Women to Watch China 2014

Luxury Goods Are a Tougher Sell Now in China

Adding Cultural and Brand Experiences Appeals to Affluent Shoppers

By Published on .

The 'Miss Dior' exhibit in Shanghai featured work by women artists.
The 'Miss Dior' exhibit in Shanghai featured work by women artists.

The playbook for selling luxury goods in China is changing fast as marketers deal with challenges ranging from the drastic crackdown on gift-related corruption to savvy Chinese shoppers who often prefer to buy abroad.

It used to be a straight-forward affair—lots of bling, lots of logos…lots of sales. Consumers bought brands like Louis Vuitton to show off status and wealth, said Mykim Chikli, CEO, China at ZenithOptimedia.

Today's landscape is far more complicated, and not getting any easier. A government crackdown on corruption started in 2012 and has caused a sharp decline in luxury sales, especially in categories associated with gifting like watches, jewelry and high-end spirits.

The new rules were a big factor in growth in luxury goods sales in China slipping from 7% in 2012 to about 2% last year, with a similar forecast for this year. Luxury watch sales fell by 13% in 2013. The Hurun Report Chinese Luxury Consumer Survey 2014 published this month surveys the super-rich and found they spent 25% less on gifts compared to last year.

At the same time, affluent consumers in China's first and second tier markets rival western shoppers in their knowledge about luxury brands and products. As a nationality, Chinese are the world's biggest luxury shoppers, accounting for 29% of global luxury sales. They have started spending less in China, opting instead to invest in shopping sprees in luxury capitals like New York, Paris and London, which offer lower taxes, better service and the latest product lines.

Mykim Chikli
Mykim Chikli

"Does this spell the end of luxury in China? No, but it is a new era with more segmentation, sophistication and personalization," said Ms. Chikli, one of Ad Age's Women to Watch China 2014.

Dior, for instance, is tackling this new reality by connecting its brand with cultural events. For instance, the company's personal shoppers in Beijing and Shanghai now share information and tickets to art exhibits and concerts with top customers.

Others are focusing on experiential marketing, especially for younger affluent consumers who are eager to understand nuances of the luxury lifestyle that may have been too subtle for their parents, like enjoying fine wine and horse racing.

Brands are also investing more online in China, where e-commerce plays a larger role than in the West. Burberry, for instance, has a strong presence on Tencent's social media platform WeChat as well as on Tmall, an online retail platform for established brands run by Alibaba. They can even buy products on overseas sites at lower prices and arrange to pick them up in stores while traveling.

Helping companies merge digital marketing and e-commerce with brand-building comes naturally to Ms. Chikli. After the French native's parents passed away when she was 20, she took over the family business of ten retail shops in a luxury French ski resort.

A France Telecom job brought her to ZenithOptimedia as head of digital in 2005. While managing director of the agency's Paris office, she developed Performics, a digital agency Publicis Groupe bought from Google. She moved to Shanghai in 2011 as the agency's chief operating officer and was promoted to CEO in January.

"Digital is now the best tool to promote the luxury category," Ms. Chikli said. "The in-store experience is still critical to feel the spirit of the brand but digital is the best medium to tell its story and history."

Women to Watch questionnaire:

Favorite social media: WeChat, but still very Facebook and LinkedIn connected.

Home city: Shanghai LOL! My home city is Meribel in the French Alps.

Hobbies: Yoga and Chinese medicine.

Best advice you've ever gotten: Live the present moment

Biggest change you've seen in the industry since you started: Smartphone revolution, in particular in China.

Most Popular