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English to Chinese: How to Attract Entry-Level Luxury Buyers in China
Source text - English Making a down-market shift might seem like an unexpected transformation for the luxury industry, but it’s what today’s modern brands are doing. That’s because brands that target entry-level luxury buyers will see a boost in revenues and profit margins, stacking the odds in their favor.
Nevertheless, some luxury retailers feel that the rewards are only short-lived, and ultimately, thriving in the mass market can imply reputational risks, overexposure, and financial losses. According to certain luxury executives, heritage brands that move further into off-price retail will suffer because of the affiliation with customers who are often perceived as non-conventional luxury buyers. Indeed, launching capsule collections aimed at entry-level luxury buyers can antagonize core consumers who will eventually stop signaling their status and privileged identity through that particular brand.
The democratization of luxury has blossomed in an age when consumers seek novelty ahead of extravagance and affinity instead of superiority. The new consumer wants to belong to a global community, not a restrictive ecosystem, which is why successful luxury brands and digital-first retailers are rewriting the rules of engagement by reaching out to new consumer segments. This venture has proven to be an effective local strategy in markets like China and India where entry-level luxury buyers represent a multi-billion market opportunity.
In “Deluxe: How Luxury Lost Its Luster,” Dana Thomas argues that brand-name accessories of questionable quality are now being designed for the mass market instead of being crafted for the moneyed, global elite, and this trickle-down effect has reshaped the whole industry. Today, modern luxury brands understand that “price-conscious shoppers are struggling to reconcile the price of luxury products with their real value, while e-commerce and tourism have exposed major differences in pricing around the world,” according to Claudia D’Arpizio, partner at Bain & Co.
Since crafting products of debatable quality and stamping logos on them is easier than investing in artisans and specialized ateliers, it’s not surprising that craftsmanship has been sacrificed on the altar of profit. And, broadly speaking, China is the ideal market in which to implement this technique.
In a McKinsey report titled China Luxury Report 2019: How young Chinese consumers are reshaping global luxury, the authors argue that China’s “affluent upper-middle-class presents an enticing prospect for the world’s designer brands.” Furthermore, McKinsey highlights that the bulk of these young consumers “are fresh to market,” and they “view ownership and affiliation with designer brands as a form of social capital; not just something to wear, but a lifestyle choice that marks them as part of a distinct and exclusive community.”
Given that this consumer base represents a prime opportunity for growth, let’s look at some marketing strategies to attract and better sell to them.
Differentiating with finesse
Just because a luxury buyer is not a billionaire or a top executive, but a teenager investing in his first branded accessory, his needs or rising expectations shouldn’t be ignored. It also goes without saying that the pre-purchase experience is as important as the after-care service offered by a luxury brand. However, there’s no unique solution for all cases and differentiating with finesse is the key to success.
The segregation between different consumer segments starts from the get-go, and smart marketers understand that entry-level luxury buyers will look for product lines that have their own identity and strengths. Therefore, diffusion lines like D&G (from Dolce & Gabbana) or O Oscar (from Oscar de la Renta) that are crafted from lower quality fabrics and sold at less expensive prices are doomed to fail. Cutting corners and presenting cheap knockoffs of outdated designs doesn’t work anymore. Young Chinese consumers are product-knowledgeable and understand the unique characteristics of a luxury brand; hence, they demand transparency and innovation.
In conclusion, retailers operating in China have to become authentic and genuine voices that communicate the company’s ideology, strengths, and core values without engaging in artificial practices. Specifically, brands like Louis Vuitton, Gucci, Burberry, and Valentino have all reshaped the marketing dynamics by engaging Chinese users at every touchpoint. Their marketing campaigns express novelty, transparency and uniquely personal experiences.
The power of first impressions
In Blink: The Power of Thinking Without Thinking, Malcolm Gladwell says, “buyers make most decisions by relying on their two-second first impressions based on stored memories, images and feelings.” Indeed, appearances matter. And they do even more in the digital age when managing reputation management is becoming even trickier.
Various online scandals and boycotts shaped 2019, proving that Chinese consumers no longer tolerate missteps, stereotyping, and controversies. Chinese buyers have thrown various luxury brands in veritable existential crisis (e.g. Versace) while others (e.g. Dolce & Gabbana) have yet to be “resurrected.”
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Why Do Luxury Businesses Fail in China? Study the Data
By Daniel Langer
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Accessibility kills the brand
“Make your product accessible,” is such an overused buzz phrase. And it doesn’t go well with luxury consumption, nor an industry that thrives on scarcity and confinement. Instead of making products more accessible, retailers should go to extremes to become more restrictive and exclusive. In fact, limited edition designer collaborations and capsule collections are having their most glorious moment.
The Louis Vuitton and Supreme collaboration sold out immediately in stores around the world. On the other end of the spectrum, luxury-mass collaborations are booming in the country. The Uniqlo x KAWS collection and the H&M x Moschino collaboration (2018) created hysteria among young Chinese consumers. Usually, such limited-edition capsule collections are retailed at higher prices and bring in better margins for brands. Since there’s an increased desire for these products, it’s worth noting that brands can justify the pricing strategy for limited edition collections.
Sensory branding
Seducing the consumer through elaborate sensory experiences is highly profitable. On a general note, entry-level luxury buyers are younger and less experienced; hence, they relate to brands on an emotional level. While experienced luxury buyers make more deliberate decisions, younger consumers have a more visceral and subconscious response to brands and marketing. Therefore, buyers new to luxury can be engaged with sensory-led branding.
For instance, Nike has found that adding scents to its retail stores, “increased intent to purchase by 80%,” while a different study shows that the smell of fresh-brewed coffee at a gas station increased coffee sales by 300%.
All in all, in 2020 we expect to see a greater number of luxury players rethinking their expansion strategy and incorporating the midsize segment into their global tactics. A perfect example in this direction is the automotive industry, where European brands such as Mercedes Benz, Audi, and BMW have been competing for years against each other in the luxury segment just to recalibrate their efforts and start investing in the midsize segment.
Unsurprisingly, China as the largest automotive industry in the world measured by automobile production has become the principal focus of European automobile manufacturers. On the whole, luxury brands that make the shift down-market will be highly rewarded. Especially in a time when they can move with growing ease as possible competition is still relatively low.
Dana Thomas在《豪华：奢华是如何失去光泽的》一书中指出，质量可疑的品牌配件现在是为大众市场设计的，而不是为有钱的全球精英而设计的，这种trick滴效应已经重塑了整个行业。如今，现代奢侈品牌了解到：“注重价格的购物者正在努力使奢侈品的价格与其实际价值相协调，而电子商务和旅游业却暴露了全球定价的主要差异，” Bain公司合伙人Claudia D'Arpizio如此表示。
不同的消费者群体之间的隔离是从一开始就开始的，精明的营销人员了解入门级奢侈品购买者将寻找具有自己身份和优势的产品系列。因此，以较低质量的面料制成并以较便宜的价格出售的D＆G（来自Dolce＆Gabbana的产品）或O Oscar（来自Oscar de la Renta的产品）的扩散线注定会失败。偷工减料并提出过时的设计便宜的假货不再起作用。年轻的中国消费者精通产品，并了解奢侈品牌的独特特征；因此，他们要求透明和创新。
路易威登（Louis Vuitton）和Supreme的合作在全球商店立即售罄。另一方面，在该国，奢侈品与大众的合作正在蓬勃发展。Uniqlo x KAWS系列和H＆M x Moschino合作（2018）在中国年轻消费者中产生了歇斯底里的情绪。通常，这种限量版胶囊系列的零售价较高，并为品牌带来更好的利润。由于对这些产品的需求不断增加，因此值得注意的是，品牌可以证明限量版产品的定价策略是合理的。
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