As Luxury Brands Expand To China, Have They Laid Out A Mobile Strategy?

As the luster of luxury goods fades in Japan, luxury brands are expanding their presence and retail locations in China and other parts of Asia. It seems China will be the luxury industry’s shining beacon of hope.China’s 6 billion euro ($8 billion) luxury market accounts for just 3 percent of global sales; China (along with Brazil) is projected to be the fastest-growing luxury markets through 2012, according to consulting firm Bain & Co. The firm also predicted that luxury sales would grow 10% in Asia; while declining 10% in Japan and 16% in North America.In a recent interview, Lanvin’s Andretta told WWD, “We need to accelerate [in China] but in the right way, every brand needs to have a different approach. The most important thing is to be consistent in the location you choose.”

Louis Vuitton Opens A Retail Store in MongoliaEarlier this month, Louis Vuitton opened its first store in Mongolia, an Asian country of 2.7 million people with extensive mineral resources and an average per capita annual income of just $1800-2001 USD.Antoine Belge, luxury expert at British bank HSBC, explained the strategy.“In Mongolia, the big luxury brands are targeting pockets of wealth. In countries which are making revenues from energy, there are small communities of people that have money,” he said. ”When you open a store in a new city in China, the clientele in that city multiplies by a factor of 10. There’s the client who is used to buying the brand abroad and nine others who are new.”LVMH added,”First we get local elites familiar with our brand, then we open a place where we offer the same quality of service, the same products and therefore the same prices as in other brand shops.”Luxury Brands Develop Long-Term Plans For ExpansionIt’s evident that luxury brands and retailers know that developing client bases and generating consumer demand for their products requires a long-term plan. They are focusing their marketing efforts and carefully planing retail expansion in the country’s first, second and third tier cities.But all that focus and planning seems to be focused on LOCATION and physical demographics.What about the Internet?Luxury Brands Lack Digital Expansion StrategyBruno Pavlovsky, fashion director for Chanel, told AFP, ”The digital revolution, with the global reach of information, has increased demand by acting as a catalyst for markets. The fact that we are investing in new markets means that clearly they have a strategic role in the growth of our brand in the long term.”The Questions:1. If the digital revolution has been a catalyst for retailers, making it necessary for them to become more reactionary, are they giving thought to their mobile commerce strategies?2. And do those mobile commerce strategies cover m-commerce enabled e-commerce websites in which they, as retailers, can accept mobile payments?I’m sure a few are, but it appears most aren’t. History, as well as Fashion, has a habit of repeating itself.In this case, brands and retailers are once again overlooking the power and influence of the Internet on consumer spending.China’s Growing Adoption of Mobile Commerce

“Chinese consumers are just beginning to appreciate the benefits of shopping online,” said Shelly Lin, Director of e-Business at Li-Ning Company Limited. “Mobile commerce is the next wave of opportunity.”A recent FMCG survey in February revealed that online shopping has become one of the most preferred outlets for Chinese consumers; 57.1% bought clothing and accessories via e-commerce portals. By the end of September 2009, Internet subscribers in China reached 360 million, of which 192 million were mobile phone subscribers who used their phones to access the Internet.“About 70% of these mobile Internet users are in their twenties (75% are male, 25% female)”, reports Trendsniff. “The number of consumers registering as online shoppers increased 185% from a year earlier to 120 million. More than 70% of the online shoppers are from secondary and tertiary cities.”Furthermore, after three years, the country’s largest telecom operator, China Mobile, is launching a cell-phone payment system based on mobile Internet technology. Staff of China Mobile said, “The service allows users to use their mobile phone to buy items and pay bills, just like a bank card. All ordinary purchases can be done with your phone. You don’t have to take your wallet with you any more.” A mature mobile payment system further speeds up mobile commerce adoption in China.Chinese mobile users clearly fit the consumer profiles and target audiences of luxury brands in Asia.Mobile Commerce Isn’t On The Rise, It’s HereCell phone payments systems are nothing new, but their popularity has increased as millions of consumers shop online via their smart phones. In response to the growing demand to cell phone payment systems, Intuit launched Go Payment for merchants and retailers; moreover, mobile focused company, such as San Francisco-based Bling Nation, are receiving large capital funding to further develop cell phone payment technologies.When I wrote about developing successful mobile commerce sites in July, there were only 45 mobile commerce-enabled sites available; four months later, 112 retailers have 153 m-commerce sites and apps.Emerging Technologies consulting firm ABI Research reports that North American mobile commerce sales will top $750 million this year. Furthermore, retailers in mobile commerce report that consumers are not just browsing, they’re buying—and sales are growing. eBay, for example, reported a whopping $380 million in sales through its iPhone app and m-commerce site for the first nine months of 2009.Once again, we’ve brought ourselves back to the question of what digital technology and online marketing means to retailers and brands.The Answer: Revenue. Digital technology equates to retail sales.So What Does That Mean For China & Luxury Brands?

Growth in China may not be huge in dollar terms, but it helps counter sales declines elsewhere, says Claudia D’Arpizio, a Bain partner in Milan. According to D’Arpizio, China’s luxury market is still modest when compared to Europe’s (which accounts for 38 percent of worldwide spending on luxury goods), South and North America’s (which accounts for 33 percent) and Japan’s (which accounts for 12 percent).Michael Ouyang, CEO of the World Luxury Association China Office, said luxury brands have become an essential part of life for many Chinese and estimates China will become the biggest consumer of luxury goods by 2015, accounting for at least 32 percent of the market.China has an estimated 300,000 millionaires and a 250-million strong middle class. When combined, these groups spend 40 billion yuan a year on luxuries, according to figures from accounting firm Ernst & Young.As China grows, the consumption of luxury goods will not only be found in stores and in person – they’ll be found online and through mobile devices. Luxury brands need to develop long-term digital strategies that focus on e-commerce and m-commerce. And those strategies need to coincide with the brand’s long-term strategy for expansion and growth of retail locations in the cities’ brick and mortar stores.Otherwise, luxury brands risk losing valuable market share, revenue or face a situation similar to Versace’s in Japan.Online DownloadCisco’s Emerging Market Consumers Ready for Mobile Retail ServicesOnline Resources* Luxury Brands look to China Amidst Economic Crisis* China: Luxury Consumers Still Spending* Luxury Auto Sales Falter In China During Recession* Luxury Sales In China Strong* Luxury Brands Hunt For Untapped Markets* Luxury Brands Look To China For Cushion in Crisis* China’s Growing Appetite For Luxury Goods* China Consumer Spending 2009* Consumerism hasn’t hit China Yet* Can China Lead A Recovery?* IBM’s WebSphere Enhancing Mobile Commerce* China’s Mobile Internet Users are 20-Somethings* Communities Dominate BrandsTo discover more Fashion Marketing articles, visit FashionablyMarketing.Me.