Luxury brands underinvested in digital marketing in China: L2

The report, titled "Digital IQ Index: China 2012”, studied the digital performance of 100 brands in China and came up with the digital IQ ranking, which is based on the evaluation of the brands’ compatibility, optimisation, and marketing on smartphones and tablets (20 per cent); brand presence, community size, content and engagement on social media (30 per cent); localisation of site features (30 per cent); and digital marketing, including search, digital media, and email marketing efforts (20 per cent).

While the beauty category continues to lead in site sophistication, the fashion category is gaining momentum.

The top 10 brands are Estée Lauder, Audi, Chow Tai Fook, Lancôme, Volvo, BMW, Buick, Land Rover, Benefit and Burberry.

The first four are classified as ‘Genius’, as their digital competence is a point of competitive differentiation, characterised by successful, multichannel, digital campaigns, functional sites catering to local needs and strong social presence and integration across platforms.

The rest of the top 10 join an additional 12 brands in the ‘Gifted’ class. These brands are experimenting and innovating across their site, mobile, traditional and emerging social media platforms, according to the report.

The ranking also shows almost half of the brands (44 per cent) are not investing enough to match the opportunity in the market.

Chinese e-commerce sales are projected to triple in the next three years, according to the L2 report. While pricing transparency, counterfeits, operational hurdles and poor customer service remain challenges for prestige sales online, the adoption of Web 2.0 tools, including social-media sharing, user reviews, and live chat, has increased year-on-year in China.

Sixty-one per cent of Chinese high-net-worth individuals indicate the Internet is a primary source for brand information, more than any other channel, L2 reported, citing HuRun Report 2012.

Also, nearly 80 per cent use social media to learn more about luxury brands and products, based on data from Boston Consulting Group’s “The World’s Next E-Commerce Superpower” report.

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.

Meanwhile, due to the increase in smartphone penetration in China, mobile is becoming an increasingly influential platform for online purchase. Ninety-seven per cent of Chinese smartphone users research products on their phone, and 59 per cent have made a purchase, Ipsos and Google found out in their “Our Mobile Planet: China” report in May 2012.

However, the L2 index shows that although this year has seen double-digit increases in mobile investment targeting Chinese consumers, only 23 per cent of brands maintain a mobile-optimised version of their China site, and only a third of these sites are e-commerce enabled.

Also, only one in five prestige brands host their site in China and just over half display prices in RMB. Sina Weibo adoption by prestige brands has reached 91 per cent, and the industry has registered double-digit increases in mobile, social, and search engine marketing adoption, but only four brands have launched direct e-commerce since 2011.

Luxury marketers need to step up their game, according to the report. McKinsey & Company’s “China’s Social-Media Boom” report shows China’s luxury e-commerce market was RMB15 billion (US$2.4 billion) in 2011 and is expected to reach RMB20 billion (US$3.2 billion) in 2012.

As the Chinese government continues to place restrictions on traditional media, Chinese digital marketing spend is set to double over the next three years, said Adobe’s “Q2 2012 Global Digital Advertising Update”. This will also push innovation in digital marketing that will inspire consumer exploration and purchase that may supplant traditional methods.