ADAPT TO THE AGE & ECOSYSTEM OF IMPULSE PURCHASE
Luxury brands were slow to enter the digital space. The experience of purchasing a luxury good is as paramount as the good itself. Luxury brands have struggled to replicate the same experience online, as the seemingly democratic Internet should be fundamentally at odds with the exclusivity of luxury.
Though unable to ignore the power of e-commerce in China, many brands have chosen to setup flagship stores in JD and Tmall, establish social commerce capabilities on WeChat, and seed content into the social commerce space of Little Red Book.
Signing away part of their power, luxury brands must then be prepared to learn to play by the rules of China’s Internet giants. Initially, having the badge appeal of the brand was enough to draw interest. But now, as e-commerce evolves from “product-centric” ecosystem where people searched for the brands & goods they had in mind, to a “discovery-centric” ecosystem where algorithms, content seeding, and social recommendations takes the user from product discovery all the way to purchase. The e-commerce ecosystem has evolved its role from bottom of the marketing funnel to enabling the entirety of the marketing funnel on one single platform.
Users no longer log on with intent but browse e-commerce as a leisure activity. Impulse purchase of luxury goods on e-commerce has doubled from 2012 to 2018 (Bain), one in two of their luxury purchases are decided in a single day (McKinsey).
Flagship stores on e-commerce platforms have already become the most important channel for some brands, as they reserve even exclusive product launches and launch online fashion shows with Alibaba.
One of the e-commerce tactics that is furthering impulse purchases is livestreaming.
Alibaba’s Taobao Marketplace generated more than 100 billion RMB in livestream sales, a 400% y.o.y. increase.
Li Jiaqi known as the “Lipstick King” of China sold more than 100 million RMB worth of product in just 6 minutes on his 2019 11.11 pre-sale livestream. With COVID-19, brands sought to enlist Li Jiaqi to bolster their online sales. He was even the face of a livestream to raise funds for Wuhan. Li’s rate card has risen to 100,000 RMB for a 10-minute livestream in response to the anticipated ROI (Caixin).
As COVID-19 lowers intent for luxury purchases, the right tactics can foster impulse purchases to trigger bursts of growth.
FROM GLOBAL MAISONS TO LOCAL BOUTIQUES
Luxury brands initially scored big in Asia by building the idealized image of aspirational European culture. But now it’s the brands that combine their heritage with local culture that truly enjoys success.
Take Hermes, famous for its Birkins – but makes everything from Asian-style fans to mahjong sets.
It is not a diffusion of decisions from global headquarters that trickles down to each local store. Each store director visits the Paris HQ twice a year, not just to learn but also to feedback. Those top performing Chinese store directors, of course have a lot more sway, but this ultimately means the seemingly random Asian-themed Hermes products are created from consumer feedback. Coupled with using Chinese designers, Hermes both retains its heritage yet evolves to fulfill the needs of its Asian customers.
Financial Times reported Hermes as being the most profitable luxury brand in 2019 with 34.8% profit margin. WWD reported a Hermes store in Guangzhou reopened earlier this month, with 19 million RMB in sales during its reopening day, with enthusiastic customers documenting their purchase experience on Little Red Book.