Earlier this year, before the seismic summer shift in the Chinese stock market, global consultancy Bain & Co reported in its annual “Luxury Worldwide Market Study” that 2014 was the first year of negative growth for the world’s largest consumers of luxury.
This was not at all to say that the China luxury boom was even remotely approaching bust, but simply that it had settled down into what Bain & Co dubbed the “new normal” of more moderate growth.
Industry observers are pointing to a number of factors: slowing economic growth, a proliferation of luxury labels, anti-corruption campaigns targeting luxury gift giving, and, ultimately, increasingly sophisticated consumers who no longer need bling to show status.
“Brands need to find the right balance between remaining loyal to their roots while speaking the same language as their target audience.”
“Ten years ago luxury stood for buying a product with a big label that everybody recognises as a luxury level,” said Marc Finsterlin, managing director and partner at brand builder Serviceplan Shanghai. “The new generation still likes luxury. Luxury in the sense of owning something special, something that is outstanding and individual.”
As a result of this shift, luxury product makers are newly beset with the task of not only recalibrating strategies in China, but also with fine-tuning the way they cultivate emerging luxury markets across Asia.
The AAA Team
Much of the conversation revolves around “Generation AAA” –a moniker coined by Singapore-based Agility Research.
Aspirational, affluent, and ambitious, Generation AAA are the 18- to 35-year-olds in emerging Asian markets. This cohort of discerning, well-educated, digital natives with fashionable tastes and increasing buying power is estimated to be about 100 million strong.
For marketers of luxury, Generation AAA represents a game changer. Unlike their elders, who viewed price tags as the measure of their quality of life, Generation AAA has become more like their Western Millennial counterparts, appreciative of the finer things but far less enamored of the bling factor.
“Brands need to find the right balance between remaining loyal to their roots while speaking the same language as their target audience,” said Pablo Mauron, general manager, China, of Digital Luxury Group, a marketing service that advises some of the world’s top luxury brands. “The challenge is to be localised enough to resonate with your audience but not lose your essence in order to remain aspirational.”
While luxury makers look for messaging that resonates with consumers in emerging markets, experts agree: Digital is essential.
Agility Research managing director Amrita Banta said this generation of prospective luxury consumers wants options for researching before making a purchase.
“Millennials have entangled digital into almost every aspect of their everyday life,” Banta said. “Luxury brands have realised the importance of having a consistent and appealing omnichannel offering.”
Marcus Osborne, founder and chief executive of Kuala Lumpur’s FusionBrand, said luxury makers have lagged in the digital merchandising migration, partly due to an inconsistency with their core brand values.
“Luxury brands have been slow to adapt to online, primarily because a lot of what makes a luxury brand happens offline,” Osborne said. “The experience of sitting in a leather chair drinking champagne in a Bulgari showroom is hard to replicate on a laptop with your kids climbing all over your lap.”
It’s also a lot about balancing efforts to navigate through the noise to stake out a channel while maintaining an image of exclusivity. This creates an additional challenge for building relationships with first-time luxury buyers, Mauron said.
“The act of purchasing full-priced luxury goods online also requires a strong trust in the brand, which is usually built based on previous experiences or purchases but also based on the brand’s presence in the market,” Mauron said. “Online-to-offline strategies have become key to capturing the purchase intentions expressed online and then to support the acquisition, no matter if it’s done online or offline.”
Culture Is Key
Some companies are utilising an even more hands-on approach in Southeast Asian markets.
“Instead of investing massive amounts of money on blanket advertising in a bid to win market share, they instead integrated themselves into the local purchasing culture,” Osborne said. “Luxury brands in Jakarta, Singapore, and Kuala Lumpur send account managers to the homes of established customers with products based on their preferences and lavish attention on those influential customers with loud voices.”
Getting it right is certainly worthwhile: Boston Consulting Group said the luxury goods and services category will keep growing by about 7% a year for the near future.
Whether it’s a shout, a whisper, or a chorus of tweets, opportunities abound for luxury brands that secure a place in this immense and growing market.
This article was also published on CMO.com