Battling for China’s gen Z, dynamic positioning is key for western luxury brands

This content is produced by a member of The Drum Network, a paid-for membership club for CEOs and their agencies who want to share their expertise and grow their business.

To succeed in the lucrative Chinese luxury market in the long term, western brands have to win over Chinese gen Zers. Meanwhile, Chinese competition is growing stronger and stronger, and young Chinese consumers are proving friendlier to local brands than their parents were. TD Reply’s Lars-Alexander Mayer argues that strong, dynamic brand positioning is key in this market.

The Chinese market has become the most important driver for European luxury giants’ growth, from Balenciaga to Gucci and Louis Vuitton. Nothing is more crucial for success in the Chinese luxury market than winning the hearts and minds of gen Z, the cohort of Chinese consumers born after 1997. Their purchasing power is steadily rising, and even though they only account for 17% of China’s population, they are the most important growth driver for new Chinese brands, accounting for 25% of spending on new domestic brands.

China’s gen Z has some unique characteristics, including a distinctively ‘patriotic’ attitude, having been raised in an environment dominated by narratives of China’s staggering economic and technological progress. In a white paper we released with Highsnobiety and Tony Wang last fall, many Chinese fashion opinion leaders emphasized that gen Z are extremely supportive of local brands. And they expect foreign brands to have a detailed understanding of Chinese history, culture and political sensitivities.

For clients looking to strengthen their foothold in China, brand image is the most important factor for sales success. Especially when targeting gen Z, brands must actively manage positioning to ensure they are embedded organically in Chinese culture.

The best foundation for a dynamic brand positioning is social listening (the continuous analysis of discussions and trends on Chinese social media platforms using specialized tools).

Online reactions offer clues about what matters to gen Z

Social listening tools help brands identify relevant patterns by analyzing individuals’ digital footprints in the form of posts, search terms and other online reactions. What and who are people talking about? Who are they talking about most, or most positively?

This allows brands to respond quickly to new trends and topics. It also enables them to quickly spot suitable partners for collaborations, which are highly valuable in China. Here, brand collaborations with opinion leaders are more likely to contribute to the brand’s success than in other markets.

At this year’s Winter Olympics, snowboarder Su Yiming charmed gen Z with his rebellious attitude, authentic image and outstanding performance. He quickly became one of the most talked-about people on Chinese social media. This made him an ideal advertising partner for virtually all well-known western luxury brands, according to the influential Jing Daily. Luxury brands who failed to recognize Su’s appeal early on quickly found themselves out of luck, as dozens of better-informed competitors had already flocked to him, offering lucrative contracts.

Had those brands been using social listening, they would have had a continuous window into what and who gen Z is talking about, allowing them to identify discussion leaders such as Su Yiming as a potential partner early on (even before the Olympics started).

Think bigger and be culturally authentic

An important brand positioning lever for western luxury brands in their fight to win gen Z is thinking outside the fashion box. Too many luxury brands fail to look beyond well-worn paths.

One notable exception is Louis Vuitton, the most-searched luxury brand on China’s leading search engine Baidu, according to an analysis by TD Reply. As early as 2019, they were collaborating with the developers of League of Legends, which is popular in China. The brand was present as a global sponsor at an esports championship; players could buy in-game Louis Vuitton skins; and Louis Vuitton launched a League of Legends-inspired collection in China.

At least as important a lever is cultural authenticity, which is deeply valued among China’s gen Z. Again, Louis Vuitton is taking the lead. Following lockdown in Wuhan, the brand chose this relatively unknown city for its See LV exhibition, generating extremely positive reactions from gen Z fashion influencers and their followers. The brand was lauded for helping to improve Wuhan’s image, and the exhibition garnered praise for sensitivity toward Chinese cultural nuances.

Another outstanding performance came from Balenciaga, which launched a daring campaign in 2020 to coincide with the Qixi Festival, China’s equivalent to Valentine’s Day. The brand – whose business in China accounts for a third of sales – unveiled a collection inspired by traditional Chinese peasant aesthetics. Although it was initially met with controversy, the collection ultimately won the hearts of Chinese gen Zers, who recognized Balenciaga’s authentic understanding of their cultural values.

A growing home-field advantage for Chinese brands

In the long term, it will become increasingly difficult to compete with the home-field advantage of Chinese brands in the battle for gen Z. In fashion, at least, the Chinese market is becoming increasingly competitive. Chinese fashion brands currently dominate the mid-market segment. Last Singles’ Day Chinese jacket brand Bosideng dominated the conversations on Chinese social media.

Four of the 10 most talked-about fashion labels were Chinese brands. We can expect a similar trend in the luxury segment over the next few years. Western brands will need to start doing everything they can to keep up.