Why do Fashion & Luxury Brands Suck at Digital in China?

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Burberry - The Only Fashion Brand 'Digital Genius' in China. Source: L2

Just over a month ago L2, a think tank based in New York released their second annual study into prestige brands and their digital competencies in China. The methodology for the study breaks down digital competencies of each brand’s websites, social media, digital marketing, E-commerce and mobile efforts. Brands ranked at the highest ‘Genius’ level will perform well over all categories while other ranking labels include ‘Gifted’, ‘Average’, ‘Challenged’ and ‘Feeble’. The implicit message emanating from the study is that luxury brands suck at digital in China! Since its release, the study has gained lots of attention and cross analysis that Google will help you find. The study does an excellent job at highlighting that brands’ efforts are lacking, but doesn’t address why. Below are some of my thoughts as to why the brands aren’t doing so well.

Lack of Human Resources and Expertise

I believe the biggest impediment to luxury brands improving their digital media in China is the lack of human resources and expertise.  Finding competent people to work in all levels of the fashion/luxury business right now in China is extremely challenging, let alone finding experts who can exist at the intersection of emerging technologies, digital media and luxury. So both the brands and their media agencies struggle to find the right staff.  It may come as a surprise just how lean staffed a many of the fashion and luxury brands are in China and the luxury conglomerates such as Richemont and LVMH will often share back office duties such as HR, accounting and legal. However, as each brand’s digital efforts require unique strategies this is something that can’t be shared so easily.

Administration and Decision Making About Digital Campaigns

How a luxury brand (or any brand) should administer their China digital media is a difficult and complicated question.  Ideally the brand should hire a leading digital media agency who can incorporate global marketing and media initiatives into China, while also making adjustments to localize the content and make it relevant. Not Easy!

Who is responsible for digital media within the company? In a perfect world each brand would have a Chief Digital Officer in China. That day may be coming but certainly isn’t here yet and so digital responsibility is often left to the China Marketing Director who then has to clear things with head office in Europe. The global marketing teams have little knowledge of what’s going on in China and the language barrier means they can’t tryout Chinese digital media for themselves, so you end up with a disconnect which slows down the digital adoption process for all brands. These issues are not specific to China, but need addressing nonetheless before a brand can tackle the digital media task.

Brands are Prioritizing Getting the Stores Right First

In a sense, China caught everybody off guard. Some luxury brands including Burberry, Dunhill, LV and Zegna have been in the market for a long time and were kind of cruising along. Then all of a sudden, BAMM! China becomes the biggest growth market for luxury in the world and everybody wants in. So now most luxury brands are scrambling to open stores and get them up and running smoothly which is distracting them from their digital media.  A mobile store locater app is useless and a waste of time and money if you don’t have a certain number of stores already open for business.

With an estimated 100 luxury brand malls currently being built in China and the store opening process taking around two years per store, it takes an incredible amount time and resources to cover store development alone. Most Presidents of the luxury brands in China I know often spend four or more days every week flying around China looking at new malls, negotiating leases and ensuring current stores are operating properly. They don’t have time to focus on digital right now.

For brands that have been in China for a long time and already have a strong store presence digital efforts should indeed be a higher priority and I expected to see strong results from them. Burberry – the best performing and only ‘Digital Genius’ in the fashion category has indeed been in China for a long time and already have a strong store base. Louis Vuitton already has 36 stores across China and have been in China for 20 years, they were ranked ‘Average’  at 18th place in L2’s study which out of line with their other impressive efforts. There is little excuses for a brand like Zegna who have a commanding 70+ store presence and 20 years experience in China to be doing so poorly on digital. Zegna was placed 83rd earning them the ‘Feeble’ ranking.

Platforms and developing too fast

As L2’s study points out, traffic on Sina Weibo (China’s Twitter) has grown 490% in the last three months. In 2010 Sina Weibo was not even considered as a metric and now it is the leading social network in China. With platforms emerging so quickly it takes a brave luxury brand to be one of the first to adopt new social networks in China, especially considering they can be shut down without any notice by the government.  I feel the majority of luxury brands prefer a ‘wait and see’ or ‘let others experiment and get it right first’ approach in China.

Impediments to E commerce

It’s amazing to see how fast a topic will reach tipping point in China. In the last month the buzz about E commerce amongst fashion industry executives has been phenomenal. Now everyone is talking about it and wants to be doing it, but no one knows how and there are so many impediments still to be resolved. Logistics, payment systems and counterfeiting are three issues that come up time and time again for E commerce in China.

 

From 'Genius' to 'Feeble', Key Findings in L2's Report. Source: L2

Movers and Shakers in L2's Report. Source: L2

Social Media Statistics in China in L2's Report. Source: L2

Lamborghinis Sold Online in China as Reported by L2. Source: L2

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