With a career in China’s luxury world, Thibault Villet co-founded Mei.com in 2010, was the CEO and remains as the Chairman. Mei.com is now one of the largest luxury e-commerce platforms in China, having been acquired by the Alibaba group in 2015. It has partnered with thousands of top brands and with looks and products curated by stylists from luxury designer backgrounds.
Mei.com, in collaboration with KPMG, recently released the results of their survey of over 3,000 mainland China consumers (with a focus on the Millennial / non-Millennial divide), which aimed to improve understanding of their current and future shopping habits.
Just a few of the insights within this report were:
- 77 percent of respondents chose online shopping as their favourite leisure activity
- The majority (74 percent) of Millennials in China are interested in innovative products and services associated with emerging technologies.
- Over 67 percent indicated they post comments on an online store following a purchase, while 59 percent would share their product feedback on WeChat or other social media platforms.
We sat down with Thibault for a quick Q&A, to get his insights on the present and near-future issues of the luxury market in China.
In the China luxury market, there have been so many developments and there is non-stop change. What do you see as the next step of changes for the market and the consumer?
What we see is the ongoing sophistication of the Chinese consumer. They are embracing luxury, not only with a theme of individuality, but more than this, what I call singularity. They want a the truly ‘unique’, one-off. Therefore, we will see a major success of limited editions – not only a change of colour and so on, but limited editions created via collaborations and totally new creative styles.
This is important for Chinese consumers such limited, collaborative results are more authentic. That direction of authenticity is a key point. Another key point for 2018 that we are reaching tipping point for luxury designer ready to wear. In the last 20 years, we saw the rise of beauty and prestige in fashion, followed by accessories such as watches, jewellery, then mens fashion. What we saw toward the end of 2017 and predict it to continue is a strong trend – driven by Millennials – for luxury designs also in the form streetwear and the like. They are embracing ready to wear in a big way.
While many brands are either already in China or at the point of entering, we still talk to some people who are ‘deciding’ whether to enter the China market. Honestly, it surprises us. Why would you think that some brands even need to consider this?
If they are managed outside of china, they have a clear disadvantage. I’ll actually quote a good friend of mine at this point – my friend said to me that brands managed by a Hong Kong HQ who come to stay at a 5 star hotel for a couple of nights now and again aren’t exactly maximising their understanding of China!
It is understandable that any company needs to balance their investment between distribution, investment in image, digital and media, as well as other ways such as product placement, co-branding with celebrities and KOLs, so it’s a big challenge to decide all of this.
They must resonate with Millennials, as they are the ones driving consumption.
This becomes ever-more demanding, so it’s a vicious circle; if you don’t adapt then you are already missing out on the potential and the investment to catch up is an issue.
Moreover, it’s more competitive and fragmented now. Distribution is not simply by city tiers one through four, but it’s about a full reading between the luxury consumer community, about understanding customer profiles and an online-offline mix which needs to be integrated.
So it’s complex, needing a focused and diverse investment. It’s more difficult than just getting a few pages in Vogue and Elle. Yet the opportunity is here, the consumption is here, and the leading luxury market segment is here.
We read plenty of snippets about ‘lower tier’ cities. Are these really places for luxury brands to go to? Or are they not quite there yet?
There is rising interest to buy luxury in these other tier of cities.
They have purchasing power, and luxury still represents the dream of self realisation and status.
So it is there, but for our clients, it is divided on their own aspect. Some decide to build ‘mega stores’ in tier 1 and 2 but they don’t want to dilute the brand, thus they do not go further into other tiers of cities, even with e-commerce.
Other brands are more pragmatic, so they believe they have to serve the customer. They don’t want to rely on customers to only to buy online or travel to buy. So it depends how you position your brand.
If you are right at the height of luxury, then you may opt for limited distribution and feel safe with e-commerce and for your customers travel. For those needing a wider reach then you may look for lower tier cities with consumption power, but also with a logical sense of convenience – don’t build somewhere a one hour drive from a major city … but if you look at, for example, somewhere like Guiyang, it’s difficult to reach but still has a customer base.
The international, ‘outside world’ has endless articles to read, via all media, on LinkedIn and so on, about China. Yet what is it that those overseas still do not understand about China?
In the luxury segment there is the tendency to focus on distribution. Some people, or perhaps therefore some brands, have not understood the change that China has gone through.
It is not as simple as ‘low hanging fruit’ – they may not realise the level of engagement needed for the consumer, the feeling of creativity and giving a consumer the aspirations and connection with a brand.
Indeed, in China it is a totally different e-commerce eco system, they do get that, but they feel lost on how to work with it. One piece of advice in this regard is that brands simply must spend more resources, have more people and be in the market to understand it.
It changes so much, and so quickly, that if brands don’t get in and engage. they risk missing the opportunity.
They need to understand the aspiration of the Chinese consumer. They are not only random travellers that spend, but you need to understand the motivation; who are they, and how do you build the relationship based on authenticity and confidence.
In that regards, Chinese customers, especially Millennials, are driven by authentic creation. Brands must understand this and even decide to take a bit of risk with co-creations, collaborations with Chinese figures. Not celebrities, but Chinese artists, designers of all types, creative people and so on. There is more and more pride in ‘their own’, as well as trust in something Chinese.
On VR and AR, are they in danger of becoming a gimmick, or do they have direct use?
VR and AR really have use. Recently, we have seen a growth in gamification, and I think it will move to a more of a ‘shopping assistant’ type of function.
We see it in categories like beauty, where they both becomes more mainstream. So for fashion, it can be applied when customers are looking for confidence, or to simulate or improve their experience. The demand is there.
The tech also evolves fast. There are companies developing VR solutions that are amazing. I recently visited a company that is helping luxury cars offer customisation services. So let’s say when you go to buy a Ferrari, you can personalise a lot of the interior and exterior, visualising the options.
The good news is that Chinese customers are very open to new experiences. In fact, it goes back to a key trend; 10 years ago brands were only considering ‘selling’, while in the last 5 years we saw a massive change towards brand content, made to engage and inspire the customers. Now, we see a desire – again driven by Millennials – to be engaged through experiences.
It’s not only engagement with travel, hotels, food and so on, but there is an interest for technology.
Whatever can help the consumer understand the brand and build confidence and a result in the ‘singularity’ that they crave, these tech and apps are appreciated by such consumers, and therefore they represent an opportunity for brands.
Just one example is Starbucks new Roastery – powered by Alibaba technology. Starbucks recognise that China is the leading market and biggest partner. They invest their concept, powered with new tech and experiences, in China. Brands should keep in mind that China is the present and future’s largest market. They have to invest in the latest concepts and interactive technologies, to create long-lasting relationships.