationalism and “cultural confidence” (a buzzword referring to the country’s rising cultural self-esteem), are generally more passionate about Chinese culture. The impact of this patriotism can be seen in online comments like, “It’s a tear-jerking moment to see ACG culture combine with traditional Chinese art forms, especially as this niche reaches mainstream audiences.”

In 2016, former Givenchy design director Riccardo Tisci designed a haute couture dress for Hatsune Miku. The gown included lace, tassels, fur, and Swarovski crystals. Source: Vogue.com

How luxury brands should approach the trend: 

Virtual idols have transformed from a niche interest into a global phenomenon, and they offer excellent potential to a fashion industry that has already birthed some examples of their potency. Examples of cross-genre collaborations between luxury houses and virtual idols include Givenchy’s haute couture dress for Hatsune Miku and the checkerboard two-piece Miku wore for her first vocaloid opera, The End, which was designed by Marc Jacobs and Louis Vuitton‘s studio team.

According to Miro Li, founder of the Chinese consulting company Double V., luxury brands that wish to monetize the virtual livestreamer trend must be creative when evaluating their marketing campaigns. That’s particularly true for companies promoting designs that are available to buy and wear in real life but will be modeled by virtual idols. “Instead of merely including products in the livestream, brands should design limited edition items for the virtual idol,” Li stated. “Otherwise, it’s no different to using a human livestreamer.”

Moreover, before launching any campaign, brands must first identify their target consumer and carefully match it to the virtual idol’s fanbase. According to Li, female virtual idols like Luo Tianyi and Miku target male Gen Zers, and they work well with electronics or brands that sell figurines, gaming supplies, or other ACG merchandise. Meanwhile, most male characters, like those in the Chinese dating simulation game “Mr Love: Queen’s Choice” (恋与制作人), target female consumers and are more suited for beauty, fashion, and food-related companies. The aforementioned dating game has already collaborated with the personal care company Lux on a product launch livestream, which resulted in $714k in sales. In fact, this partnership laid the groundwork for more companies to work with virtual livestreamers in China.

The well-known Chinese dating game “Mr Love: Queen’s Choice” (恋与制作人)” collaborated with the personal care company Lux. Source: adquan.com

But collaborating with virtual livestreamers, as opposed to influencers like Li Jiaqi, is posing its own set of complex challenges. Virtual livestreamers come without physical location limitations, time restrictions, and — most notably — don’t make mistakes. But Li has found one big flaw with virtual presenters. “It’s hard for them to relate emotionally to audiences,” he said, “especially when they cannot try on the product endorsements.” Additionally, there have been pricing roadblocks when linking a product to these idols. Luo Tianyi’s fee, for example, is much higher than those of top livestreamers or celebrities.

Nevertheless, livestreaming continues to gain traction in China, and virtual livestreaming is the next dynamic step. Though it’s still largely unexplored ground, virtual idols’ usefulness in creating a fresh experience for consumers is guaranteed. “In short, I don’t think virtual livestreamers will replace humans,” Li added, “but with the development of new technology, we will definitely see more of them in the future.”

Source link

Hong Kong’s ‘Third Wave’ Of COVID-19 Stalls Its Recovery

What happened: Hong Kong is currently experiencing a spike in COVID-19 infections, as the city reported 121 new cases on July 31. It is the tenth day in a row the city has registered 100-plus new infections, and this third wave of COVID-19 infections is showing no signs of easing up. Amid these record-breaking infection figures, the government has reinstated a full-day ban on dining in restaurants. The BBC reported that Hong Kong’s government warned citizens that its hospital system could face collapse, and it has postponed September’s parliamentary elections by a year, saying it was necessary during this rise in coronavirus infections.

Jing Take: Despite sharing a border with the mainland, where the first cases of COVID-19 were reported, Hong Kong initially kept its tally of infections low and was able to avoid the extreme lockdown measures introduced in other parts of the world. But now, the city is grappling with its third wave of infections. Alongside the virus, Hong Kong is also facing an additional dilemma, as its economy contracted by 9 percent year-on-year during the second quarter. The Wall Street Journal reported that two of Hong Kong’s biggest landlords disclosed lackluster results at the end of the second quarter. Losses at Wharf Real Estate Investment Co. sank from $900 million (HK$7 billion) to $574 million (HK$4.45 billion) year-on-year for the six months ending on June 30. Meanwhile, Hang Lung Properties Ltd. dropped from a booming $454 million (HK$3.52 billion) a year ago to $328 million (HK$2.54 billion) today.

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.

Source link