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Jun
2015

2014 the year of the Chinese luxury individual

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As evolutions go, China and its people have made quantum leaps forward over the past few decades. Putting aside the money the country has generated, its ability to cope with such huge changes in such a short period of time are due to the political system, and importantly the ability of its people to be flexible and to cope with constant uncertainty. This last point is one that Chinese people have grown up on; their parents concern that doom and gloom is always round the corner, so they should be ready for it.

Clearly doom and gloom hasn’t been anywhere to be seen for some time, but that readiness to handle anything and adapt has been an asset to the people. For western nationals, the lack of what appears to be structure and logic in China can be utterly frustrating; the way things are done ‘randomly’, and how people change their minds instantly and plans have to be written and re-written overnight. Unfortunately it’s the norm and we who work here have had to learn to adapt our own ways around the culture and live with short-term Chinese visions.

Understanding these basic cultural mannerisms and their origins is of course a necessity for anyone running a brand in China or wanting to sell to or engage with Chinese travelling overseas. Like many nationalities the Chinese have their own peculiarities, it’s just that they are perhaps, more peculiar than most. If therefore, as almost every brand claims, the Chinese consumer is one of their most important, developing a specific engagement activity localised for them has the potential to be a profitable activity.

Evolution of the Chinese luxury consumer

Over the past 12 to 18 months, luxury consumer attitudes and habits have been rapidly evolving in China, at a pace that retailers have struggled to understand, let alone match. Just when they thought that this consumer group was homogenous, they began to separate out and demonstrate a range of new and different attitudes, there was no longer one group to communicate with, but many. The slowing of the economy and subsequent slowing of consumer confidence gave buyers the chance to consider in greater detail what to spend their money on, and importantly why to spend it; something they had not paid a great deal of attention to in the past.

The trust they had in the circle of friends and associates didn’t change, and a safe call was to buy products that those around you thought were OK. But as we have seen, tastes became fractured and brands that had in the previous few years been the darlings of all, lost their attractiveness to those with greater knowledge, while they remained top of the list for the less experienced. Evolution of consumer attitudes was taking place.
With the evolution came greater personal confidence and a faith among the more experienced consumers that they were both capable of making their own choices and had the right to be individualistic if they chose to be. These people were not just going to buy from a brand because of its name, and whichever brand they did decide to go with, may or may not have a say in what they finally selected. So will the evolution continue, and what will it mean in 2014 to brand engagement opportunities and strategies? If we consider the physical retail environment, many brands are faced with fewer walk-in customers and lower conversion rates on top of the rapidly changing personal attitudes to luxury spending.

Engaging with the individual in 2014

2014 will bring with it a further rapid evolution of the individual luxury consumer in China. Some may say that evolving further will make this consumer group similar to their counterparts in the developed luxury markets of the world, and to some extent they would be correct. But in China, western rules and expectations are often turned on their head, making profiling and anticipation of buying behaviours less predictable. So what will be the key aspects of engagement for luxury brands with the Chinese consumer next year?

It has already been said that consumers have, and are becoming more individualistic and more confident. They are not expecting to be deluged with mass communications and expect brands to treat them differently than they have in the past. One of the greatest challenges for luxury brands over the past year has been building their knowledge of the customer via a CRM system so that they could treat them in a more individual manner, this was principally because until late 2012 they had neither the time or in fact the inclination to focus on the task.

To compound the problem in 2013, the Chinese consumer now knows their value to the luxury industry and is far less willing to provide personal information without very strong justification. Brands need to deliver consumers something special in order to establish a level of trust and a demonstration of respect that they feel they should be afforded. The slowing of the economy has also brought with it the time for consumers to think about their overall lifestyles and a realisation that living in China at such a hectic pace is not healthy or in fact enjoyable. Many have chosen to spend more time overseas to benefit from clean air and more relaxed environments.

Handling the new Chinese luxury consumer

So in 2014 luxury brands must be interactive and experiential, delivering lifestyle value, and giving their customers a chance to have a say in the brand and express an opinion. Many Chinese may not in fact be confident to actually do this due to engrained cultural habits, but they will however, express their opinions and pleasure (if they enjoyed being given the opportunity) within their own circle; an absolute necessity for all brands to acknowledge.

One subject regular reported on by us among others is that luxury shopping malls and retail stores in China are often clean and beautifully presented, but very clinical. There is often no visible life in a store; a lack of warmth or the human attraction for shoppers to want to be there and this issue must be rectified. This doesn’t mean that some malls haven’t put on some very engaging activities to increase footfall, they have. But for most retailers, there are rules and limitations of space in their stores that prevent a similar approach.

Given the current and more conservative nature of Chinese shoppers, retailers need to introduce concepts to increase footfall and interact more engagingly with those who do step across the threshold, the result being greater brand loyalty and actual sales. Big glitzy events have their place and worked some time ago when consumers where homogeneous group, but we are dealing with individuals now, and this requires a more personal engagement.

Our suggestion involves creating hooks into two Chinese cultural habits within the store environment and to add two and two together to make five; the whole being greater than the sum of the parts. Two cultural characteristics to tap into are that of curiosity and the herd instinct. And the two personal Chinese needs being gaining face, and a chance to give an opinion.

Where there is a crowd, Chinese will gather to find out what’s going on, and given the chance they will tell you what they think. Consider these low cost and easy to implement suggestions

The opinionated customer urge

  • Use a member of staff or an actor as a ‘customer’ who not only tries your products but also has very vocal opinions about them that can be heard across the store and that will interest other shoppers. Have them also ask the opinion of other shoppers; the buzz will increase, as will the number of customers wanting to see what is going on and to give their opinion. The ‘customer’ having asked for opinion will also give opinion to those making suggestions that they ought to try the product or others in the store.
  • Viewed from outside the store, the herding instinct will attract passing shoppers to enter to see and hear what is going on, something they may not have done otherwise. They to may give an opinion and become part of the consumer group.

If a brand were to actually ask a consumer their opinion in person, the face and resulting social capital from doing so will create brand ambassadors and actual paying customers. This will be news and gossip worthy and attract other consumers to take more notice of the brand.

Ask an opinion in person and give the customer ‘face’

  • Invite a small number of customers from the CRM system to visit a store at a specific time on day because you, the brand would like to hear what they think about a product(s). Have one of them try them or use them and start the others talking and commenting on the product and its suitability. Those invited will feel that you acknowledge their importance and that they have been identified as special or important. They are being given an opportunity to actually engage with the brand and talk about it with others, both meeting their need for recognition and to be seen as an individual.
  • The fact that in store, in view of others they are being singled out, or included in a small group of special customers will attract others to see what they are missing out on, and provide your invitee’s with information and stories to spread amongst their circle and on social media.
  • With so many Chinese luxury consumers travelling internationally, a similar approach can be used to send an open invitation to those who are known international clients giving them a chance to visit a store in another country on a specific day to give their views. They will be pleased to have been acknowledged, will tell their circle and if they cannot be there, will suggest others do after ensuring that those they contact know the brand asked them first.

Accepting that its harder for a retailer to have the space and resources to put on a big event in store; they need to consider how in fact a smaller one can be far more personal and can establish a true bond between them and the consumer, attract greater footfall and hence generate revenue. The cost is low, and the space that might otherwise see low utilisation begins to buzz.

Keeping it simple and show you recognise the individual

Although these ideas may not create a truly two way relationship, the consumers in store are now engaging with the brand in more depth than they might have had before, and will see the social and lifestyle benefits. The brand is giving is customers a chance to have their say, to recognise their opinion and possibly to meet other like minded people. It brings people to the store who might not come otherwise and potentially those who will spend money. It’s a win-win opportunity, and a chance to demonstrate recognition of the individual Chinese luxury consumer.

The Chinese luxury market will undoubtedly become the largest in the world, and its one that no brand with any international aspirations can afford to ignore, but it has moved in the past two years from being a place where the consumer just needed to spend money on a name, to one that has and continues to evolve in a peculiarly Chinese way. Consumer confidence is leading brands to rethink their approach to everything they traditionally considered normal.

 


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