European luxury brands need to understand consumer habits, track behavioral changes and bank on online community

During this year's Spring Festival it is estimated that more than 6 million Chinese consumers ventured overseas. And in recent years almost 100 million Chinese consumers have enjoyed an annual foreign holiday.

Many continue to explain these foreign holidays as shopping experiences but very recent research by Exane BNP Paribas and customer engagement specialists Conctactlink indicates that Chinese shoppers are starting to purchase more goods in the mainland itself rather than goods from overseas.

During the second half of last year sales of major European brands such as LVMH and Burberry increased significantly, and unexpectedly, across the Chinese mainland market. The report also finds that some European luxury brands remain uncompetitive in comparison with local Chinese brands. Specifically, European luxury brands lag behind their Chinese competitors with their digital marketing campaigns and in customer engagement online generally.

Titled The Online Purchase Experience in China: Local Champions Dominate, the report highlights the almost revolutionary change in digital marketing that is leading to a significant transformation of Chinese consumer behavior.

According to the report, Chinese consumers, who account for 30 percent of the total global spend on luxury goods, are the most digitally advanced. But the report also concludes that, while European luxury brands are improving their digital marketing and e-commerce effort dramatically, their understanding of the Chinese social media scene is very limited.

The report repeatedly highlights European luxury brands' continued reluctance to embrace Chinese social media and an over-reliance on email for communication. Increasingly engaged and discerning Chinese luxury goods consumers now consider social elements essential in any online offering. For example, chatting with other consumers about product and brand experience now has a critical role in the decision-making process. Most Chinese e-commerce operators, notably Tencent's WeChat, provide a full range of online assistance mechanisms as well as the option to pay. At present European brands competing across the Chinese mainland market are not offering the online social experience that Chinese consumers value so highly and that is being provided by the majority of Chinese competitors.

The report also notes that European luxury brand producers and retailers continue to assume that their products outside the country are perceived as far superior and more authentic than the same thing inside China. Not only are Chinese luxury brands beginning to threaten the more established European branded goods but the report finds that Chinese consumers are also starting to trust foreign luxury brands for sale in China, mainly due to online contacts and discussion.

My ongoing consumer research in China continues to provide findings which are consistent. European brands, and luxury goods remain ahead and enjoy significant competitive advantage but the gap is narrowing. Chinese brands have capitalized substantially on the use of social media in order to position their brands more competitively. Even though vast numbers of Chinese shopping tourists regularly make luxury brand pilgrimages to the fashion capitals of Europe, such as London, Paris and Milan, far too few European brand producers even make use of the English language version of Chinese social media such as WeChat.

Change among Chinese luxury consumers, many of whom are below the age of 30, goes far beyond the use of technology and online shopping. Young Chinese consumers are quite rapidly becoming far more independent, self-confident and even assertive, yet European luxury brand producers have so far shown little understanding of this changing set of values and personal characteristics.

It would be extremely dangerous for European luxury brand producers to assume that these changes somehow signal "Westernization" or even "Americanization" and that similarities in consumer behavior across the US, Europe and China will become more apparent.

Paradoxically, there is now a substantial body of research which shows that Chinese consumers now seek luxury brands that in some way project a Chinese image with a combination of associations with Chinese culture.

The European luxury industry desperately needs to gain real understanding of the changing Chinese consumer and their online shopping expectations in particular. Above all, European luxury brand producers need to design and implement effective digital marketing campaigns. High ranking positions on Baidu and other Chinese engines should be a key target of any digital marketing activity. New product launches and updates should be announced on social media and directly to Chinese consumers' mobile devices.

Chinese consumer perception and interpretation of information conveyed via social media differs significantly from the typical European or American perception. Social media messages, both chat and commercial communication, are seen as far more authentic and believable by the typical Chinese consumer.

Crucially, use of Chinese digital platforms by European luxury brands should not be confined to product information and brand imagery but should also connect with local and national Chinese culture. Such a connection will resonate with Chinese luxury consumers, who are now determined not to be seen as simply following the crowd. Self-identity now drives the Chinese consumer much more and local and national Chinese culture will always play a pivotal part here.

It is vital, therefore, that European luxury brand producers turn more and more to local design and advertising agencies and even go so far as considering co-branding partnerships within the rapidly emerging Chinese luxury industry.

Brand repositioning that requires significant dilution of any Western or European image may necessitate changes to many aspects of a brand's identity, including the brand name itself. If such brand repositioning also requires a blend of Chinese and European identity, the increasingly diligent, knowledgeable and tech-savvy Chinese consumer may almost demand the presence of a Chinese partner alongside an established European brand.

Finally, the message to the European luxury industry is not simply to jump onto the WeChat platform and/or populate Sina's Weibo site. WeChat and Weibo dominate the Chinese social media landscape and should, therefore, be seen as critical to current and future success. But if a real understanding of the changing nature of Chinese consumerism is to be gained then careful monitoring of a range of widely used Chinese social media sites is necessary. In particular, lesser known social media platforms require urgent attention, such as Baidu's Tieba and the social networking site Douban.

Baidu Tieba is a widely used social media platform that allows users to post and discuss reviews of brands as well as everyday entertainment experiences such as films and concerts. Tieba is not nearly as popular as WeChat and Sina Weibo but can still provide important insights into changing consumer habits and tastes.

Douban, not too dissimilar to Baidu's Tieba, is another important Chinese social networking website which allows registered users to record information and create content related to film, books and music, as well as any recent events and/or activities in Chinese cities.

European luxury brand producers need to think and act "digital" in the Chinese marketplace and, even more importantly, to look deeper into social change and accept that, where younger Chinese consumers are concerned, the only thing that is permanent is change. The typical Chinese luxury brand consumer is more modern but this does not mean more Western. Nor does it mean more European or American and it certainly does not mean any less traditional.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer at Southampton University.

The views do not necessarily reflect those of China Daily.