by Added Value

customer serviceNature branded

Today’s cultural conditions that shape Chinese con-sumers’ luxury mindset?

Highlight of the key findings

• From a cultural insight stand point, we have identified five macro drivers shaping Chinese consumers’ luxury consumption.

• These are: increasing internet exposure, cultural confidence and optimism, nature as luxury, re-appreciation of the real, sophistication – discerning eye.

• We still see significant potential for luxury brands in China, with Chinese brands playing an increasingly important role

• Six growth platforms that tap into these cultural drivers have been identified for luxury brands

• Brands must ensure they are creating increasingly interactive experiences both in the real and digital worlds

Fusing tradition with modernity

The ART of luxury

Experientialism

Understated Minimalism

Ideal representations

• In the eyes of luxury consumers,

stand out as the most important defining elements of luxury.

authenticity

craftsmanship

IWhat is the Chinese luxury market like in 2014 & what does luxury mean in the eyes of today’s Chinese consumers?

So what are the cultural secrets of winning the luxury game? II

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China’s Luxury Market in 2014

The 5 Driving Forces That Are Shaping the Meaning of Luxury in the Chinese Context

How Brands Can Tap Into Culture to Win With the Chinese Consumer

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Contents

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Significant growth potential for luxury brands still exists with Chinese consumers

There are more opportunities to connect with luxury consumers, both in the real and digital worlds

Chinese Luxury Market in 2014

%-24Sales of luxury goods are hitting hard times, Prada reported luxury handbag sales down 24% compared with the same period last year

Luxury Consumers: online and digitally savvy

However China is still producing more private sector millionaires than the rest of the world so China must still be a focus for luxury retailers

Travelling abroad and spending on luxury brands

Increasingly looking for something beyond a luxury shopping experience

However their tastes are rapidly evolving, this report looks at key trends that luxury brands should consider as the market moves ‘beyond bling’

As an example of these efforts, Bulgari Hotel will make its debut in Shanghai in 2015, the 4th of its kind after London, Milan and Bali

Online shopping on domestic and overseas websites a common consumer habit

Rapid growth of internet sophistication and mobile internet usage. 81% of Chinese millionaires use WeChat more than 5 times a day 1

Chinese visitors accounted for 27% of all tax free shopping globally in 2013, making them biggest spenders in the world 2

116 million outbound Chinese tourists estimated by end of 2014 3

68% high income travelers spent more than 50,000 RMB each trip 4

Source: 2013 Hurun Report.

Source:

1. 2013 Hurun Report2. Global Blue3. Chinese Tourism Academy’s forecast for 20144. The Chinese Luxury Traveler Report 2012. High income travelers with annual income of 500,000 RMB and above

Number & Growth Rate of High Networth Individuals (Personal capital of 10 million RMB and above)

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825.000 875.000960.000

1020.000 1050.000

2009 2010 2011 2012 2013

(NA)增长率

数量

6.1% 9.7% 6.3% 2.9%

Number

Growth Rate

And we see significant potential for luxury brands of Chinese origin

The parameters of luxury in the eyes of the Chinese consumer

Interestingly what signifies Chinese and Western luxury brands today differs

Openness to Chinese brands is also reflected in attitudes to purchasing

in the future, Chinese luxury brands will be just as good as Western luxury brands

“ “

84%Authenticity, customer service, craftsmanship stand out as the most important defining elements of luxury in the eyes of Chinese consumers, whether this about Western or Chinese luxury brands

Attitude towards purchasing luxury brands

Elements more important to…

of consumers agree that

In our recent luxury attitudes study, we found that...

This further reinforces our belief that Chinese brands will be increasingly successful with the growth of appreciation of craftsmanship and heritage

Western brands Chinese brands

Only buy Western

Only buy Chinese

Buy Chinese first, consider Western

Buy Western first, consider Chinese

Buy both international & Chinese

Source: Added Value’s online survey among 600 luxury targets. Source: Added Value’s online survey among 600 luxury targets.

Source: Added Value’s online survey among 600 luxury targets.

Source: Added Value’s online survey among 600 luxury targets. Top 1 box agree on 7 point scale.

Chinese Luxury Market in 2014

Authenticity customer service craftsmanship

Quality Sophistication Great design Heritage

61% 58% 56%

53% 53% 52% 48%

Long historyStrong heritage

Great craftsmanshipAre authentic

Are expensiveReflect the latest trends

Are exclusive51%22%

14%9%4%

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both Western & Chinese brands must truly understand the key trends shaping our luxury consumer

we believe...To succeed

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Tap on the tie you are interested in

Today’s 5 Cultural Conditions That Shape Chinese Consumers’ Luxury Mindset

Through the lens of Cultural Insight, we have identified 5 driving forces that are shaping the meaning of luxury in the Chinese context

Increasing internet exposure

Emergent macro cultural conditions that shape Chinese consumers’ understanding and purchase decision of luxury

Creates greater desire and access to luxury goods.Luxury goods must create meaningful connections with their customers online

Increasing internet exposure

Cultural confidence and optimism

Scarce Nature = authentic luxury

Re-appreciation of the real

Sophistication – Discerning eye

China first had internet access back in 1994. Despite the local inconveniences of media environment, China now has 632 million internet users by Jun 2014. Internet penetration is 47% of the entire population. Mobile internet penetration reached a historic record high of 83.4%, exceeding the 80.9% of PC*.Consumers now get prolonged exposure to global culture

A further look of the tie (against the background of virtual white shirt)

Dancing elephants show up when you zoom in on design details

Hermès Tie Break mobile APP allows consumers to interact with product designs and ‘try’ it on your shirt

This provides a sense of comparison, measure and subjectivity leading to greater knowledge, higher aesthetic appreciation and a greater demand for quality.Source: CNNIC

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Try it on your shirt by placing mobile phone screen next to your neck

Environmental disasters, growing pollution and international public outcry have shifted perceptions towards nature’s increasing value and appreciation.

The Beijing Olympic Games mark a starting point that signifies this new era of self-awareness. Chinese people free from shame and negativity. Their eyes are opening to the cultural virtues and values of their rich heritage. The past is being re-evaluated and reimagined under a new, liberated light.

Comparison of air quality when taking off from Australia and landing

back in China sparked lots of discussion online.

(Photo from Sina Weibo Link)

The new open-minded way of thinking enables such a revisit to take place drawing inspiration from visuals, motifs, materials, philosophies and techniques of previous eras.

The future is seen with optimism in terms of its infinite potential promised by the world’s most growing economy and the sense of historical momentum that comes with it.

Due to international pressure, word of mouth and increasing online media transparency, there is growing awareness to the damage and scarcity of nature.

As nature is becoming scarce in exponentially growing cities, it is also becoming a rare sellable commodity with great cultural value. Urban design is starting to incorporate naturalness into its blueprints, ensuring enough avenues for healthy living (creation of green spaces, face lifts of canals and rivers etc.).

Today’s 5 Cultural Conditions That Shape Chinese Consumers’ Luxury Mindset

Cultural confidence and optimism Nature as luxury

Creates greater belief in the value and quality of Chinese brands – an opportunity to reference the richness of Chinese culture (old & new) in brand building

Natural themes are very relevant in communicating exclusivity and rarity – referencing the increasing scarcity of pure and unpolluted nature in China

Reinventing the pyramid: Jin Mao tower and China Art Museum

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As mobile and digital connectivity have become an inseparable part of Chinese consumers’ daily lives, the idea of reality is being renegotiated and its rarity is being seen as a precious commodity; moments of intimacy and real personal connection become important and that applies to consumer-brand relationships also.

This has caused an increasing appreciation of the need to create ‘real’ and ‘physical’ connections which deliver richer and more real brand experiences.

We observe an emerging shift from luxury defined as overt status and ‘bling’ to a greater value being placed on understatement and contemporary aesthetics

Today’s 5 Cultural Conditions That Shape Chinese Consumers’ Luxury Mindset

Sophistication – Discerning eye

Customers are looking for more and richer experiences in both the real and the virtual world

A high price is no longer enough to be considered luxury.Brands must provide evidence of their quality craftsmanship and rich experiences to justify their luxury status

K11 in Shanghai is a luxury mall demonstrating the emergent condition of luxury through creating a fully authentic and immersive environment that uses natural realism and art to provide a shopping experience that is beyond digital’s grasp. This takes shape in the form of artworks scattered among shops, vast gallery space downstairs, an enormous ambient nature sound and visual installation at the entrance, and an urban farm experience where fresh, mall-grown vegetables can be purchased.

Residual luxurious interior design / chair communicating ostentatiousness and royal status through gold color, shiny surfaces and intricate patterns

Emergent luxurious interior design / chair communicating sophistication, naturalness and refined taste through use of fine lines, minimal composition and colors

Re-appreciation of the real

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“ It’s not the matter of the (store) number. It’s how you engage with your customers that counts

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Our Cultural secrets that can inspire new ways for luxury brands to stay fresh and one step ahead of their customers

How brands can tap into culture to win with the Chinese consumer

- Patrizio di Marco, President and CEO of Gucci

Fusing Tradition With Modernity Ideal Representations

Experientialism Understated Minimalism

Nature Branded The ART of Luxury

Fusing Tradition With ModernityWe believe to win, brands must find more relevant ways to connect with their customerst

Apply it across different facets of brand building and communication

Brand philosophies become sophisticated statements that draw inspiration from the past but at the same time ride the wave of emerging culture. As such, products and communications are based on traditional ideas and techniques but adjusted in contemporary context and aesthetics, connecting pride of heritage with optimism and confidence for the future. Traditional motifs, elements and patterns resurface in digital format, new materials and fresh combinations giving brands a sense of historical continuity and eternal, classical value.

Qeelin is using Qilin as its vehicle of communication: a mythical animal of the past adopted into digital format and in the bosom of a modern woman. It communicates acknowledgement and respect of tradition combined with awareness of contemporary conditions such as female empowerment

(Qeelin, NE Tiger: Photos: from their websites)

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How brands can tap into culture to win with the Chinese consumer

(Shang Xia, Shanghai Tang. Photos from their websites)

Retail is evolving into theatrical kind of spaces, creating immersive environments (through design, service, and overall experience) while celebrating the brand. The use of design elements such as organic shapes, intimate lighting and carefully orchestrated product display as well as the use of pop-up shops and ambient media create elevating brand contact points that draw from the increasing value of physical and real experiences.

Offering rich brand experience with new mobile technology is becoming an increasingly powerful approach to engage.

Nature becomes associated with something that is rare and hence exclusive; its appreciation connotes wisdom and sophistication. Brands use nature to borrow these characteristics and transform them into brand attributes. Nature provides ideas and themes for brand philosophies and stories, raw ingredients for crafting products and inspiration for communications such as the use of natural shapes and materials, earthy tones and people portrayed immersed in natural environments.

Nature Branded

Apply it in interactive experiences in both online and offline Apply it in product design, packaging or communication

(Mixmind store and interactive pop-up shop, Shang Xia)

Mixmind’s retail spaces provide a multisensory experience where smell, sight and touch are aroused, creating a spiritual almost experience that transcends a normal walk in a shop

The products of Shang Xia use raw natural materials to communicate superior aesthetic and unsurpassable beauty that only nature can deliver

Experientialism

Burberry’s mobile marketing piece on WeChat to announce the launch of its new flagship store in Shanghai’s Kerry Center has sparked lots of interest thanks to its engaging HTML5 brand experience

(Campaign themed “From London to Shanghai”, April 2014)

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How brands can tap into culture to win with the Chinese consumer

Understated MinimalismIdeal Representations

Apply it in product design and communication Apply it in all communication touch points

Less is more and brands that choose to speak in an understated way suggest confidence in the superiority and sophistication of their products. In a world where branding and products become increasingly complex and ‘loud’ the simplified becomes associated not with lack of attention but with overt thoughtfulness in the process of creation and hence extraordinary and luxurious. Simple product and packaging lines and shapes, subtle colors and details, minimal visual compositions, motifs and product displays become evidence of luxurious branding.

The use of elegant animation and graphic design communicates an ideal state of being and is being preferred over more realistic ways of representation (i.e. photography) that refers to more ordinary condition. This targets the imagination of consumers and is associated with perfection in terms of promised consumer benefits; in other words, it promises to deliver benefits that are so superior and perfect that only the imagination of consumers can conceive. Furthermore, it implies meticulous, often handmade crafting of product - equivalent to the one used to create the communications - justifying luxurious brand value.

(Mixmind, Shui Jing Fang, Shanghai Vive. Photos from their websites) (Mixmind, Spin Ceramics. Photos from their websites)

The ‘models’ for Shanghai Vive are perfectly and eternally beautiful; they never grow old promising the ones who use it similar long lasting, dreamy and flawless beauty

Moving away from luxury clothing with large logos and shiny surfaces, Mixmind creates products with simple design and almost no branding communicating luxury for those who know and don’t need to show off

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(Shiatzy Chen, Mixmind (installation outside their shop), K11)

K11: Shopping amongst artworks creates a sense that the purchases borrow some attributes from the artworks themselves and hence higher emotional and aesthetic value

How brands can tap into culture to win with the Chinese consumer

Brands tap into the art world to suggest masterful crafting of products that are the commercial equivalent to works of art for a discerning, eclectic audience appreciative of high aesthetics appreciation and exclusivity. This takes form through artistic tone of voice and theme of communications, producing aesthetic commemorative objects, creating retail environments that resemble art galleries, sponsoring art exhibitions and collaborating with artists to create special edition products.

Apply it in tactical communication, design of products, packaging and retail spaces.

The ART of Luxury Inspiration for brands’ actions

This could be an overarching theme for brand philosophy across different facets of brand building and communication. Western brands can apply this to create a sub brand or specific products exhibiting knowledge and awareness of contemporary Chinese cultural condition.

Experience speaks as loud as luxury products, if not more. Brands are encouraged to be bold in creating interactive experiences in both online and offline brand spaces, in order to make luxury targets more proactively involved and engaged.

With or without nature in the brand’s DNA, the rarity of nature should be taken advantage of in product design, packaging or communication. Associate your brand with meanings of ethical values and sustainability.

Luxury brands should never stop elevating their luxurious status by pushing their boundaries in delivering the ideal of ‘ideal’ in all communication touch points, mainly website design and advertising.

Let the product design and communication speak about low profile sophistication. Let the tuned-down tone of voice create superiority and confidence around your brand.

On the level of tactical communication, bring in art to create cultural appreciation and aspiration. Also create synergy around unique artistic expressions of exclusivity in design of products, packaging and retail spaces.

Fusing Tradition With Modernity

Ideal Representations

Experientialism

Understated Minimalism

Nature Branded

The ART of Luxury

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Implications for luxury brands to win in China

Great brands understand what’s going on in culture - they often seem to ‘anticipate’ it – they connecting to the cultural zeitgeist of their consumers. They create desire by anticipating their consumers needs and desires. We look at trends in culture to see what’s hot and what’s not by identifying patterns of change that tap into cultural trends

Link your brand to an emergent part of culture and creating brand stories and executions that tap into China’s rapidly changing societal context, you can connect more effectively with your customers

Stay alert to cultural shifts and ride on the wave of the cultural zeitgeist

Cultural innovation matters

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The entire universe is perfused with signs, if it is not composed exclusively of signs “

“

- Charles Sanders Pierce (American philosopher)

Majority of the findings in this report are based on the methodology of Cultural Insight, which is a method that enables the use of culture for more efficient branding. Consumer insights talk to consumers. Cultural insights don’t. Instead they ‘read’ and ‘interpret’ cultural codes and identify the residual, dominant and emerging trends.Quantitative and qualitative studies look at the past and now, while cultural insight looks into the future.   Consumers are constantly bombarded by many different messages from different brands. These messages have cultural meanings. By examining these meanings very closely we understand how brands use culture to ‘talk’ to consumers and why the consumers think and act the way they do as a result of this. It is an approach that creates a differentiated perspective and inspires fresh brand thinking that is future-oriented. By providing invaluable understanding and insight it helps brands blend in with culture, stand out from the crowd and stay ahead of their time.

The main tool of Cultural Insight is semiotics. Semiotics is the most systematic and efficient method of studying signs and images and demonstrating how meaning is created and evolves through them. It goes straight into the heart of signification uncovering the relationship between brands, signs and meanings.  

About Methodology: Cultural Insight

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Added Value is a leading global strategic marketing consultancy providing brand strategy, innovation, insight and communications services. We are driven by one thought – to make marketing that works. Our approaches include Qualitative Insight & Ethnography, Segmentation & Portfolio Planning, Brand Positioning, Cultural Insight, Innovation, Brand Equity studies, Communications Optimization & Tracking, etc.

Added Value has 17 offices in 11 countries across Europe, North America and Asia-Pacific, and is accredited among “Best Companies to Work For 2014”. Added Value is part of Kantar, the data investment management division of WPP, the world leader in marketing communications services.

In March 2013, Added Value announced Cultural Traction™ 2013 , a global study into the impact of culture-led marketing. In its 3rd annual Cultural Traction™ 2013 report, Added Value revealed the cultural vibrancy of 160 brands, across fifteen sectors. Cultural Traction™ 2013 involved 62,250 respondents across ten markets: the US, China, France, Germany, Italy, UK, Australia, Brazil, Hong Kong and Singapore.

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