l2 digital iq 2012 – china (excerpt)
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China© L2 2012 L2ThinkTank.com
December 18, 2012
SCOTT GALLOWAYNYU Stern
dOuG GuThrieThe George Washington School of Business
Distribution of this report violates copyright, trademark and intellectual property laws.
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
This half-day, three module clinic hosted at NYU Stern will look at opportunities and trends that brands will face in 2013.
Topics include China, the Changing Landscape of Retail, and The Enterprise Effect. Industry experts will discuss new
opportunities for prestige brands in China, brand case studies will highlight effective strategies of dealing with trends
in retail and L2 will present data on how the Enterprise Effect can be a friend and a foe to prestige brands.
Co-hosted by:
JANuArY 24, 2013 | NYu STerN
FOCuS 2013NYC
Tentative Agenda
MODULE 1: China
(featuring)
Scott Galloway FoUNdER L2
Doug Guthrie dEaN The George Washington School of Business
Vimla Gupta & Andra Mielnicki VICE PRESIdENT oF GLoBaL MaRkETING ExECUTIVE dIRECToR oF GLoBaL CoMMUNICaTIoNS BeautyBank
MODULE 3: The Enterprise Effect
(featuring)
Maureen Mullen dIRECToR oF RESEaRCh & adVISoRY L2
Sonia Marciano CLINICaL FULL PRoFESSoR oF MaNaGEMENT aNd oRGaNIzaTIoNS NYU Stern
MODULE 2: Changing Landscape of Retail
(featuring)
SapientNitro presents Connected Experience: a GLIMPSE INTo ThE hIGhLY PERSoNaLIzEd ShoPPING ExPERIENCE
Alisa Gould-Simon Co-FoUNdER & VP oF CREaTIVE PaRTNERShIPS Pose.com
3
Inquire about your brand’s ranking: info@L2ThinkTank.com
© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
Q3
Q2 Q
4
Q3
Q1
Q2
34%
2011
16%
2012 21%
2012
47%
2011
26%
2011
6%
2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
81% 80% 53% 88% 92% 75% 73% 43% 41% 52% 44%
181% 209% 233% 199% 237% 206%YoY Percent Growth B2C E-Commerce
YoY Percent Growth E-Commerce
178% 164% 99% 143% 124%
2010
13.6
1.49
16.3
1.93
18.3
2.62
25.9
4.08
26.0
5.02
28.4
5.91
31.7
7.26
36.9
10.75
36.6
9.98
43.1
14.35
45.6
16.23
2010 2010 2010 2011 2011 2011 2011 2012 2012 2012
DoubtFor the first time in a decade, China is a question mark for the prestige industry.
1. “Investor Question Series: Will political change in China be a catalyst for growth?,” Barclays, November 16, 2012.2. Global Blue Q3 data.3. HuRun Report 2012.
A midst slowing growth and political uncertainty, luxury executives
are questioning whether the deceleration is temporary or the
beginning of the end. We continue to believe China offers more
upside, often linked to digital, than any other luxury market. However, there
is also more complexity and barriers to realizing return:
• While Mainland China’s organic luxury sales growth softened to single digits,1
Chinese tourist spend abroad increased 58 percent in Q3 2012,2 suggesting
consumer demand remains robust.
• In the next three years, Chinese e-commerce sales are projected to triple.
However, two thirds of online sales will remain on C2C channels such as
Taobao. Poor fulfillment infrastructure, security concerns, and nascent payment
systems pose challenges to traditional direct e-commerce businesses.
• Pricing arbitrage continues to threaten fledging e-commerce businesses.
U.S. and European retailers ranging from Neiman Marcus to House of Fraser
ship to China and advertise products at a fraction of the domestic price.
• Sixty-one percent of Chinese high-net-worth individuals indicate the Internet
is a primary source for brand information, more than any other channel.3
However, while digital, social media, and video platforms may be the best
places to reach Chinese consumers, the landscape is fragmented, with
players emerging and declining in importance each year.
Quarterly Chinese Luxury retail Sales Growth YoY Fixed exchange rate
Q2 2011–Q3 2012
Chinese e-Commerce Transaction Volume Q1 2010–Q3 2012
Total Online Shopping (Billion USD)
B2C Online Shopping (Billion USD)
Sou
rce:
Bar
clay
s E
quity
Res
earc
h
Sou
rce:
iRes
earc
h
Watch the China Video Click to Play
4
Inquire about your brand’s ranking: info@L2ThinkTank.com
© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
Visible handAttempting to ease public concern regarding the widening wealth gap, the
Chinese government continues to place restrictions on traditional luxury
advertising. Just as errant attempts to legislate tobacco companies from
television in the U.S. resulted in a surge of innovation (e.g., CRM, point of purchase
investment, better packaging), the visible hand of the Chinese government has
inspired a wave of innovation in digital marketing via tighter regulation of traditional
media. Chinese digital marketing spend is set to double over the next three years.4
The increased investment and online innovation will inspire consumer exploration and
purchase that may supplant traditional methods, transforming the Chinese digital
ecosystem into the global role model, versus the fast follower.
The Same, but differentMany viewed digital as an agent of integration into the global community.
However, while economic integration marches on, China’s digital landscape
is becoming more distinct. The “Great Firewall of China” has strengthened as
government control over Internet and mobile content tightens, fostering a “Wild
East” mentality resulting in local entrepreneurship and innovation. In this year’s
Index we saw the emergence of several forces: So.com, in a few short months,
has captured greater market share than Google, Pinterest-like curation platforms
Meilishuo and Mogujie are gaining traction, and Tencent-owned WeChat, a mobile
messaging service, has skyrocketed to 200 million users.
underinvestment?Despite opportunity, digital investment remains modest. Brands’ Chinese sites
register average load times of 24.1 seconds, four times their global peers. One in five
prestige brands host their site in China and just over half display prices in RMB. While
Sina Weibo adoption by prestige brands has reached 91 percent, and the industry
has registered double-digit increases in mobile, social, and search engine marketing
adoption, just four brands have launched direct e-commerce since 2011. Third party
players, including Western retailers, are filling the void and offering brands a trusted
platform. However, in exchange, brands sacrifice control and a direct relationship with
the end consumer.
China: Average Time Spent vs. percentage of Ad Spend 2011
Source: Ipsos via Zenith Media and CMMS Summer 2011.
2.8
2.5
0.7
0.3
40%
18% 19%
9%
TV Internet Newspapers Magazines
51%
Percentage of High Net Worth Individuals Who Claim as Source of Product Info
61% 43% 50%
% of Total Ad Spend
Average Time Spent (Hours)
digital iQ = Shareholder ValueOur thesis is that the success of prestige brands in China is inextricably
linked to digital competence. This study attempts to quantify the digital
performance of 100 iconic brands in China. Our aim is to provide a robust tool to
diagnose digital strengths and weaknesses and help managers achieve greater
return on incremental investment.
Like the medium we are assessing, our methodology is dynamic, and we hope
you reach out to us with comments that improve our approach, investigation, and
findings. You can reach us at scott@stern.nyu.edu and guthrie@gwu.edu.
SCOTT GALLOWAY
Professor of Marketing, NYU Stern
Founder, L2
dOuG GuThrie
Dean, The George Washington
University School of Business
Founder, Guthrie & Associates
4. “Q2 2012 Global Digital Advertising Update,” Adobe, July 2012.
5
Inquire about your brand’s ranking: info@L2ThinkTank.com
© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
digital iQ ClassesGenius 140+digital competence is a point of competitive differentiation. Successful multi-channel, digital campaigns; functional sites that cater to local needs; strong social presence and integration across platforms.
ABOuT The rANKiNG
Gifted 110–139Brands are experimenting and innovating across their site, mobile, traditional and emerging social media platforms.
Average 90–109digital presence is siloed by dimension.
Challenged 70–89digital efforts lack.
Feeble <70Investment does not match opportunity.
The Methodology
30% SiteLocalization of site features • Technology: Load Time, hosting Location
• Customer Service & Store Locator
• Product Page
• E-Commerce & Checkout
• Integration of Chinese Social Media
• Innovation: Product Customization, BBS/Microsites, Category-Specific Functionality
20% Digital M
arketing
Search, digital m
edia, and
email marketing efforts
Search
• Traffic
• Web authority
• SEo & SEM:
Baidu, So.com, Google
Advertising & innovation
• online & offline Synergies
• Cross Platform Initiatives
• Emerging Social Platform adoption (WeChat, Meilishuo & Mogujie, iQiyi, Jiepang)
BBS, Social, and Baidu Buzz
• Mentions
• average daily Searches
• Frequency
• Language
• Content
• Chinese Social Media Integration
SNS
• Sina Weibo
• Tencent Weibo
• kaixin
• Renren
• douban
Video Sites
• Youku
• Tudou
• Page Size & Growth
• Post Frequency
• Reposts & Comments
• Tabs & applications
• Engagement Rate
• Views
• Number of Uploads
• View & Subscriber Growth
• Viral Videos
Brand presence, community size, content and engagement30%
Social Media
20% Mobile
Mobile Site
• Compatibility of China Site
• Functionality
• Transaction Capability
iOS Applications
• availability in China
• Popularity
• Functionality
Compatibility, optimization, and marketing on smartphones and tablets
Android Applications
• availability in China
• Popularity
• Functionality
Note: Brand’s were scored based on effectivenees on platforms they participate on
KeY FiNdiNGS
6© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
diGiTAL iQ rANKiNGdiGiTAL iQ rANKiNG
RANK BRAND DIGITAL IQ
5 138
6 136
6 136
8 133
9 129
10 124
11 120
RANK BRAND DIGITAL IQ
11 120
13 118
13 118
15 117
16 116
17 115
18 113
The Estée Lauder Companies
1
2
3
4
RANK DIGITAL IQ
156
152
151
142
Chow Tai Fook Enterprises
L’Oréal
Volkswagen Group
GeN
Ius
GeN
Ius
GIFT
eDGI
FTeD
GIFT
eDGI
FTeD
Zhejiang Geely Holding Group
General Motors
BMW Group
Tata Motors
LVMH
Burberry Group
Clarins Group
Shiseido
LVMH
LVMH
Chanel
Tata Motors
L’Oréal
Shangri-La International Hotel Management
GeNIusEstée Lauder
AudiChow Tai Fook
Lancôme
GIFTeDVolvoBMWBuick
Land RoverBenefit Cosmetics
BurberryClarins
ShiseidoLouis Vuitton
Sephora ChanelJaguarKiehl’s
Shangri-La Biotherm
CoachSK-II
Cartier
AVeRAGeHerborist
Mercedes-BenzSwarovski
CadillacClinique
FerrariTiffany & Co.Bobbi Brown
GucciOrigins
PorscheJaeger-LeCoultre
Marriott Infiniti
ArmaniHilton
InterContinental
CHALLeNGeDDior
Van Cleef & ArpelsRaymond Weil
Westin M.A.C Cosmetics
St. Regis L’Occitane en Provence
GuerlainDolce & Gabbana
IWC SchaffhausenMaseratiYue-Sai
Four Seasons Hugo Boss
Mandarin Oriental Park Hyatt
The Ritz-Carlton
FeeBLeAston Martin
Wyndham Sofitel Luxury Hotels
Alfred DunhillBulgariOmega
RolexLonginesValentino
LexusKempinski
FairmontPiaget
The Peninsula HotelsBottega Veneta
MontblancTAG Heuer
BallyHublotAcura
Calvin KleinPandora
Elizabeth ArdenLamborghiniPorts 1961Balenciaga
Waldorf AstoriaErmenegildo Zegna
ChloéGivenchy
ConradSalvatore Ferragamo
De BeersDiane von Furstenberg
HermésVacheron Constantin
FendiVersace
Shanghai TangPrada
Harry WinstonBaccarat
Patek PhilippeRalph Lauren
KeY FiNdiNGS
7© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
diGiTAL iQ rANKiNGdiGiTAL iQ rANKiNGdiGiTAL iQ rANKiNG
RANK BRAND DIGITAL IQ
19 112
20 111
20 111
22 110
23 107
24 106
24 106
GIFT
eD
L’Oréal
Procter & Gamble
Coach
Compagnie Financière Richemont
Shanghai Jahwa Group
Swarovski
Daimler
RANK BRAND DIGITAL IQ
33 93
34 92
34 92
36 91
37 90
37 90
37 90
Volkswagen Group
Marriott International
Compagnie Financière Richemont
Nissan Motor Company
InterContinental Hotels Group
Giorgio Armani
Hilton Worldwide
RANK BRAND DIGITAL IQ
26 105
27 101
28 98
28 98
30 97
31 96
32 94
GIFT
eDGI
FTeD
Estée Lauder Companies
Tiffany & Co.
Fiat
Estée Lauder Companies
Gucci Group (PPR)
Estée Lauder Companies
General Motors
GeNIusEstée Lauder
AudiChow Tai Fook
Lancôme
GIFTeDVolvoBMWBuick
Land RoverBenefit Cosmetics
BurberryClarins
ShiseidoLouis Vuitton
Sephora ChanelJaguarKiehl’s
Shangri-La Biotherm
CoachSK-II
Cartier
AVeRAGeHerborist
Mercedes-BenzSwarovski
CadillacClinique
FerrariTiffany & Co.Bobbi Brown
GucciOrigins
PorscheJaeger-LeCoultre
Marriott Infiniti
ArmaniHilton
InterContinental
CHALLeNGeDDior
Van Cleef & ArpelsRaymond Weil
Westin M.A.C Cosmetics
St. Regis L’Occitane en Provence
GuerlainDolce & Gabbana
IWC SchaffhausenMaseratiYue-Sai
Four Seasons Hugo Boss
Mandarin Oriental Park Hyatt
The Ritz-Carlton
FeeBLeAston Martin
Wyndham Sofitel Luxury Hotels
Alfred DunhillBulgariOmega
RolexLonginesValentino
LexusKempinski
FairmontPiaget
The Peninsula HotelsBottega Veneta
MontblancTAG Heuer
BallyHublotAcura
Calvin KleinPandora
Elizabeth ArdenLamborghiniPorts 1961Balenciaga
Waldorf AstoriaErmenegildo Zegna
ChloéGivenchy
ConradSalvatore Ferragamo
De BeersDiane von Furstenberg
HermésVacheron Constantin
FendiVersace
Shanghai TangPrada
Harry WinstonBaccarat
Patek PhilippeRalph Lauren
GIFT
eDGI
FTeD
GIFT
eDGI
FTeD
GIFT
eDGI
FTeD
8© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
diGiTAL iQ rANKiNGdiGiTAL iQ rANKiNGdiGiTAL iQ rANKiNG
RANK BRAND DIGITAL IQ
47 76
48 75
49 73
49 73
49 73
52 72
53 71
LVMH
Dolce & Gabbana
Compagnie Financière Richemont
L’Oréal
Fiat
Four Seasons Hotels
Red & Black Holdings
CHAL
LeN
GeD
CHAL
LeN
GeD
CHAL
LeN
GeD
CHAL
LeN
GeD
RANK BRAND DIGITAL IQ
40 88
40 88
42 84
43 81
44 80
44 80
46 78
Compagnie Financière Richemont
Raymond Weil
Starwood Hotels & Resorts Worldwide
Starwood Hotels & Resorts Worldwide
Estée Lauder Companies
L’Occitane International
LVMH
FeeB
LeFe
eBLe
CHAL
LeN
GeD
CHAL
LeN
GeD
RANK BRAND DIGITAL IQ
53 71
53 71
56 70
57 69
57 69
59 67
60 66
Hyatt Hotels
Mandarin Oriental Group
Marriott International
Aston Martin
Wyndham Worldwide
Accor
Compagnie Financière Richemont
GeNIusEstée Lauder
AudiChow Tai Fook
Lancôme
GIFTeDVolvoBMWBuick
Land RoverBenefit Cosmetics
BurberryClarins
ShiseidoLouis Vuitton
Sephora ChanelJaguarKiehl’s
Shangri-La Biotherm
CoachSK-II
Cartier
AVeRAGeHerborist
Mercedes-BenzSwarovski
CadillacClinique
FerrariTiffany & Co.Bobbi Brown
GucciOrigins
PorscheJaeger-LeCoultre
Marriott Infiniti
ArmaniHilton
InterContinental
CHALLeNGeDDior
Van Cleef & ArpelsRaymond Weil
Westin M.A.C Cosmetics
St. Regis L’Occitane en Provence
GuerlainDolce & Gabbana
IWC SchaffhausenMaseratiYue-Sai
Four Seasons Hugo Boss
Mandarin Oriental Park Hyatt
The Ritz-Carlton
FeeBLeAston Martin
Wyndham Sofitel Luxury Hotels
Alfred DunhillBulgariOmega
RolexLonginesValentino
LexusKempinski
FairmontPiaget
The Peninsula HotelsBottega Veneta
MontblancTAG Heuer
BallyHublotAcura
Calvin KleinPandora
Elizabeth ArdenLamborghiniPorts 1961Balenciaga
Waldorf AstoriaErmenegildo Zegna
ChloéGivenchy
ConradSalvatore Ferragamo
De BeersDiane von Furstenberg
HermésVacheron Constantin
FendiVersace
Shanghai TangPrada
Harry WinstonBaccarat
Patek PhilippeRalph Lauren
Key Findings
9© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
RANK BRAND DIGITAL IQ
60 66
60 66
60 66
64 65
64 65
66 64
67 62
RANK BRAND DIGITAL IQ
68 61
68 61
70 59
71 58
71 58
71 58
74 57
RANK BRAND DIGITAL IQ
74 57
76 56
77 55
77 55
79 54
79 54
79 54
diGiTAL iQ rANKiNGdiGiTAL iQ rANKiNGdiGiTAL iQ rANKiNG
The Swatch Group
Valentino Fashion Group
Toyota Motor Corporation
Kempinski Hotels
The Hong Kong and Shanghai Hotels
Compagnie Financière Richemont
Gucci Group (PPR)
LVMH
Labelux Group
Pandora
Volkswagon Group
Elizabeth Arden
Ports Design
LVMH
Honda Motor Company
PVH
FeeB
LeFe
eBLe
Compagnie Financière Richemont
Fairmont Raffles Hotels International
FeeB
LeFe
eBLe
GeNIusEstée Lauder
AudiChow Tai Fook
Lancôme
GIFTeDVolvoBMWBuick
Land RoverBenefit Cosmetics
BurberryClarins
ShiseidoLouis Vuitton
Sephora ChanelJaguarKiehl’s
Shangri-La Biotherm
CoachSK-II
Cartier
AVeRAGeHerborist
Mercedes-BenzSwarovski
CadillacClinique
FerrariTiffany & Co.Bobbi Brown
GucciOrigins
PorscheJaeger-LeCoultre
Marriott Infiniti
ArmaniHilton
InterContinental
CHALLeNGeDDior
Van Cleef & ArpelsRaymond Weil
Westin M.A.C Cosmetics
St. Regis L’Occitane en Provence
GuerlainDolce & Gabbana
IWC SchaffhausenMaseratiYue-Sai
Four Seasons Hugo Boss
Mandarin Oriental Park Hyatt
The Ritz-Carlton
FeeBLeAston Martin
Wyndham Sofitel Luxury Hotels
Alfred DunhillBulgariOmega
RolexLonginesValentino
LexusKempinski
FairmontPiaget
The Peninsula HotelsBottega Veneta
MontblancTAG Heuer
BallyHublotAcura
Calvin KleinPandora
Elizabeth ArdenLamborghiniPorts 1961Balenciaga
Waldorf AstoriaErmenegildo Zegna
ChloéGivenchy
ConradSalvatore Ferragamo
De BeersDiane von Furstenberg
HermésVacheron Constantin
FendiVersace
Shanghai TangPrada
Harry WinstonBaccarat
Patek PhilippeRalph Lauren
LVMH
FeeB
LeFe
eBLe
The Swatch Group
Rolex
FLASH OF GENIUS
10© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
RANK BRAND DIGITAL IQ
96 31
97 30
98 29
99 27
100 26
Prada
Harry Winston Diamond Corporation Harry Winston
Patek Philippe
Baccarat
Ralph Lauren
FeeB
LeFe
eBLe
RANK BRAND DIGITAL IQ
82 53
83 51
84 49
85 48
85 48
87 46
88 44
Hilton Worldwide
Ermenegildo Zegna Holditalia
LVMH
Compagnie Financière Richemont
Hilton Worldwide
Salvatore Ferragamo Italia
FeeB
LeFe
eBLe
Gucci Group (PPR)
diGiTAL iQ rANKiNG
RANK BRAND DIGITAL IQ
89 41
89 41
89 41
92 40
93 39
94 34
95 32
Diane von Fürstenberg
LVMH
Compagnie Financière Richemont
LVMH
Gianni Versace
Compagnie Financière Richemont
FeeB
LeFe
eBLe
Hermès
GeNIusEstée Lauder
AudiChow Tai Fook
Lancôme
GIFTeDVolvoBMWBuick
Land RoverBenefit Cosmetics
BurberryClarins
ShiseidoLouis Vuitton
Sephora ChanelJaguarKiehl’s
Shangri-La Biotherm
CoachSK-II
Cartier
AVeRAGeHerborist
Mercedes-BenzSwarovski
CadillacClinique
FerrariTiffany & Co.Bobbi Brown
GucciOrigins
PorscheJaeger-LeCoultre
Marriott Infiniti
ArmaniHilton
InterContinental
CHALLeNGeDDior
Van Cleef & ArpelsRaymond Weil
Westin M.A.C Cosmetics
St. Regis L’Occitane en Provence
GuerlainDolce & Gabbana
IWC SchaffhausenMaseratiYue-Sai
Four Seasons Hugo Boss
Mandarin Oriental Park Hyatt
The Ritz-Carlton
FeeBLeAston Martin
Wyndham Sofitel Luxury Hotels
Alfred DunhillBulgariOmega
RolexLonginesValentino
LexusKempinski
FairmontPiaget
The Peninsula HotelsBottega Veneta
MontblancTAG Heuer
BallyHublotAcura
Calvin KleinPandora
Elizabeth ArdenLamborghiniPorts 1961Balenciaga
Waldorf AstoriaErmenegildo Zegna
ChloéGivenchy
ConradSalvatore Ferragamo
De BeersDiane von Furstenberg
HermésVacheron Constantin
FendiVersace
Shanghai TangPrada
Harry WinstonBaccarat
Patek PhilippeRalph Lauren
Key Findings
11
Inquire about your brand’s ranking: info@L2ThinkTank.com
© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
5. “China’s Social-Media Boom” McKinsey & Company. April 2012.
e-CommerceIn 2011, China’s luxury e-commerce market was 15 billion
RMB (2.4 billion USD) and is expected to reach 20 billion RMB
(3.2 billion USD) in 2012.5 Pricing transparency, counterfeits,
operational hurdles and poor customer service remain
challenges for prestige sales online.
However, amid challenges and market uncertainty,
e-commerce adoption increased little year-on-year, and only
four brands launched online shops.
The Beauty category continues to lead in site sophistication.
All but two Beauty brands in the Index (Elizabeth Arden and
Guerlain) sell through their Chinese brand sites. In the past
year, Bobbi Brown and Shiseido launched native e-commerce.
Lancôme and Herborist removed links to Chinese third-party
e-tailers, focusing efforts on their direct business.
The Fashion category is gaining momentum. In November
2012, Coach launched e-commerce following a month-long
trial store on Tmall in December 2011. Bally, Dolce & Gabbana,
and Armani are selling through brand sites powered by
YOOX. Other brands rely on third-party partners. Ermenegildo
Zegna (until recently) and Salvatore Ferragamo partnered with
thecorner.com, the latter diversifying its consumer reach by
partnering with Chinese local third-party e-tailer, Xiu.com.
Chloé links to multiple third party e-tailers, including sister
company NET-A-PORTER. This year, the brand added Hong
Kong-based Lane Crawford, which offers Chinese language
and payment support. Shanghai Tang, more popular among
Western consumers interested in a taste of Chinese culture,
removed the Chinese version of its e-commerce site but still
ships to China through its English-language site.
Shipping and returns policies percent of e-Commerce Sites (excluding hospitality Sites) Offering the Following
October 2012, n=21
Returns Free Shipping No Minimum
Free Shipping with Minimum
Average Minimum: RMB 485 (77 USD)
e-Commerce penetration by Category October 2012
100%hospitality
n=17
89%Beauty
n=18
41%Fashion
n=27
5%Watches & Jewelry
n=22
1
2
3
4
Key Findings
12
Inquire about your brand’s ranking: info@L2ThinkTank.com
© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd
exCerpT from the 2012 digital iQ index®: China To access the full report, contact membership@L2ThinkTank.om
Site FunctionalityLow e-commerce penetration and a preference for social
media render sites less important. However while only 19
percent of Chinese consumers visit an official brand site,6 48
percent say these sites influence their intent to purchase.7
The adoption of Web 2.0 tools, including social media
sharing, user reviews, and live chat, has increased year-on-
year in China. Beauty brands are most likely to feature live
chat and user reviews but fail to provide international store
locators for global travelers.
With the exception of Rolex, all brands provide store
locators, but 41 percent do not have a centralized Chinese
customer service number. Non-e-commerce sites (e.g.,
Automobiles) are more apt to publish prices on their sites.
E-commerce brands that do not publish prices may be
missing an opportunity as Chinese consumers often
research prices before traveling abroad.
6. “The World’s Next E-Commerce Superpower,” The Boston Consulting Group. November 2011. 7. Ipsos China. 2012.
Site Functionality YoY Comparison percent of Brands employing the Following
2011 vs. 2012, n=77
Site Functionality by Category percent of Brands Within each Category employing the Following
October 2012
Store Locator for China
96%94%
64%61%53%
10%
44%38%
18%10% 13%
6%
International Store Locator
Product Sharingvia Chinese Social
View Price in RMB
User Ratings/Reviews
Live Chat
Watches & Jewelry (n=22) Hospitality (n=17) Fashion (n=27) Beauty (n=18) Auto (n=16)
2011 2012
Store Locator for China View Price in RMB Wishlist User Reviews/Ratings Live ChatInternational Store Locator Customer ServiceNumber for China
99%of Index
56%of Index 38%
of Index 23%of Index 13%
of Index
65%of Index 59%
of Index95%
100%
100%
100%
100%
95%
88%
85%
22%
13%
94%
37%
94%
75%
18% 9%100%
33%
83%
81%
69%31%
63%75%
0%
9%29%
4%
0%83%
5%12%7%
0%44%
Key Findings
13
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SearchLaunched in August 2012, So.com leapfrogged established
players to become the second largest source of search traffic
in China.8 Leveraging its popular browser and Internet portal,
So.com has captured 10 percent of the Chinese search
market, leaving Google with less than five percent. Baidu
remains dominant, but has dropped to 73 percent market
share, down from 81.7 percent in August 2011.9
Google has ceased to be relevant for Chinese consumers.
As its market share has dwindled, organic visibility for
Chinese sites on the platform is down significantly year-on-
year, with Hong Kong and Taiwanese sites maintaining the
greatest visibility.
So.com has promised improved search results, but has yet
to match Baidu’s performance. Only 19 percent of the 100
Chinese brand sites appear first in organic search results on
So.com versus 34 percent on Baidu. In addition, 52 percent
of Chinese brand sites appear outside the top three organic
search results on So.com.
8. “360 Search Now No.2 Largest Web Search Engine in China, Here Is Why,” Technode, August 22, 2012.9. “Search engine usage analysis reports,” CNZZ, November 2012.
Share of Organic Search real estate on Search for Brand Term Baidu vs. Google vs. So.com
November 2012
20%
41brands
28brands
27brands
20%
20%
10%
9brands
35brands
31brands
10%
10%
30%
38brands
23brands
16brands
30%
30%
40%
8brands
5brands
20brands
40%
40%
60%
1brand
2brands
3brands
60%
60%
70%
2brands
1brand
70%
70%
80%
80%
80%
50%
2brands
5brands
2brands
50%
50%
90%
90%
90%
100%
100%
100%
Bobbi BrownThe Ritz-Carlton
Fairmont
Chow Tai Fook
Kempinski
Gucci
Shangri-La
Chow Tai Fook
Longines
DVF
The Ritz-Carlton
The Peninsula
Park Hyatt
Hilton
Estée Lauder
InterContinental
Bobbi Brown
The Peninsula
Average Brand Share of Organic Search Real Estate: 20%
Average Brand Share of Organic Search Real Estate: 22%
Average Brand Share of Organic Search Real Estate: 23%
On average, brands held 12% of real estate in Paid Search:
On average, brands held 14% of real estate in Paid Search:
InterContinental is the sole brand engaging in Paid Search
Key Findings
14
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100%
100%
82%
85%
94%
29%
39%
68%
52%
56%
41%
50%
14%
26%
19%
91%of Index
12%
28%
14%
0%
38%
6%
17%
18%
11%
38%
6%
11%
5%
7%
19%
6%
22%
32%
15%
0%
16%of Index
17%of index
9%of Index
20%of Index
51%of Index
29%of Index
Sina Weibo Youku Kaixin Tencent WeiboDouban RenrenTudou
Sina Weibo
88%
60%
26% 23% 21% 18%10%8% 3% 6%
16%8%9%
18%27%
64%
Youku Kaixin Tudou Douban Tencent Weibo Renren Jiepang
Three Month Traffic Growth (September–November 2012)*
Registered Users (Millions)+
+6.0% -4.8% +2.2% -1.5% +5% N/A -19.6% -1.8%
400 263 130 227 60 373 162 3
Social MediaChina is home to the world’s most socially active online
population. Ninety-five percent of Internet users in Tier 1, 2
and 3 cities are registered on at least one social media site
and more than half use microblogs.10 Forty percent have either
read or posted a product review, and nearly 80 percent use
social media to learn more about luxury brands and products.11
Social media adoption by prestige brands is now ubiquitous.
Only five brands in the Index have no social presence. Ten
are present on more than five platforms, compared with just
two brands last year. The social media ecosystem in China
remains fragmented and increasingly competitive with a
plethora of new entrants.
10. “China’s Social-Media Boom“ McKinsey & Company. April 2012. 11. “The World’s Next E-Commerce Superpower” Boston Consulting Group. November 2011.
Social Media Adoption YoY Comparison percent of Brands on the Following platforms
October 2012, n=77
Social Media Adoption by Category percent of Brands present on the Following platforms
October 2012, n=100
Watches & Jewelry (n=22) Hospitality (n=17) Fashion (n=27) Beauty (n=18) Auto (n=16)
Source: Alexa
2011 2012
*Source: Alexa+Source: Platform Q3 Press Releases
Key Findings
15
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MobileWith more than a billion mobile phone users, China is the
world’s largest mobile market. Search, social networking,
and shopping are popular activities on smartphones.
Mobile is becoming an increasingly influential path to
purchase and point of purchase. Ninety-seven percent
of Chinese smartphone users research products on their
phone and 59 percent have made a purchase.12 Still in its
infancy, mobile shopping accounts for 5.5 percent of digital
commerce.13
This year has seen double-digit increases in mobile
investment targeting Chinese consumers. Still, just 23
percent of brands maintain a mobile-optimized version
of their China site, and only a third of these sites are
e-commerce enabled.
12. “Our Mobile Planet: China,” Ipsos/Google, May 2012.13. “GMV of Mobile Shopping Quadruples to 15.64 Billion Yuan in Q3 2012,” iResearch, November 16, 2012.
14. “China at Your Fingertips,” Group M, July 2012.15. “China Internet Development Report,” CNNIC, July 2012. 16. “China at Your Fingertips,” Group M, July 2012.17. “Our Mobile Planet: China,” Ipsos/Google, May 2012.
Chinese smartphone users spend an average of 5 hours a day on their devices, checking them every 6 minutes.14
There are now more than 388 million Chinese mobile internet users, surpassing the number of desktop internet users for the first time in July 2012.15
38 percent of mobile web users in China access the internet solely through their mobile phones.16
With 3G penetration lingering at just 25 percent, China is second only to India for the world’s slowest mobile internet speed.17
1
2
Chinese Mobile Site implementationOctober 2012 (n=100)
Mobile Optimized
Broken Site/ Flash
HTML5
Non-HTML5
23%
7%
43%
22%
5%
Redirects to English Mobile Site
16
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TABLe OF CONTeNTSClick to Jump To:
5 Methodology
6 Digital IQ Rankings6 Genius
7 Gifted
8 Average
9 Challenged
10 Feeble
14 Key Findings14 Estée Lauder: In the Company of Genius
15 Pulling Away
16 Biggest Winners & Losers
17 E-Commerce
19 Site Functionality
20 Payment & Load Times
21 Brand Owned BBS Sites
22 Third Party BBS Sites
23 Social Media
24 Sina Weibo
26 Social Media Buzz
27 Video
28 Video Localization
29 Declining: Kaixin, Renren
30 Jury Is Still Out: Tencent Weibo, Jiepang, Douban
31 Emerging: WeChat, Meilishuo & Mogujie, iQiyi, Xiaozhan
32 Search
34 Mobile
36 Email
37 Flash of Genius37 L’Oréal: Multi-brand E-Commerce/Sampling
38 Chow Tai Fook: Multi-Channel Commerce
39 Benefit Cosmetics, Lancôme, Chow Tai Fook: Singles’ Day
40 Gucci, Burberry: Social Media Sampling
41 Dior, Chanel: Online Magazines
42 Gucci, Four Seasons, LVMH: Online Magazines Continued
43 Louis Vuitton, Chanel: Offline + Online
44 Swarovski: Sparkling Secrets
45 Lancôme: Doll Eyes Bar
46 Audi, Buick: Driving Online Engagement
47 Shangri-La: Mobile
48 L2 Team
49 About L2
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51 East 12th Street, 2nd Floor New York, NY 10003 L2ThinkTank.com info@L2ThinkTank.com
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