Daily Insights

Luxury Offline Activations Are Back in China

By: Wilson Zhao | Sep 02, 2020

Luxury offline activations are back to pre-COVID-19 levels in China for the first time since the Coronavirus pandemic began. As consumers begin to feel more comfortable shopping in brick-and-mortar stores, luxury brands ramped up investment in offline activations and omnichannel (O2O) capability to attract foot traffic.

As an essential part of luxury brands’ strategy in China, offline activations not only drive foot traffic but are also an effective way to drive social buzz and build brand awareness. “Offline is a great tool to target millennial and Gen Z groups in China. These social-savvy consumers are passionate about trying and sharing their offline experiences,” says Amie Song, Sr. Specialist at Gartner for Marketers. 

When COVID-19 broke out in China, many brands had to cancel or postpone their offline plans. Conversations about O2O content by luxury brands on Weibo were limited from February to March, and started to pick up again in April as the economy gradually reopened. But it is not until recently that offline mentions were able to fully resume to pre-COVID-19 levels.  

In July, the total mentions of O2O content on Weibo by luxury brands tracked in Gartner’s Digital IQ Index: Luxury China grew by 24%  year-on-year. Particularly, in an effort to attract more store visits, the mention of offline stores on Weibo saw the biggest increase since February and grew by 154% year-on-year. 

In fact, as early as April, some brands went ahead to test the offline market and were able to reap the benefit of revenge shopping after weeks of stay-home quarantine. The first day of the Hermès Guangzhou flagship store reopening in April received record-breaking sales of at least $2.7M. The new store offered a more limited selection, including a rare diamond-studded Himalayan Birkin, and heavily promoted on social and through its CRM. Hermès also hosted a livestream with a KOL (Key Opinion Leaders) in a different store to present curated selections that further drove consumers’ interests to visit offline. 

Mentions of physical store activations and services returned to pre-COVID-19 levels in July. To incentivize more traffic to physical stores, luxury brands invested to strengthen their O2O capability.  Burberry recently launched its first ‘Social Retail Store’ in Shenzhen to target young, digital-savvy Chinese consumers, offering an innovative omnichannel experience empowered by WeChat. Chaumet upgraded its two WeChat mini programs to include offline store location finding and service reservation functionality. Some brands also used heavy promotions to attract store visits. For example, jewelry giant Chow Tai Fook gave out shopping coupons worth nearly $71.4M along with product discounts as much as 15% off in nationwide stores.

As for pop-ups and exhibitions, mentions in July have recovered back to the level a year ago thanks to Dior’s Designer of Dreams Shanghai exhibition and a star-studded launch party that drove massive buzz online. Jewelry brand Harry Winston also hosted two in-store, limited-time exhibitions in Chengdu and Beijing to showcase its high-end jewelry collections including the world-famous 45.52-carat jewel ‘The Hope of Diamond’. Fashion brands Prada, Louis Vuitton, Fendi, Armani, and Valentino are among the first group of brands to host limited-time pop-up stores to present their new seasonal collections back in April. 

As of July, events and fashion shows had not yet recovered, only receiving half of the total mentions compared to a year ago. However, they have continued growth in August with Louis Vuitton’s Shanghai fashion show, Prada Mode Shanghai event, and Qixi festivals, one of the key sales-driving holidays for luxury brands in China. 

This year, Qixi became more important than before because many luxury brands used it as a testing ground for foot traffic and offline activations since the pandemic. In July, Dior and Fendi have both already hosted launch parties with celebrities to support their Qixi special collections. Apart from pop-ups stores, Dior also created “Dioramour Cafés” in Shanghai and Xi’an to further diversify its offline experience offering to customers. 

“Offline activations are a key pillar of luxury marketing in China. The resumption of large-scale exhibitions and fashion shows are a clear signal of China’s recovery,” says Danielle Bailey, MVP, APAC at Gartner for Marketers. “Pop-ups, long used by luxury brands to create brand buzz and launch new collections, are now showcases for omnichannel capabilities clearly targeting young Chinese consumers who are the market’s growth drivers.”   

Gucci renovated its four flagship stores in Shanghai, Shenzhen, Wuhan, and Chengdu to become photogenic exhibition halls for their Qixi special collection: GG Apple Print. Although the limited editions were also sold on its official brand site, WeChat mini program, and a flash store on RED, to drive more foot traffic, Gucci launched a lottery giveaway on RED to incentivize users posting photos with the big apple icon on the wall of stores.

While most of the world is still fighting COVID-19, for many luxury brands China is the growth engine as international travel restrictions have repatriated spending. According to the Q2 2020 earning releases, luxury groups LVMH, Richemont, and Kering all saw significant year-on-year growth from the Chinese domestic market while global sales continued to decline. This year, luxury brands are betting heavily in China and have significantly invested their digital capabilities to weather the challenges brought by COVID-19. However, as online space gets more crowded, offline activation and omnichannel capability could be the key differentiator and success driver.