How are China’s Emerging Technologies Shaping The Future of Luxury?

Chinese consumers today spend over USD$750 billion online – more than the US and UK combined. China generates more e-commerce activity than any country in the world, but what is striking is how dramatically different China’s digital landscape has evolved compared to the West. From technology platforms and customer online behaviors to how consumers shop in digital marketplaces, China has evolved on its own.

Retailers looking to attract Chinese customers are finding they must embrace new, Chinese home-grown platforms, as well as the range of options available. Artificial intelligence, virtual reality, smart mannequins, instant buying, and live-streaming name just a few of these new technologies.

To many, the fast-changing digital landscape can be overwhelming and exhausting. Lilian Lee, Partner at Reuter Communications spoke at this year’s “Experiential Luxury Marketing in the Digital Age” conference held earlier this month in Hong Kong providing insight into China’s fast evolving digital marketplace and the future of luxury experiences.

Here are the top five emerging technologies discussed at the conference and what marketers can learn about them.

1. Live Streaming and Online Sales

Live streaming is one of the fastest growing technologies in China at the moment. In 2016, Chinese live streaming users exceeded 312 million with over 200 apps and platforms, according to the Chinese consulting company iiMedia Research. Credit Suisse estimates that the live streaming market in China is nearly the same size as the country’s total movie box office – worth 40 billion RMB last year. Moreover, sales on live streaming is expected to exceed 100 billion RMB by 2020, according to a report by Huachuang Securities.

The most commercially-focused online sales platform in China is Taobao Live, owned by Alibaba. As of April 2017, over 10 million users view Taobao Live per day, and over 1,000 hosts have streamed on the platform. The conversion rate – percentage of users who make a purchase during the streaming- of Taobao Live is over 30%. Tmall, Taobao’s brand retail section, has a conversion rate between 10 and 20%.

A top KOL, such as Zhang Dayi, can attract 410,000 views and generate over 20 million RMB revenue in a 2-hour live streaming session. While these figures are impressive, what is more interesting is that live streaming opens up opportunity for grassroots and micro-influencers. Marketers should tap into these focused and local micro-KOLs across all industries, as they are perfect for attracting niche consumers.

2. VR SHOPPING

Virtual reality shopping is no longer science fiction. With the release of Alibaba’s Buy+ in November 2016, we can now experience interactive shopping from the comfort of our own home. Buy+ allows shoppers anywhere in the world to browse the stores of Macy’s, Costco, and Target in the U.S. as well as selected shops in Tokyo. The application is linked with Alibaba’s AliPay, so customers can pay with a nod while wearing the VR device. Customers can also select items from shelves, virtually try them on, and interact with models.

What’s even more impressive is that Alibaba is able to mine the data of hundreds of millions of consumers to create personalized experiences. This creates new opportunities for brands to tailor their messages, product selections and virtual storefronts to grab attention and drive traffic to sales. For retailers who do not have a brick-and-mortar presence in China, this could be a game changer and a dream come true.

3. Artificial Intelligence (AI)

Artificial Intelligence, computer programs that comprehend, interpret, and respond to humans’ input, has been discussed for decades. But now the Chinese government is taking it very seriously and have recently included AI in China’s 13th five-year plan as of last year. As a result, we are witnessing an investment boom of tens of billions of RMB into AI research, with a particular focus on deep learning.

Marketers and retailers see this research benefiting the commercial side through the development and advancement of chatbots. Chatbots were used in China as early as 2014 by Burberry to offer exclusivity during Fashion Week through WeChat. Now brands are able to sell products directly to more than 900 million WeChat users efficiently by using chatbots as a customer service tool. As a result, customers are guided through the purchase process and can make informed decisions based on personalized and tailored responses to their requests.

4. instant delivery and drones

Nowadays discerning customers who think of luxury experiences want ‘instant’ everything. This includes the expectation of purchases arriving faster than before. This prompted Gucci to launch a 90 minute store-to-door service across 10 major cities through a partnership with e-commerce platform Farfetch. Autonomous drones could be a major advantage for brands looking to deliver their services quickly without the high cost of labor.

A leader in this field is JD.com, an e-commerce giant in China second only to Alibaba. JD.com launched its drone delivery service this year offering 20 fixed routes with 5 different types of drones. The company expects to expand its drone fleet to 150 drones with over 100 routes by the end of 2017. Last month, JD.com announced plans to open 150 air bases in the next three years, hoping to reduce freight delivery costs by 70% even in mountainous areas such as Sichuan making the plan not only a better experience for discerning customers but also helping to improve the quality of life in rural, less accessible areas.

5. Driverless Cars

Hailing from China, Baidu is a dark horse in the driverless car market. In April 2017, Baidu announced that it will release its autonomous driving technology as open-source in July. Their plan is to share it with driverless cars in “simple urban road conditions” by the end of the year. After receiving a driverless car test permit in California in 2016, the company expects its technology to enable cars to hit highways and city roads by 2020. This is another example of a Chinese tech titan stepping up to challenge Google and Tesla.

CONCLUSION

To say that China has given rise to one of the most advanced digital marketplaces in the world with sophisticated shoppers is an understatement. Marketers and retailers need to pay close attention to the rapid rate of innovation and integration to stay on top.

At the same time, while it’s easy to get distracted by the next new, shiny thing, it is important for marketers to stay focused on getting the fundamentals right. They must ask themselves whether these new platforms or technologies make sense for the brand, and if they support the optimal customer experience and journey. Staying customer-obsessed and building brand stories through powerful content remains the only constant in this fast-moving industry. These technologies are all the rage, but they can not replace human emotion, which experienced marketers know is always the best way to connect with your audience.

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