Luxury in China - social responsibility and increased sales go hand-in-hand

Trying to promote your brand in China, the world’s second largest luxury market? Most labels instinctively turn to ads – print, outdoor, TV, online, mobile or radio. But a new study points to a more powerful tool: promoting corporate social responsibility. More than two-thirds of Chinese consumers said a luxury brand’s CSR would affect their decision to purchase decision, according to a new report. Asian market research company Albatross Global Solutions, and Ruder Finn Asia  surveyed 1,100 luxury consumers earlier this year in China, Hong Kong and Taiwan to produce their China Luxury forecast 2010. CSR was found to be particularly important among the more educated shoppers with higher incomes.

Jean-Michel Dumont, chairman of Ruder Finn Asia, says the earthquake in Sichuan two years ago “was a turning point for CSR in China, whichever sector you are in.”

Local companies donated millions of dollars immediately after the quake. But some multinationals were criticised for not doing enough. Bloggers labelled companies like Louis Vuitton, Nokia, Coca Cola, McDonald’s and KFC as tie gong ji, which literally translates to “iron-roosters”, meaning scrooge. Foreign companies were quick to respond. Now consumers expect more, says Dumont.

“Consumers are looking at what companies do beyond donations. They want to know how companies are getting the society involved,” he says, adding that “when you talk about luxury in China, you are talking about European brands.”

The study found that among the 15 most popular brands in China, Hong Kong and Taiwan, 14 are from Europe, with the most sought-after being Louis Vuitton, Chanel and Gucci. The only American label that made it to the list is Estee Lauder, the cosmetics company.

A notable exception from the list is Japanese brands, says Christophe Cais, executive director of Albatross.

There are two main reasons for the prejudice. Firstly, the Japanese are big in cosmetics, which is a small segment of the luxury market in China. The other, more sensitive reason is a long and bitter history between China and Japan. The two countries were war enemies and “some consumers are still resentful of Japanese products in China,” says Cais.

Foreign iron-roosters take note, Chinese luxury consumers now expect more than just a great brand.

This article first appeared on the FT’s blog here.

Storm shopping

Slate magazine today reported on the apparent contradiction in the US  with declining consumer confidence paired with rising sales. They look at whether this represents ‘Gloomy Growth’ or whether it is muscle memory.

The Conference Board reported Tuesday morning that consumer confidence declined in July for the second straight month. Worse, consumers’ expectations for the near future declined sharply. “Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves,” said Lynn Franco, director of the Conference Board’s Consumer Research Centre.

And yet there are signs that back-to-school shopping isn’t going to be a disaster. Each week, the International Council of Shopping Centers and Goldman Sachs release a weekly index for chain-store sales. In the most recent week, sales rose 0.6 percent from the week before and were up 3.8 percent from the year before. Sales have risen from the week before in six of the last nine weeks; and over the past two months, weekly sales have been up between 2.5 percent and 4.2 percent from the year before.

So how can the two apparent contradictions live alongside one another?

Daniel Gross argues that it is down to Muscle Memory.

“Muscle memory exerts a powerful influence on economic behavior. Government bond interest rates hovered at high levels through the 1980s and early 1990s, even though Federal Reserve Chairman Paul Volcker had long since slayed inflation. Investors burned in the 1929 crash avoided the stock market for a generation. For the same reason, companies that experienced a near-death moment in the fall of 2008, when the credit markets seized up, continue to hoard cash today, and consumers burned by excessive debt continue to pay it down. I’d argue that our collective muscle memory now includes the knowledge that the economy can come close to collapse. It makes consumers feel wary, even as they open their pocketbooks.”

The full article can be read here.

Laptops, iPads and mobile working - coming to a Starbucks near you

Starbucks in the US have announced that it will be offering free WiFi access at all its US cafes from next month. About time too. As MediaPost described “For a company that puts the customer experience at the center of corporate culture, the paid WiFi culture in Starbucks outlets was always a bad fit.”

The full report from MediaPost can be found here.

Looking back - © Creative Commons, travelling steve (2007)

Scope

Six Canvas8 Thought Leaders share their thoughts on the trials and tribulations of the last 12 months. Unsurprisingly, the impact of the recession dominates trends – but tough times breed innovation, and the ensuing change in both people’s outlook and brand response has led to several interesting developments in technology, luxury, retail and advertising.

—-

2009 has been an incredible year of change and one that many brands and agencies will be keen to consign to history.

It was the year when engagement and authenticity became a prerequisite for brands, when people opted for choice over control and technology fulfilled its potential as a powerful agent of change – whether it was the Iranian elections, Trafigura’s ’super-injunction’ or the #welovetheNHS hashtag in response to Republican scorn.

We’ve not seen people downgrading their lives in the same way as in previous recessions, or settling for lower quality products – but we have seen a reduction in quantity. People still treated themselves to luxury items but just less frequently, becoming increasingly judicious about how and where they spent their retail pound.

On the high street we’ve seen retailers continuing with recession-busting survival packages and smart responses that understand people’s changing habits. This resulted in a growth of luxury goods in smaller packaging and a rise of gourmet home cooking. The latter accelerated by an increased awareness in the West of the importance of nutrition, balanced diet and health concerns over obesity.

Against this backdrop online peer recommendation and real time feedback became the norm. Whether through UGC sites, peer recommendation offerings or Twitter there is nowhere left for brands to hide.

Consumers in the Western world have become increasingly cynical and less trusting of brands – Edelman’s Trust Barometer revealed 77% of US consumers trust brands less this year than last. Central to this have been financing scandals, greenwashing and heightened transparency through technology. While eco and ethics have remained high on the agenda they have taken a backseat in people’s mindset to the more pressing concern of family survival.

We asked some of our Thought Leaders what stand-out changes they’d observed in the last 12 months.

Alan Moore on engagement

One of the greatest changes in my sector has been an awakening that we are not going back to the way things used to be! There is now a growing realisation that in this wired-up world, people and data are inextricably interwoven. In addition, I’ve noticed the intensifying pressure by legacy media and business upon existing legislation, for example copyright law, to protect their industrial business models. I believe this will ultimately damage the long term economic future of this country.

Mandy Saven on retail

This year we saw the incorporation of Augmented Reality into e-commerce, advertising, packaging and in-store applications, effectively enabling consumers to view three- dimensional objects and garments superimposed upon a marker. This technology allows shoppers to ‘try on’ accessories and fashion items, without the hassle of the fitting room. In particular, we were impressed with www.holition.com (an AR application that could potentially change the way high-end jewellery is consumed) and www.zugara.com (where shoppers can ‘virtually fit’ clothing to their body shapes).

We have also seen the rise of more sophisticated, targeted and partnership-based pop-up concepts. For example, Gap’s revolving pop-up store, in New York, hosts a multitude of brands and retailers – and the roster has so far included non-fashion brands as well as high-end retailers. We’ve also seen pop-ups move into permanent stores, as retailers look to shake up their product mix. The concept has also been harnessed to bring a dose of art and culture to mass-market brands.

Lastly, we have recently been tracking the emergence of new – and often provocative – business models that allow consumers to make money as well as spend it. Crowdsprouting techniques used within physical stores, physical eBay stores, buy-sell-swap stores and underground supperclubs all point towards a new order. The boundaries are blurred between seller and consumer, online and offline, legitimate and underground – and the playing field has opened up for less established designers to trade in creative ways.

Lars Cosh-Ishii on mobile

While there are several interesting stories for 2009 in Japan’s mobile scene, the most significant development relates to the confirmation of next-generation wireless networks.

On June 10 the Ministry of Information and Communications (MIC) announced allocation of new spectrum for Long Term Evolution (LTE) operations based on approved business plans submitted by four Japanese telecom operators: DoCoMo, KDDI, SoftBank Mobile and eMobile.

Targeting commercial service launches in late 2010, and running through 2012. The combined budget for infrastructure for these new networks is estimated to top 1 Trillion JPY – or just over $11 Billion – by 2014. It was also forecast that, on average, 30% of the current subscriber base will migrate to take advantage of this “fiber-to-phone” speed increase within three years of initial deployment.

Alex Gordon on advertising and behaviour

The continued decline in spending on TV advertising and the continued rise and importance of digital advertising, and the richness & diversity of apps for mobile handsets.  It is almost possible to run every aspect of one’s life from an iphone – and this will influence all forms of advertising and media including entertainment as they shift to fit within the smallest of frames on these devices.

The continuing search for greater insight into consumer behaviour and attitudes has seen the growth in 2009 of alternative research techniques to challenge the dominance of traditional quant & qual e.g. eye tracking, brain imaging, ethnography, online groups, and of course semiotics.

Mary Lou Quinlan on women in the US

No Jobs, No Jobs, No Jobs: women were stunned to find themselves out of work, or afraid they soon would be, even when they are good at what they do. Confidence hits the purse hard.

In addition, as their partners lost their jobs, there’s been the 77% of a loaf syndrome. Women became the breadwinners, adding yet another burden to an already overwhelmed life, but without paycheck equality. ‘Her money’ is a thing of the past. Amidst these mounting pressures women’s lives became something of a No Fun Zone: cutting back and redefining “the essentials” took precedence over rewards. What started out as a “Yes, we can” attitude has devolved into a cautious “No, we can’t.”

Marco Bevolo on the global luxury buyer

The economic downturn, of course. Luxury – as in ‘marketing bling bling’ – hit the wall, and without an airbag! People disinvested from mid-range, out-of-nowhere brands.

With less money and more insecurity, people have been returning to “the” luxury brands (Cartier, Chanel, Hermes…), the ones with solid roots, superior (hi)story (telling) and true core in terms of real value over the decades: luxury is back to being an investment, not a frivolity.

The urge to de-invest from stocks and similar has led to a rapid rise of top luxury products: this has been one of the best years for Ferrari. Lamborghini, on the other hand, being more of a toy-for-boys with less perceived lasting value, suffered.

Arvind Singhal on the Indian market

The Indian economy is expected to have grown by more than 6.5% in 2009. At the beginning of the year, people were still hesitant about the outlook for the year in view of continuous flow of “bad news” from rest of the world which found its way to the Indian media and impacted by tightening of budgets all round by different businesses and employers.

Against this background, the first big challenge for the Indian consumer was probably deciding whether “to buy or not to buy”. Few really lost jobs, and while there were salary cuts or wage-increase freezes in many organizations, the overall sentiment in the first half of the year was that of introspection and conservation.

India has been seeing a ‘what not to buy’ phenomenon for many years now where a relatively young, highly aspirational, and increasingly a “first time” consuming population is seeing an expansion of the categories of goods and services that they would like to spend money on increasing faster than their incomes. Hence, the consumers have been facing this dilemma almost every day as they experience this “category” collide and have to make choices. The third major trend is a redefinition of value. With newer, aggressive players in almost all categories of consumer products and services, “value” is getting redefined very regularly putting some pressure on the consumer to reorient themselves to these new definitions.

Canvas8 subscribers can access related reports on Canvas8

Chris Arnold, ‘Eco then and in 2010: how will next year’s ethical buyer behave?’, 11 December 2009. Available here

Debbi Evans, ‘Impermanence as a rising cultural trend’, 16 October 2009. Available here

David North, ‘The authentic dollar: the secret of the anti-marketing market’, 11 August 2009. Available here

A phone-booth outside of Old Street Station, London

What happens if you like music, photos and style? Do they have to be exclusive? Can someone who listens to music not also be stylish? Can someone who likes to take photos not also like to listen to music?

Convenient, simple...and making lots of money © Redbox (2009)

Although the buoyant online rental market and streaming services such as Spotify show no signs of slowing, a recent survey by Screen Digest (1) reveals that in spite of beleaguered brick and mortar video rentals in the UK and Europe (a predicted fall of 11% in 2009 and 6% year-on-year after that until 2013), the US market is on the up. This, the analysts say, is predominantly down to a small but significant factor: the $1 a night rental kiosk.

Here, we focus on recent cases within the media and entertainment industry which have had, or could have, a considerable impact on an otherwise struggling sector.

Canvas8 subscribers can read the full report here.

Perpetuating the 'bad bank' image © Creative commons

It’s not surprising, given the very loud dissent towards the global banking industry, that there’s a flurry of activity among mainstream banks to rebrand and repair some of the damage. In doing so, however, they should be wary of superficial gestures that will make little difference in the long term. Caja Navarra is one institution redefining the industry at a grassroots level and delivering a genuinely different customer experience.

Canvas8 subscribers can read the full case study and opportunities for the banking sector here.

The whole truth or the half truth? © Canvas8

Coinciding the release of her latest book, What She’s Not Telling You, Canvas8 Thought Leader Mary Lou Quinlan explores the female psyche and why research doesn’t always give you the right answer.

Scope
This year, more than ever, every dollar counts. With women buying or influencing 85% of what is sold, it’s fair to say that your success at attracting their attention and retaining their loyalty is more critical than ever. So, you’d think that this would be the time for brands to increase their Female IQ.

But in this global economic nosedive, Mary Lou notes that many marketers are still putting more of their best creativity into their executional intelligence, fascinated with the frontiers of the mom blogosphere or concocting an unorthodox segmentation scheme. All this rather than examining the very foundation of their marketing investment: the truth of what women want.

In this fascinating insight May Lou lifts the veil on Half Truths. Half truths are what women admit. Whole truths are what women really do and believe and buy.

Canvas8 subscribers can read the full report here.