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Nov
2013

The expansion opportunities and disruptive technologies

Web and mobile based services are not necessarily only a threat to luxury brands, as they offer an opportunity if correctly used, to expand brand reach and to enhance the customer experience that can be limited in the physical retail environment. The cost for any brand to establish and operate physical stores in tier 3, 4 and even 5 cities is likely to be prohibitive to many, even if the consumer demographics indicate a need for them. Yet the use of e-commerce via the Internet or mobile phone presents a cost effective method to reach consumers in all these locations.

Even without a physical store in a city, shopping online has the potential to provide the local consumer with original branded product, potentially a greater selection of items than they might find in a physical store if they had one, and the convenience of shopping from home or wherever they might be. Using mobile technology, the convenience and product choice available to a particular consumer could be tailored using features of the systems such as location services enabling purchase options to be tailored by customer or known preferences in that geography i.e. clothing choices in December in Tianjin will differ from those in Shenzhen at the same time of year.

E-commerce clearly offers a faster and more cost effective route to market for those brands new to China. Of course they still need to invest in brand positioning and communications to establish their name, but an integrated programme linking an e-commerce platform and a brand specific phone app would make the brand and its products available to the entire country, and provide a means to develop a specific customer following and the all important personal recommendation that comes from social media, especially among the younger and developing luxury consumer group. It is also important to acknowledge that this particular group of consumers are more open to new brands, ideas and ways of buying, so for those late to market disruptive technologies are a clear opportunity to make up for lost ground.

“E-retail can be seen as either a threat or as an opportunity. As with all new technologies, e-retail will most likely prove to be very disruptive. However, those companies, retailers and landlords which embrace these new tools
for reaching consumers will outperform those who shun them. E-retail will not replace bricks and mortar business, but it will change the way that physical stores are perceived and used.”

James Macdonald, Savills Head of Research for China
Savills 2013 Retailer Survey…

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