Key points to remember:
- The luxury “customer journey” in China is much more digital than anywhere else in the world while being increasingly data-driven.
- The race is on for luxury brands to take the lead in their respective fields using data analytics.
- In 2022 and beyond, luxury brands will be more actively involved in setting up China-based collaborations with data management companies.
The urgency for luxury players to develop data collection and analysis capacities is more pressing than ever. This applies even more to the complexity of Chinese markets where massive volumes of data are collected and stored for processing.
Chinese data consumption continues to grow rapidly, and many expect it to become the largest source of consumer information in the next year or so. Part of the reason is that Chinese consumers are less sensitive to privacy and data protection concerns than consumers in many other countries. In fact, a 2021 Euromonitor survey found that more than 45% of respondents in China said they were ready to share data for personalized offers and exclusive offers.
The challenge for luxury executives is to make sense of this data, and even the exabytes of data, which have become increasingly available and profitable when used. We expect “big data” and “data analytics” to be at the top of the 2022 agenda for luxury executives as they accelerate their development and execution of effective data-driven strategies. . And that will happen as artificial intelligence (AI) matures over the next several decades. He seems unstoppable.
The luxury customer journey in China is much more digital than anywhere else in the world. And the reality is that the result is increasingly data driven. Fashion companies that leverage data analytics to personalize customers’ e-commerce experiences have increased their digital sales by 30 to 50 percent, according to McKinsey & Co.
Data will play a bigger role in delivering tangible benefits along the value chain, such as creating seamless digital shopping experiences. For example, each visit to L’Oréal’s flagship store in Shanghai is linked to the user’s WeChat account via the L’Oréal mini-app. Executives no longer think in omnichannel terms but of “harmonized retail,” which Infosys says “operates at the intersection of physical dispositions, digital technologies and human experiences.”
Digital disruptions, driven by non-luxury players, have increased customer expectations from other consumer sectors. CB Insights reports that Nike has increased its direct-to-consumer sales from 16% ten years ago to 39% of its brand’s revenue today. This relationship model gives Nike direct access to customer data.
According to Nike, data analysis was key to its Nike Rise retail concept in Guangzhou. “Using the information members have shared with Nike, along with the response to real-time sporting moments in the city, the data will fuel the full customer experience in Nike Rise,” the brand said in a statement. In a similar vein, fast fashion retailer Shein redefined the meaning of ultra-fashion by using data analytics software to deliver a virtual, on-demand order book.
Indirect competitive pressures have shaped these good practices, which will not go unnoticed by consumers and luxury executives alike. Now the race is on for luxury brands to take the lead in their respective fields with these new concepts.
Luxury players will continue to invest in building big data-driven ecosystems to ensure unified integration of data across various databases that businesses can access. For example, LVMH and Google Cloud announced a strategic partnership to develop new cloud-based AI solutions.
However, luxury brands will be more actively involved in setting up China-based collaborations. For example, Porsche Ventures invests more than 150 million euros per year in emerging technology start-ups, including a strategic investment in Chinese industrial 3D printing manufacturer INTAMSYS. This partnership will allow Porsche to expand its application scenarios for digital additive manufacturing. We expect luxury brands to step up cooperation with China-based companies to address these critical knowledge gaps.
The power of data in huge cross-referenced databases, along with the use of data analytics, has become a critical source of competitive advantage. These tools, combined with the future development of AI, can provide insight and advice on specifically chosen time frames and emerging consumer trends.
In the future, these tools could help brands understand broad target markets down to their individual consumers. Some early-stage luxury executives are learning to harness this technology now that data sources have become more interconnected and integrated throughout their value chains. While not all stakeholders will find big data and analytics at odds with the creative process, a noticeable cultural shift is taking place in the luxury industry today. Data proficiency will make a difference in hiring as executives recruit and upgrade their skills at all levels and across organizational units.
Ultimately, big data, analytics and AI will give marketers the tool of their dreams: the power to present directly to every consumer “on the grid” in a way that is just one way. in its infancy. It is clear that China is at a more advanced stage of development. For latecomers, now is the time for luxury executives to apply big data and related technologies, so they can project themselves into the future and ensure success by fostering their company’s most valuable intangible asset. : the data.
Glyn Atwal is associate professor at the Ecole Supérieure de Commerce de Bourgogne (France). He is co-author of Luxury Brands in China and India (Palgrave Macmillan).