The new challenge for Luxury Brands is to target international, Chinese travelers. With growing levels of wealth and over 300 million middle-class consumers traveling overseas more frequently than ever, a new trend in China has emerged; buying luxury products abroad. In fact, a staggering 80% of Chinese tourists traveling to Europe have purchased luxury branded products in the country where they are produced, notably; Italy, France and the UK.
As shopping and traveling fuses together in new and interesting ways it is important for high-end brands to attract this new wealthy consumer. It is about re-orientating your marketing strategy to not just sell in China but also attract the traveler to shop in stores outside of China, particularly flagship, national stores.
Let’s analyze this developing trend further.
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Chinese international travel increases!
For the Chinese New Year, 6.15 million Chinese people made overseas trips, up 7% from last year, according to official statistics. China’ international travelers are young (over a third are ages 25-34) whilst 69% say they prefer destinations where they can purchase luxury goods, according to a study from Aviator, the travel marketing arm of Kinetic.
This new wave of tourist prioritizes shopping as part of their itinerary and sense of identity. Rich Millenials have become the key market sector for luxury brands to target as they are spending abroad like never before.
The report also highlights that 74 million “travel-ready millennials” will be graduating from Chinese universities over the next 10 years with continued exponential growth expected.
Buying Luxury Brands abroad from native markets
The real question is why are so many Chinese buying luxuries abroad when there is such a strong branded presence from the big names in China? for example, Shanghai has 10 luxury malls.
There are a number of factors to consider. Firstly there is the issue of fakery in China, the market is renowned for counterfeit products. Discerning consumers want to ensure they are buying the genuine article with wealthy buyers even flying out to stores abroad specifically to purchase an item.
Secondly, buying abroad in a country associated with luxuries such as Italy, France or the UK reflects status and provides the Chinese with a positive ‘face’. This is the Chinese concept (prolific throughout modern society) of fixating on appearance, status and reputation. Luxury brands have become the most powerful way to demonstrate this to a Chinese consumer’s peers.
The other point is that it is a more exotic, exciting way to shop. Discerning consumers can soak up the culture of the brand in its home country and come to understand and experience a new sense of luxury in a different setting. As China opens up to international influence so does the consumer demand for new experiences around the world, this has always been what luxury offers and is now developing a step further.
International Payment Methods
The ease of international payment has helped facilitate this trend. Alipay, the largest third-party payment app in China is growing abroad, luxury brands offering Alipay services will be at a strong advantage when it comes to developing customer loyalty. The app allows users to transfer funds and is linked directly with a users bank account for instant payment.
China’s UnionPay has traditionally had a monopoly on bank payment cards in China. Chinese regulators have now cleared foreign card companies to apply for licenses to process domestic payments, the process is slow but moving in the direction of international payments from Chinese bank cards.
Advertising for Chinese New Year focused on this trend
Visa has been marketing itself as the best way to make payment overseas with a large advertising campaign launched for the Lunar New Year period. The ad humorously taps into the generational divide we are now witnessing. A well traveled young woman is doted on by her parents who are proud of all the imported products she brings home from her trips. It highlights the difference in lifestyle for the younger generation post economic boom. The daughter states that; ‘My world is bigger and bigger, but their world hasn’t changed,” before bringing her parents to Australia on a family holiday.
LV ads follow this trend in Chinese Airports.
Gucci Advertising surf on the same trend!
The growth of the ‘Dai Gou’
The rise of ‘Dai Gou’s’ or personal buyers is an interesting phenomenon. These are often wealthy individuals who travel abroad to buy products and then sell them to their social circle back in China. We have witnessed a rising number of ‘Dai Gou’ purchasing luxury abroad in bulk to re-sell.
The most effective method for attracting luxury, traveling consumers in China is digital marketing. With 850 million netziens online the growth of the online sphere has been unprecedented.
The digital strategy offers a number of benefits:
– Consumers can be more specifically targeted through dedicated online communities
– Online users are incredibly engaged and active on social media and forums
– The vast uptake of the internet and smartphones has created an ‘on the go’ type of mobile digital engagement which luxury brands can benefit from with quality, mobile optimized content.
– China’s Online Sphere is separate from the rest of the global web and therefore presents a more captive market.
– Chinese platforms dominate which cater perfectly for the end user, you can utilize the infrastructure they provide to attract luxury buyers.
There are now over 300 million Chinese netziens watching live streaming feeds, It has become very popular with luxury brands set to tap into this through live streaming of store openings, new product launches and tours of key heritage sites linked to the brand.
This offers a sense of exclusivity and incentivizes the wealthy consumer to travel and experience this for themselves. Brands could feature Chinese celebrities at the launch to encourage others to emulate them and visit too.
A good example of the Lunar Festival was San Francisco Travel partnering with Ctrip to incorporate live streaming of interesting places to visit in the city; charming neighborhoods, cafes, and sites. This is a cost-effective way of advertising local services too.
Social Media Branding – Selling the ‘International Lifestyle’
WeChat is the most effective platform for branding with over 750 million users. Creating an official account or ‘mini site’ on the platform is a necessity. This functions as an information feed for consumers and allows luxury brands to share travel related content to sell the concept of the ‘international buyer’. Content can promote exclusivity, with special product launches and ranges on offer in certain stores to physically drive footfall across the globe.
WeChat also boasts geo-location services which allow users to share their location with friends, going abroad and sharing a prestigious, luxury store location to unlock exclusive content can be a strong motivator.
Arguably the best way to grow in China is through luxury fashion influencers. These influencers have built up substantial communities around themselves which are highly impressionable. Posts of a KOL or ‘key opinion leader’ representing the brand abroad, at an exclusive opening or shopping at a flagship store for Burberry in London (for example) is likely to go viral amongst their followers. This can offer maximum visibility and the chance to tap into hundreds of thousands of followers in active communities.. but at a price. KOL’s know their market value and recruiting them is expensive. A sustained KOL marketing strategy can be very profitable in the long run.
Making Great Content Visible on Search Engines
Articles, content, infographics and promotions all need to be optimized for the Chinese web and made highly visible on search engines as well as forums. A quality website hosted on a Chinese server for speed and accessibility is required. For the website’s promotion on Baidu (the largest search engine in China channeling 70% of all online research) you need to produce quality content for backlinks and references, this is also how you share branded content to spread the message of ‘international luxury’.
This is an interesting developing market for Brands in China. It can be thought of as an extra string to their bow in the largest luxury market in the world. With levels of wealth continuing to increase what constitutes the term ‘luxury’ may also start to change with international consumers expecting more than just the product but a whole traveling experience too. To grow this trend, brands need to sell international, high end lifestyle experiences and associate this enrichment with quality products.