How hard luxury embraced a Chinese digital future

To receive the Vogue Business China Edit, sign up here. In China, Jaeger-LeCoultre’s Master Ultra Thin Moon watches sell from RMB 77,000 to 205,000 ($11,809 to $31,440). During 2020’s Singles Day (11 November), one customer on Tmall Luxury Pavilion bought two of them, spending RMB 330,000 ($50,600) in a single online transaction. Until recently, hard luxury brands did not focus much on high-ticket purchases through e-commerce. Besides consumers’ reluctance to spend lavishly online, brands were concerned about damaging brand equity and exclusivity. In China, however, online has become just another sales channel in a market with sales of nearly $10 billion for luxury jewellery and watches in 2020. “Chinese consumers, especially Gen Z, are very comfortable purchasing luxury jewellery and watches online,” says Rocky Chi, head of planning at Emerging Communications. Before Covid-19, Chinese consumers typically purchased hard luxury abroad. The in-store visit was part of their travelling experience. Digital strategies were useful as an additional tool to connect with them. Following the onset of the pandemic, brands had to quickly adapt to a new reality, focused on the local market, pushing digital strategies to the forefront. That’s why, since February 2020, 10 brands, including Cartier, Chopard and Boucheron, have opened flagship stores on Tmall Luxury Pavilion. Many have experimented with social media, such as Xiaohongshu, and formats such as live streaming, digital store integration and gaming. Rocky Chi reports a transformation in attitude towards digital. “In the past year in China, luxury jewellery and watch brands have done something that they have never done before,” she says. The pivot has paid off. According to Euromonitor International, luxury jewellery and timepiece sales in China increased 39.4 and 33.8 per cent respectively in 2020. China was the only market where Swiss watch exports increased last year, up 20 per cent. Richemont, which owns brands such as Buccellati, Van Cleef & Arpels, Piaget and IWC Schaffhausen, posted 17 per cent year-on-year growth in online business in the third quarter of 2020, with sales in Mainland China growing by 80 per cent. With international travel unlikely to restart anytime soon, Chinese consumers are expected to continue to spend at home. Jewellery and timepiece sales in Mainland China are projected to grow 27 and 18.6 per cent respectively in 2021, according to Euromonitor International. Building momentum in online sales, still a relatively small share of spending, front of mind for hard luxury brands. “More than ever, we have to intensify e-commerce in China,” says Jean-Christophe Babin, CEO of Bulgari. E-commerce is expected to contribute in the single digits to total sales in China in 2021, says Céline Assimon, CEO of De Beers. “We expect this number to increase as we continue to optimise the customer journey and experience on the different digital platforms.” Beyond e-commerce The sector expects sales in the physical space to hold up. According to a Deloitte survey, 70 per cent of senior executives in the watch industry believe that offline retail channels will continue to dominate. A significant number of consumers, however, are turning to digital channels: 31 per cent of surveyed Chinese consumers are “most likely” to purchase watches online. Online and offline are being primed to feed off each other. “Whether for soft or hard luxury brands, sales online haven't really slowed down after stores reopened, so the two channels are becoming increasingly related and complementary,” says Francesca di Pasquantonio, head of luxury goods, equity research at Deutsche Bank. Hard luxury brands are also developing digital strategies beyond e-commerce. For Bulgari, digital is a tool for doubling down on clienteling and establishing a direct local touch with many clients. “CRM was very much one to many, but post-Covid CRM is much more one to one,” says Babin. The brand has leveraged WeChat to trigger visits to Bulgari stores and occasionally for sales during key periods, such as Chinese Valentine’s Day. Kemo Zhou, an analyst at Euromonitor International, says that brands are learning to master different social commerce platforms and social strategies for different target consumers. She notes how Weibo, for example, is used to emphasise brand narrative and brand value transmission, while Douyin stimulates online purchases and WeChat is preferred for pop-up sales and to boost interactivity with consumers. Online, customisation, such as engraving or ring design, AR fittings and 3D virtual try-ons, is valued by customers. Surprisingly, live streaming, often associated with cheap fast-moving consumer goods and beauty products, has also emerged as a useful marketing and sales tool. Hard luxury brands, including Cartier, IWC, Chopard and Van Cleef & Arpels, have shown their highest-value boutique pieces during information-reach live streams on Tmall, which often feature high-level KOLs and brand CEOs. Ahead of Singles Day, Cartier showed a necklace valued at about RMB 190 million ($29.4 million) and broke through RMB 100 million in sales during the Singles Day shopping period. “For so many brands, we had replenishment problems because we were looking at [live streaming] more as a marketing experience,” says Christina Fontana, head of Tmall fashion and luxury Europe for Alibaba. She adds that consumers who can’t afford high-value timepieces presented during a live stream often end up buying more affordable options. Luxury communication agency Mazarine Asia Pacific has created exclusive live streams targeting high-end jewellery brands’ very important customers (VICs) and others for larger audiences, using WeChat, Tencent, Tmall, Douyin and Xiaohongshu. Managing director Jean-Laurent Vilon says that live streaming “works perfectly”, as long as everything is scripted and brand tonality is preserved. He singles out Douyin, the Chinese name for TikTok, as an important channel. The integration between live streaming and digital stores will be one of the biggest trends of 2021, he notes. Reaching growth pockets Well-crafted digital strategies have become an essential marketing tool to reach the new Chinese consumers who will drive luxury growth in the future, namely Gen Zs and lower-tier city shoppers. “The growth in luxury and the acceleration of growth in luxury is tightly connected to new consumer recruitment,” notes di Pasquantonio. In a country the size of China, e-commerce broadens a brand’s reach considerably. “We are really making a unique e-commerce experience in China because we know that we will never be physically in many cities, which are important,” says Babin of Bulgari. The brand already has stores in 25 Chinese cities, but Babin notes that China has more than 100 cities of over 10 million people – “and we don't plan to have 100 bricks-and-mortar in China.” Deloitte research shows third-tier cities and below drove 44 per cent of luxury goods consumption in 2019. Significantly, they also show higher growth rates. While millennials currently make up more than 70 per cent of consumers shopping for luxury fashion and lifestyle products on Tmall, Gen Z is the fastest-growing group. Many of these younger customers visit physical stores for the experience but complete the transaction online — a direct reversal of previous shopping trends. What’s clear from the pandemic is that digitalisation in marketing and sales of luxury jewellery and watches is being driven most strongly by Chinese millennials and Gen Z. “It’s an emerging trend in the new ecosystem,” says Rocky Chi. “That is the only way in which [brands] can really get the money from their pockets.” To receive the Vogue Business newsletter, sign up here. Comments, questions or feedback? Email us at feedback@voguebusiness.com. More from this author: Louis Vuitton joins China’s JD.com amid online luxury battle What brands should know about Zhihu China's daigou personal shoppers aren't going away

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