How Did "Chinese Valentine's Day" Become a Big Test of Online Selling for Luxury Brands?

They all want to know the same things: on online platforms, where do consumers like to shop? And what kind of marketing actually works for luxury goods?

On the marketing calendar, Qixi used to be no different from any other holiday. Now luxury brands mean to turn it into the moment when they test their online sales channels in China all at once — and Chinese companies hungry for a piece of the luxury e-commerce business are lining up to help.

On August 15, Dior released the first Qixi-themed luxury ad on WeChat Moments, promoting a Qixi limited-edition bag from the Dioramour line — the red-studded Lady Dior. Clicking through led to a 51-second video. Its star was Angelababy, who became Dior's China brand ambassador in late April this year. The content was simple: the ambassador shifted from pose to pose showing off the bag while saying "baby" and "I love you" once each in Mandarin, Cantonese, English, and French.

Next to the first ad Dior ran on Moments two years ago, this one was far more "localized." Back then the brand had not yet found a Chinese celebrity ambassador — the video starred Natalie Portman — and the ad copy had not even been translated into Chinese.

In the days just before and after the Moments ad ran, Dior also enlisted Becky Li, Jiliang Xiansheng, and Shiliupo — three of the "10 Top Chinese Fashion Bloggers" named in January by BNP Paribas's luxury goods division — to push the video again, each on their own account. Without exception, the "Read More" link led straight to the limited-edition bag's purchase page.

As if that were not enough, Secoo — a homegrown luxury e-commerce platform founded in 2008 — became Dior's exclusive e-commerce partner for the Qixi limited-edition bag. On August 15, the same copy and video appeared on Secoo's WeChat official account, its app, and the homepage of its PC site.

The result of these several waves of promotion across platforms: 400 bags priced at 29,500 yuan went on sale in the early hours of the 15th and showed as sold out by the 17th. Last year, 200 bags at the same price took 36 hours to sell out.

Luxury goods staged an unexpected recovery in 2017. In brand earnings reports and consulting-firm analyses alike, online sales and the Chinese market emerged as the main drivers of growth.

In China, where e-commerce reaches far more people than in most countries, luxury brands are that much keener to try every online channel — and the competition this sets off among e-commerce platforms, bloggers, and logistics companies has grown fiercer to match.

Over the past three months, Gucci and Louis Vuitton have both launched online shopping in China; JD.com invested US$400 million in Farfetch; Tmall rolled out its luxury channel, Luxury Pavilion, and then its online luxury pop-up store, Tmall Space; and the homegrown platform Secoo brought in Ferragamo, La Perla, Sergio Rossi, TAG, and 10 Corso Como, among others.

They all want to know the same things: on online platforms, where do consumers like to shop? Which marketing channels and methods work best for luxury goods? And how do you take a share of a market that keeps growing?

This year's Qixi marketing push is where all those questions converge.

Marketing platforms diversify, but the goal is still sales

Even if you take little interest in luxury goods, you have probably run into a Qixi luxury promotion or two lately while scrolling Moments, reading a blogger's post, or browsing an e-commerce site.

Part of the reason is that more brands are releasing Qixi limited editions for the Chinese market. Public information shows at least seven did so this year, including Dior, Chloé, Marni, Longchamp, Valentino, MCM, Cartier, and Lancel. Apart from MCM, which released both a T-shirt and a backpack, every brand led with a bag.

Gucci and Louis Vuitton released no Qixi limited editions, but both set up a Qixi section on their official websites and hired bloggers to promote it.

The bigger reason is that luxury brands have grown bolder about where they market than they were six months ago.

Fashion bloggers remain the promotional partners luxury brands prefer. Compared with February, both the number and the frequency of these collaborations have risen. Seven of the bloggers on the BNP Paribas luxury division's "10 Top Chinese Fashion Bloggers" list took on luxury promotions. By QDaily's incomplete count, the busiest were Mr Bags, Becky Li's Fantasy World, Jiliang Xiansheng, and Shiliupo, each of whom ran single-post WeChat promotions for more than three luxury brands.

Qixi promotions by BNP Paribas's "10 Top Chinese Fashion Bloggers"

(Incomplete count)

Gogoboi

Aug 24, Fresh (LVMH)

Dipsy

None

Mr Bags

Aug 11, Chloé limited-edition bag

Aug 16, LV Qixi shopping list

Aug 22, roundup recommending 26 brands

Aug 24, Gucci Qixi shopping list

Becky Li

Aug 15, Dior limited-edition bag

Aug 17, Piaget (Richemont)

Aug 19, LV Qixi shopping list

Aug 20, Cartier shopping list

Aug 22, Tasaki

Jiliang Xiansheng

Aug 12, Valentino limited-edition bag

Aug 14, Dior limited-edition bag

Aug 23, Chopard

Style_Notes

Aug 21, Gucci Qixi shopping list

Aug 24, MCM limited-edition T-shirt and backpack

Freshboy

Aug 16, Lancôme's high-end fragrance line, Maison Lancôme

Wei Shaonian K Xiansheng

Aug 12, Valentino limited-edition bag

Aug 22, MCM limited-edition T-shirt and backpack

VintageMuse

None

Shiliupo

Aug 14, Dior limited-edition bag

Aug 17, LV fragrance line

Aug 23, Bottega Veneta

Aug 24, Lancel limited-edition bag

Moments ads, meanwhile, became the most crowded channel of all. A schedule shown to us by Tencent Social Ads had luxury and fashion brands running placements from August 12 all the way through August 29. Last Qixi, only Dior, Cartier, Tiffany, and Chanel bought Moments ads; as of this writing the number has grown to 14, adding Valentino, Swarovski, Burberry, Bulgari, Van Cleef & Arpels, Chloé, Rado, Pandora, Tissot, and Tasaki to last year's four.

Chanel, Cartier, Dior, and Burberry spent the most. Pandora ran two placements with different creative, and Chanel advertised its jewelry and its fragrance lines separately. Most of the 14 sent traffic straight to a sales page; only a few, such as Van Cleef & Arpels and Tiffany, stuck to brand advertising.

Tencent Social Ads told QDaily it could not disclose what the brands spent, but said "this Qixi, the frequency and scale of luxury brands' Moments ad placements hit a new high." A source who asked not to be named put it this way: "Given how densely the brands are buying, Tencent doesn't look like it needs to worry about its luxury advertising sales target this year."

Compare Dior's ad performance in 2016 and 2017 and the sharpest change is in how often users shared it. Total reach grew only from 17.043 million to 17.595 million, but shares jumped from 4,438 to 9,565.

Luxury brands, normally cautious, also tried working with local third-party e-commerce platforms for the first time.

Besides the Dior-Secoo partnership mentioned at the top, Loewe became the first brand to enter Tmall's luxury pop-up store, Tmall Space, from August 10 to 19, releasing the Qixi edition of its Barcelona bag for the Chinese market at 15,900 yuan, limited to 99 pieces. The affordable-luxury brand Furla opened a Tmall store on August 14 and picked nine bag styles for a limited Valentine's Day pre-sale.

On August 23, the Swiss watch and jewelry brand Chopard opened a store on JD.com and used Qixi to promote its Happy Hearts bracelet and Happy Ocean watch.

The multinational luxury e-tailers Net-a-Porter and Farfetch, by contrast, did little with brands over Qixi. Farfetch simply put out a Qixi shopping list through a press release and a WeChat push; Net-a-Porter teamed up with Naked Stables on an experiential campaign promoting its own platform. Both face much the same problem in China that the brands do: how to make things work locally while staying in step with global headquarters' plans.

On the whole, though, most luxury brands' marketing across these platforms is still aimed at selling, especially for brands that made a Qixi limited edition on purpose. Moments ads, blogger posts on WeChat official accounts, the Tmall pop-up, simultaneous sales on Secoo — what the brands are after comes down to two things: the largest possible user base, and precision in sorting those users into tiers.

Once the consumer places an order, how do luxury brands plan to compete?

If the thing luxury brands worry about most as they expand online is "how to reproduce the store experience on a screen," then beyond choosing a platform, choosing products, and design, what matters more is what happens after the order goes in — delivery, for instance.

Outside China, mid- to high-end luxury retail sites such as Farfetch, Net-a-Porter, and Matchesfashion.com have offered same-day delivery in capital cities and resort towns for some time. This April, Farfetch.com announced "90-minute Gucci home delivery" in 10 major cities worldwide.

In China, the fight over luxury delivery may only just be starting.

Because third-party luxury e-commerce platforms have few warehouses in China, or none, they usually turn to global logistics companies — DHL, Net-a-Porter's long-time partner, for instance. Cathy Zhu, a consumer used to shopping overseas sites, finds the experience decent: "Since it's DHL the whole way, it's easy to track, and you get email updates on where the shipment is — it usually takes one to two weeks. And the major overseas-shopping sites now collect duty upfront, so it still works out cheaper than buying abroad. I don't worry much about shipping or customs."

But for the brands themselves, which care more and more about engaging Chinese consumers directly, the last mile is the more pressing problem.

According to figures SF Express gave QDaily, the company now has full-service partnerships with 35 of the world's 50 largest luxury groups — 70%. It expects that to reach 95% by the end of 2018.

The head of SF Express's PR and sales department told QDaily that, judging by their own business, "starting in 2016, growth in the luxury brand business became substantial — with some clients we even saw compound growth. Because their average order value is higher, luxury brands ask more of us than other clients do on delivery speed, security, privacy, last-mile service, and customization."

To meet those demands, the manager said, SF Express has already rolled out services for luxury clients including "90-minute same-city delivery," "dedicated luxury delivery," and "secure password pickup." The company plans to launch a premium product line for luxury clients this year but would not give details.

The other company building new delivery products for luxury goods is JD.com, which has long wanted to expand into fashion. In June it launched Jingzunda, billed as "high-end customized delivery." In everything JD.com publishes about Jingzunda, photographs make the point that this service is special: the couriers are tall, dressed in matching black suits and white gloves, driving black cars reserved for the job, carrying gift boxes in a uniform black-and-red scheme.

JD.com says the high-end goods Jingzunda handles are kept in a dedicated area, in packaging designed to order by professional design firms; the vehicles are all new-energy electric cars with dedicated drivers. The delivery team is recruited separately, and the criteria include: age 25 to 35, height 170 to 185 cm, plenty of driving experience, good looks, a polished appearance, fluent Mandarin, and rigorous training in business etiquette.

After Farfetch took JD.com's investment in April, it planned to drop its existing international logistics provider for Jingzunda to improve delivery speed and service in China. It declined to tell QDaily more, because "everything is still being prepared."

In its Qixi copy, Chopard, fresh from opening its JD.com store, made delivery a main selling point, stressing that "consumers in Beijing, Shanghai, Guangzhou, Shenzhen, and Chengdu can enjoy dedicated staff, dedicated vehicles, and dedicated-route delivery from the 16th through the 28th."

What consumers care about is still "is it real" and "is it worth the money"

Luxury brands and the companies working on their online channels all look eager. Consumers may see it differently.

We surveyed six luxury consumers at random. Five buy luxury goods online, though for big items — bags and shoes, as opposed to cosmetics — they rarely buy straight from brand websites or WeChat boutiques, going instead through daigou (personal shoppers) or third-party luxury e-commerce platforms. They also rarely buy limited editions, not only because those are hard to get, but mainly because, as they put it, "they're too specific, not versatile enough, not practical enough."

Michelle, 36, a PR director at a foreign company, is one of the more conservative buyers: she wants luxury goods she can use, such as the Givenchy Pandora bag she spent more than 20,000 yuan on and carries to work and on weekends alike. Holiday limited editions are what she likes least. "Qixi, Valentine's Day, Chinese New Year specials and so on. They don't last, and they don't suit me. If I'm buying luxury, I'd rather buy something that's in the line year-round."

Price is why she never buys luxury goods online; she will only browse sites like Net-a-Porter now and then for outfit ideas. When it comes to buying, "what matters most is trying it on and confirming it's real."

Hu Yue, 28, who works at a public-sector institution, has bought plenty of luxury goods online, though mostly from daigou sellers on Taobao. That is mainly because daigou is "genuinely cheaper, gets you bags ordinary people can't get, and lets you legally avoid tax."

She has bought Sam Edelman flats and discounted Free People clothes on third-party luxury sites like Shopbop, but she does not shop there regularly. "As far as I know, most people who buy real luxury — not affordable-luxury brands — rely on daigou. Chanel, Dior, Hermès, Delvaux, that kind of thing."

"There are very few genuine big names on third-party platforms, and the price advantage isn't obvious. Loewe on Farfetch actually goes for 18,000 yuan; I paid only 13,000 to 14,000 in Korea, about what a daigou charges. Or take Pomellato: a moonstone ring is US$1,350 on the U.S. official site but US$1,621 on Net-a-Porter. With a gap like that I might as well buy it at a counter in China. And the items that really are cheaper are all discounted styles, with sizes and colors badly incomplete — especially sizes that fit Asian bodies, which are basically unavailable," Hu Yue told QDaily.

Hu Yue has also noticed that these platforms tend to draw people in with inventive styling content and niche luxury labels. That does little for her, because "information comes from all sorts of places, you don't have to depend on any one brand. And unless you're an influencer, most people buying luxury goods are after practicality and value for money."

Amy, about Hu Yue's age, works at a private company. Unlike Hu Yue, she does not much trust daigou; having studied abroad, she is used to buying luxury goods on Net-a-Porter, Farfetch, and Shopbop, and on the official sites of overseas department stores.

Shopping online, though, Amy stresses the same two things Hu Yue does: "price and authenticity."

"Every time Net-a-Porter runs a promotion, the prices differ from one country's site to the next. Sometimes the China site is cheaper, sometimes Australia or the UK, so I switch between them. I'll spend a long, long time comparing prices and waiting, because I want to be sure what I buy is worth the money."

Luxury goods, from "status symbol" to "treat yourself"

Chinese consumers are clearly coming back to shopping at home. That does not mean luxury brands can satisfy them with a few adjustments to the sales channels and marketing routes they already have.

McKinsey made the same point two months ago in its China Luxury Report 2017, where it summed up today's Chinese consumers as "increasingly savvy." Since 2015, the main driver of growth in Chinese luxury spending has shifted from first-time purchases to repeat purchases: in 2008, 60% of growth still came from first-time buyers, but by 2016 as much as 53% came from repeat spending. After more than a decade of seasoning, in other words, Chinese consumers' money is no longer easy to earn. They want new products and new ways of being talked to.

Luxury brands' new tricks on Chinese social networks, and the unusual energy they are putting into digitizing sales and marketing, amount to a fresh round of feeling their way around a Chinese market they know and don't know at once.

The last boom for luxury goods in China was three years ago. Between 2010 and 2014 — a stretch Bain & Company likened to "Chinese Bulimia" — luxury brands leaned mainly on purchases made with public money, and on real estate and internet nouveau riche who had struck it rich overnight.

The anti-corruption campaign that began in 2012, the 2015 move to narrow the price gap between luxury goods in China and abroad, and the new tariff rules introduced from 2016 turned over the luxury-buying population in just three years. A new generation of middle-class Chinese consumers became the brands' second chance to break out of the slump: younger, more attentive to value for money and to individuality, and entirely at home in a digital environment for buying goods and consuming information. For them, buying a luxury item is no longer only about pleasing someone else with a gift, or purely about showing rank; it also means indulging and rewarding themselves — or rather, they are being encouraged to think of it that way.

Luxury brands need new routes to these consumers, both to keep promoting and selling and to stay visible.

Meanwhile the promotional channel brands know best — traditional fashion magazines — was taking a beating over the same years. Late last year Femina, a women's fashion monthly eight years old, closed; Elle, another fashion title under Hearst Media Advertising Group (China), went back from twice-monthly to monthly. Over the past year Modern Media's revenue fell 12.9% and net profit collapsed 85.4%, to 3 million yuan. Advertising revenue from its traditional magazines, including Modern Weekly, dropped 30.5% — the group's steepest decline since it went public.

Offline channels have always been the weak point. China is vast and its regions differ enormously, so any one store reaches only so far. And the "Chinese Bulimia" years left luxury brands with a careless illusion about how much this market could spend; when growth slowed, the gaps in service quality and sales standards showed.

Store-opening plans drawn up years earlier were still unrolling slowly, while change on the consumer side arrived fast and completely: according to McKinsey's figures, from 2008 to 2016 the number of luxury stores in mainland China grew 3.3-fold, but mainland sales grew only 2.8-fold.

So reaching consumers on social networks has become what luxury brands care about most. Like the companies they depend on in China — JD.com, Alibaba — they now treat every holiday that can move product as a fixture on the calendar.

Graphics: Feng Xiuxia

Cover image from upursesforum.com