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China – A brand new world, but a world in itself, for online luxury

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August 2011


The Chinese market has passed from the status of becoming a promising market to now being one of the common and indispensable components in the development strategies of most international watch brands. According to the study ‘China’s Digital Generations 2.0’ by the Boston Consulting Group, advertising spending in the digital domain in China should increase from 8 per cent in 2008 to 20 per cent by 2012.
Today, the Internet is the favoured method of reaching the Chinese consumer and of thus developing the reputation and image of a brand or a product as well as effectively supporting sales.
According to the ‘2011 Luxury Consumer Report’ published by the McKinsey Institute, the consumer of luxury products in China is generally young:

45 per cent of consumers of luxury products in China are less than 35 years of age, versus 28 per cent in Europe.

Hence, the growing influence of the Internet on their ideas is clear. Again, according to the McKinsey Institute’s report, after direct in-store experience (44 per cent), the Internet—more specifically online advertising—represents the point of contact that has the most influence (21 per cent) for the buying process in the luxury products sector in China.
The goal then consists of working in two strategic areas of the Internet in China: online advertising and search engines. Many questions remain, however, as to the ways to effectively position a brand or product in the Chinese online sector. Online advertising – or how to generate qualified searches.
Despite the gigantic numbers of people who visit Chinese websites, and in spite of the considerable increase in purchasing power over the last few years, the size of the clientele for luxury products is still very small in comparison to the hundreds of millions of Chinese who surf the web.
More than ever, the quality of the targeted audience is very important if one wants to guarantee the return on investment of an online advertising campaign. From financial sites, including those dedicated to the luxury and fashion segments, to social networks reserved for affluent people, China now has a variety of websites that offer quality for watch brands.

www.iwatch365.net is a chat room devoted exclusively to the universe of luxury watches. It has 240,000 unique visitors and 2.6 million page views per month (Source: Google Adplanner – DLG 2011).
Many brands are already present on the site, in both editorial and advertising formats.

China – A brand new world, but a world in itself, for online luxury

www.p1.cn is a social network operating on an by-invitation-only basis and reserved for the affluent class in China. It claims to have 800,000 members.

China – A brand new world, but a world in itself, for online luxury

Baidu – or how to capture searches.
Currently, few brands manage, in an optimal manner, their rankings on Baidu, which has a market share of around 80 per cent of searches in China. In fact, approximately 70 per cent of luxury watch brands are not able to have themselves placed in the top rankings for searches that are directly linked to their own brand. And, to this problem can be added all the advertising placed by their competitors, sites offering counterfeit watches, and ‘grey market’ sellers, which position themselves using sponsored links in the searches for brands.
As of now, Baidu has more than 500,000 qualified monthly searches for Longines, the most popular watch brand in China, according to the 2011 World Watch Report of the Digital Luxury Group. With these types of numbers, having visibility on Chinese search engines is an important strategy.

China – A brand new world, but a world in itself, for online luxury

Baidu thus proposes an effective alternative to the lack of visibility in the search engines. Its solution involves paying Baidu to display a large ‘brand zone’ containing elements of text, links, and banners that are totally customized by the brands.
This solution offers the double advantage of capturing searches for the brand as well as securing its own legitimate space by pushing competitors down to lower placements on the search pages.

China – A brand new world, but a world in itself, for online luxury

Don’t stop at attracting visitors
While visibility on the Internet in China is key to developing a reputation, attracting visitors is not the only challenge that brands are facing. Additionally, China suffers from very low Internet download speeds and the government actively censures foreign websites. These two elements represent a considerable risk when efforts to generate a desire for a brand or a product are conducted on a website that is potentially inaccessible.
Some websites of watch brands have download speeds of up to eight times slower for a Chinese visitor than for an occidental visitor. This means that the probability of losing a visitor is very high if he or she has to wait 40 seconds to see the site. As a result, the perception of the brand may be seriously damaged.
Finding a solution to these concerns and obtaining governmental authorization should thus be considered as indispensable for any online campaign if a brand wants to ensure their impact in the Chinese market.

Source: Europa Star August - September 2011 Magazine Issue