China Daily Asia Weekly: Keeping up with Asia’s shoppers

Keeping up with Asia’s shoppers

Consumers in Asia are increasingly knowledgeable, demanding and technologically savvy, and expect the brands they follow to meet their specific and increasingly sophisticated needs.

Speaking in Hong Kong on June 11 during a China Daily Asia Leadership Roundtable, a group of luxury brand executives and e-commerce experts made it abundantly clear the region’s consumers cannot be treated as an afterthought or reached using strategies recycled from other markets.

Brands and companies that forget this simple reality do so at their peril, experts said at the event, titled Strategies for the Next Generation of Retailing in Asia.

“If you are coming into Asia, one of the things we keep telling people, is stop assuming that Asia is homogeneous,” said Edge Zarrella, clients and innovation partner at KPMG in Hong Kong. “You have to target the specific consumer that you are after.”
Zarrella works with clients to develop innovative online strategies and find better ways to use the huge amounts of data that online retailing produces on the needs of customers.

The roundtable was held at the Hong Kong Convention and Exhibition Centre as part of the third annual Omni-Channel Retailing Conference. During the conference, KPMG released a report, of which Zarrella was one of the lead authors, on the rapid growth of e-commerce in China.

The global consultancy firm reached out to 10,200 luxury consumers across the country. The report found that online interactions continue to grow; social media drives more sales of luxury goods; and the most important motivation for online Chinese consumers is still the search for better deals.

The market for online retailing is large enough that some companies are using it as their only outlet for goods.
Among them is Glamour Sales China, a company that sells luxury goods online at lower prices. Glamour Sales was part of the KPMG survey and its CEO, Thibault Villet, participated in the roundtable. The future, he said, is bright for companies that can reach enough consumers and can put in place the physical logistics infrastructure to reach them quickly and efficiently.

“Nowadays, consumers are the champions. Consumers have access to information. Consumers are looking online for information and they have multiple options to purchase,” said Villet.

And that means brands have to reach out to consumers more than they ever have before, not only with innovative products but with an appealing shopping experience.

“We are not only selling products or experiences but we are also storytellers,” Villet said. “We can’t just sell the product as we did before.”
One approach that is increasingly popular, he said, is the use of special edition crossover products between multiple brands, or between brands and celebrities.

And in the luxury product space, which is increasingly driven by online sales and online communication between the brand and the consumer, brands rely on cachet more than in just about any other sector.

Discounts may not be the best way to maintain that cachet. On the contrary, said Raphael le Masne de Chermont, executive chairman of Shanghai Tang, which has positioned itself as the first Chinese luxury lifestyle brand. Innovation is certainly key to growth going forward, but that innovation has to be balanced with tradition and a certain amount of inaccessibility.

“One of the most important things will be to keep up prices,” said de Chermont. “Luxury is about dreams. If you devalue the dream, there is no more dream,” he said. “Look at Rolex. Rolex is cash.”

Keeping prices up is just part of the growth equation. To grow sustainably, brands have to be profitable. And in today’s market, particularly in the shopping hotspot of Hong Kong, profitability often requires careful balancing of growth and strategy between physical and online retail. Shanghai Tang uses e-commerce as another boutique, one with growing prospects.

“Everything goes very fast but at least in the next five years we are going to have a very fast growth of e-commerce,” said de Chermont. “It is an interesting battle on profitability … particularly in Hong Kong.”

The main challenge in Hong Kong is the cost of retail space. This is something Shanghai Tang had to contend with when it moved out of its long-time flagship store in the Pedder Building in the upscale Central district. The space was taken over by US fashion retailer Abercrombie & Fitch for a monthly rent of HK$10 million ($1.3 million). That price was simply unsustainable, de Chermont said.
But in the challenge of moving the store, which Shanghai Tang did by April 2012 just down the street, there is also an opportunity.
“That was the best lesson I have taken in my business life, losing our flagship store,” he said. “But what doesn’t kill you makes you stronger … We have totally reshaped our brand.”

The future, said de Chermont, will see brands focus on online retailing and a few strategically placed locations where they can make the best use of the increasingly high rents they have to pay.

Keeping up with Asia’s shoppers
Zhou Li, publisher and editor-in-chief at China Daily Asia Pacific, addresses the audience. Digital boom
The need for more efficient sales channels that reach out to more consumers was made clear in Hong Kong through April when retail sales fell more than 9 percent, in large part due to a drop in purchases by visitors from the Chinese mainland.
“Hong Kong’s retail sector has long been one of the pillars of our city’s economy,” said Zhou Li, publisher and editor-in-chief, China Daily Asia Pacific.

He said Hong Kong’s retail sector had suffered recently, with the biggest drop recorded in luxury goods, such as jewelry and watches. “A sudden and dramatic drop in retail sales could set up a chain reaction in Hong Kong,” he added.

But there is a ray of hope in the projected growth of more than 4 percent in retail sales over the next year in Hong Kong and more than 10 percent in the Chinese mainland. Much of the growth is likely to be driven by the growing popularity of online retail, said Zhou.
Consumers in the mainland, particularly those that don’t have easy access to physical outlets, are particularly attracted to online shopping, he said. Companies like Alibaba or 360buy.com are reshaping the future of Chinese retailing.

“A digitally powered commercial experience is now reshaping the future of Chinese retail practices and the Chinese business model could set an example for the rest of the world,” said Zhou.

But innovation has to be nurtured and risks have to be addressed, such as payment risk and the potential for fraud. Another issue, especially for luxury goods, is meeting the demands of consumers.

The Chinese consumer is demanding and is getting more demanding every year. Women are shopping more, and they know what they want, said Jacqlyne Li, senior regional travel retail manager at Bally GC Retail. But profits may not be immediate.
“You have to be realistic on the return on investment. Some brands say, ‘we need a return on investment in a year’. Three years might be too long but a year is (too short),” said Li.

But there are profits to be had and sales to be made to ever-more-savvy Chinese and Asian consumers. The trick is to reach them, not just physically but through increasingly clever online retailing strategies that target the local consumers in each and every market.

http://www.chinadailyasia.com/asiaweekly/2014-06/13/content_15140717.html