Amid the changes and challenges in the APAC premium retail market, WARC speaks to ESSEC Business School’s Sonja Prokopec about who the region’s luxury consumers are and what luxury brands have to do to connect with them.
What is the state of premium and luxury retail environments in APAC? What are the key shifts and challenges that marketers are grappling with?
First, a bit of context. Before the pandemic happened, around 30% of luxury purchases were usually happening outside of the consumers’ home countries. There was not a lot of local consumption of luxury. Because of that, many companies were catering to tourists rather than local consumers.
But because of COVID-19, the first big shift for marketers is how to cater to local consumers who had the extra money to spend because they couldn’t travel anymore. Luxury marketers had to think about how to incentivise local clientele to spend in their markets, as opposed to planning their purchases for whenever they travelled.
The second shift is about how to engage with luxury consumers through digital channels. Asian consumers are extremely digitally savvy. And that's probably one of the biggest differences with the Western counterparts, who are definitely not moving at the same rate.
The third shift is the growth opportunity in Southeast Asia and Singapore becoming a hub for the region. Historically, the first market that was important for luxury was Japan but now it’s considered a mature market. Most of the headquarters for luxury companies were based in Hong Kong, and then China became a giant and critical market for all luxury companies.
But now Southeast Asia is becoming much more important, especially with growth in markets like Indonesia, Thailand, Vietnam and recently, the Philippines. Luxury brands are slowly opening stores there and tapping into those consumers who historically have always been the elite group of consumers that would travel.
The behaviour is changing in those markets with more local consumption and growth. Singapore is becoming a very important hub. For example, L'Oreal shifted their headquarters from HK to Singapore.
Who are the APAC luxury consumers today and what makes them different to the West? What must luxury brands do differently to connect with them?
Before, a lot of luxury Asian consumers would be motivated by certain products they wanted to have and were interested in the heritage to a degree. But mainly, they were more on a mission to get certain products as part of their trip experience.
Now, when they're shopping locally, they want to be engaged in a much more meaningful way. This is different from when they would travel and shopping would be more transactional. Luxury Asian consumers are becoming more demanding. They are more interested about what happens behind the scenes. For example, in beauty, they want to know about the ingredients and the sustainability story. Brands need to also understand that and cater to them in a more meaningful way.
Can you give an example of a luxury brand in Asia that is effectively targeting this new Asian luxury consumer?
There are a lot of high jewelry brands that have really reinforced their engagement efforts locally. For example, Van Cleef organised an immersive experience for their clients. It was for their high-end jewelry clients.
There are brands who are engaging or reaching out to clients through different partnerships. The Robb Report partnered with Montblanc to create an event where they shared a little bit of their history but to also create that sense of community with like-minded people who have something in common and also connecting to the story of the brand.
Now that digital is becoming a key channel, what is its role compared to more traditional channels such as brick-and-mortar for luxury brands?
Digital has become the fastest way that you can reach your consumer. If used properly and with the correct data, you can personalise how you approach your consumer through personalised emails. There is a lot of power with digital in creating that desire with the product.
Phones are an extension of our identity. So instead of thinking, “Is the consumer going to open that Vogue and see that print ad? Or are they going to pass by a shop and want to walk in?”, now you can actually get to them much faster, track their behaviour and then personalise the experience. And if you're able to do that level of personalisation, you're looking at significantly more engagement and more conversion.
Even though luxury companies have resisted this for very long, now they are trying to innovate, which is not something traditional players have been good at compared with mass market players. That’s changing now. For example, Bulgari has launched their website here in Singapore and it allows you to see products in 3D and AR. They are really trying to touch the consumer in a more immersive and engaging way, and then either convert them right away online or bring them back to the store.
What's some best practice advice that you can give to luxury brands looking to make the transition into omnichannel?
There is a difference between omnichannel and multichannel. Omnichannel involves all channels and centres around customer, while multichannel involves many channels and centres around product. Multichannel allows the customer to choose the channel of choice but then they have to stay within the confines of the chosen channel. Omnichannel allows the customer to move seamlessly between the channels and offers customer experience within and between the channels.
People talk about omnichannel very freely. When you have that discrepancy, the experience won't feel seamless which is the key word. This disconnect causes frustration with the consumer.
And then how forgiving the consumer is depends on how desirable your brand is.
If a consumer is only mildly motivated to buy, this level of frustration will make them go elsewhere.
So my first piece of advice is to consider how you can integrate your e-commerce into your other channels in a more seamless way where your e-commerce becomes an extension of your store, so there is a seamless transition in how the consumer crosses over from one channel to another.
My second piece of advice is to be careful about the partners you choose to associate yourself with online. In the short term, certain partners could be very beneficial to you in terms of the short-term sales but they could also be degrading your brand image in the long run.
So it's confusing to the customer. Not every company can control their distribution entirely but similar to how you control it in a traditional environment, you have to do the same in a digital environment. You have to think about what is the short-term win but a long-term loss. That’s a balance that strong luxury brands understand. But those who suffer with the consistency of the brand image, they focus too much on the short-term.
Can you give an example of a luxury brand doing this well in Asia?
There are a number of brands that only sell through their own websites which are controlled. For example, traditional players like Louis Vuitton, Bulgari and Burberry are very good at controlling the channel and the experience that you have. They have some partnerships and you can find them on platforms like Farfetch. It’s tried and tested and both brands are targeting the same type of clientele with more or less the same kind of an experience, as long as you're controlling your channels.
For example, Lazada is trying to do a premium channel and that's a risky strategy depending on what your strategy is in the region. You can reach a lot of customers but it could also be damaging to your brand image.
You recently worked with Tiffany on their transition to omnichannel. Any best practice you can share from that initiative?
Tiffany is a great example of a company that's been extremely digitally savvy. They are significantly investing in digital. But even with the shift into digital and omnichannel marketing, it’s still important for brands to think about their overall strategy and product portfolio.
At the end of the day, it’s still about how do you make your brand desirable. Even though a brand is very good in omnichannel, it still needs to think strategically – through the product, storytelling and visual codes. The bigger question for luxury brands is about desirability and digital is an operation of that.