In 2016, Alibaba founder Jack Ma envisioned the concept of New Retail: the seamless merging of offline, online and logistics for a dynamic new world of retailing. Instead of having to compromise between on and offline shopping, firms should be aiming to offer the best of both worlds, reacting to consumer demand in real-time, adjusting prices based on market equilibrium, harnessing technology in ways consumers relish. And arguably, Ma has delivered. China is poised to become the world’s top retail market this year, overtaking the US, and has become a leading force in e-commerce.
According to eMarketer, online sales are set to grow 30% in 2019, with 35% of China’s retail sales now happening online, and by 2020 Chinese consumers will account for an astonishing 56% of global online retail sales. It’s New Retail in action, and luxury forms a huge part of it. Tencent predicts that China will contribute 41% of global luxury consumption by 2025, powered by millennials and Gen Z. 48% of Chinese luxury consumers are under 30 and the way they’re looking to shop is - for the luxury market - radically different to the norm for luxury consumers in the West. These younger digital natives are increasingly happy shopping for high-end goods with their thumbs.
The seamless merging of physical and digital retailing is now a prerequisite to success in China. Consumer expectation for connected digital experiences is high - luxury consumers want highly personalised experiences of the standard they are used to in other walks of life. Yet they also want it fast, hence the inexorable rise of WeChat as a platform for luxury brands. According to a recent Gartner L2 study, 60% of luxury fashion brands have at least one WeChat store, up from 36% in 2018. Yet this still leaves 40% of luxury brands not meeting their customers on a platform where they want to be engaged.
Many luxury brands, especially in the West, have been reticent to deploy the full weight of digital, relying instead on the social prestige of their brand. Many haven’t even connected in-store consumer data with CRM data to achieve anything close to an understanding of their customers. Yet even luxury brands have to engage with their customers in the manner that best suits them, and increasingly that’s on the smaller screens of mobile. 1.1 billion people use WeChat each month, and if luxury brands properly engage with this vast audience in the right way, they’ll reap the benefits.
Luxury brands can - and should - build their own bespoke Mini Programs on WeChat - app integrations enabling brands to use it as an e-commerce website. At a time when third-party e-commerce retailers like JD.com and Tmall dominate in China, on WeChat brands can design their own pages, visuals and campaigns, something brands like Gucci do well. Its customers can browse and pay without having to leave the app, a premium experience without losing any control over the brand.
It isn’t just a question of building a WeChat store and sitting back though. Indeed many brands are building them without properly considering how to get customers to actually use them. Unlike Tmall, which has huge traffic visiting the site to shop, a WeChat mini-program doesn’t create an audience without wider activity. So it’ll need its own marketing funnel to grow traffic and achieve sales. Currently, most of the success stories are from brands that are spending a lot – as it involves building traffic essentially from scratch.
Where it does add value to a brand, this is a great time to test and learn and to innovate with interesting applications of the latest tech. Armani just partnered with L’Oreal to debut an Augmented Reality Mini Program to enable customers to virtually try on lipstick and order within the app. For brands with strong creativity, there’s a great potential to entertain and engage customers while also driving sales, but only for those brands who properly consider how it fits and evolves their brand’s story.
So while WeChat is a significant channel, luxury brands shouldn’t see it as a quick fix, and should be building a fully joined-up, high-quality digital experience. There’s a wealth of tech that luxury brands can deploy, to offer the level of service that luxury customers would expect in-store. There is, of course, an onus on luxury brands to maintain their premium, exclusive feel. So it’s important that new technologies are implemented with care, and only when they’ve reached sufficient maturity to enhance the customer experience. So while voice tech is something that arguably isn’t quite ready for the greater expectations people have from luxury, AI and chatbots are definitely an area where luxury brands should be testing and learning. In China, social commerce will only grow, as users explore product ranges before either buying online or visiting a luxury store. Burberry has done a good job of implementing AI, using deep learning to boost UX, building up an online picture of their customer which can then be paired with offline data to ensure a high-quality in-store experience.
The growth of social commerce in China is a huge opportunity for luxury brands, but any activity must be complemented with a sensitive and fitting use of technology to ensure that brands are taking advantage of evolving consumer behaviour on social and making the most of brilliant platforms like WeChat.
Chris Donnelly is founder and MD of Verb Brands.