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Saturday, June 9, 2018

CEIBS Forum Looks at Growth of Prestige Brands in the New Era

June 9, 2018. Shanghai – Today’s conference marks the 10th anniversary of CEIBS’ Prestige Brands Forum, an important branding event of the China’s leading international business school that has been looking at brands, and consumption since 2008. Today the consumption landscape in China has entered a new stage where the demand side is undergoing a process of upgrading, which is characterised by a growing trend of sophistication and diversification. To address this change, as it is in many other fields, “innovation” is the solution, says CEIBS President (European) Professor Pedro Nueno. “Innovation is of ultimate importance for all brands today, but with technologies becoming more advanced and consumers more savvy, ‘understanding [consumers]’ is becoming more and more difficult for brands,” he said during the welcome address. Along with the booming “New Retail” segment that is reshaping the retail industry and consumer behaviour, the issue of how long-established prestige brands strike a balance between heritage and innovation to nurture a lifelong relationship with their consumers, was the basis for today’s discussion.

The forum opened with an insightful dialogue between Mr. Clemens Pflanz and Professor Michel Gutsatz. Mr. Pflanz is Founder and Chair of MEISTERKREIS, a German luxury forum, and Germany’s Luxury Goods Association while Prof. Gutsatz is MBA Director at the Kedge Business School in France. Both experts touched on an important trend much discussed in the global luxury landscape marked by a China-initiated M&A frenzy in Europe. Pflanz sees China transforming from the “World Factory” to a respected “World Investor”.  According to a survey by Germany’s Luxury Goods Association, contrary to some clichés about Chinese acquirers, most German PME investees are “quite happy” with their Chinese partners. Lauding Chinese investors’ efforts in helping European brands grow and win on the China market while preserving their original management and know-how, he is optimistic about the development of China-EU business ties in the future, which are becoming closer as the major strategies of both sides – “Made in China 2025” and the German “Industry 4.0” do present a “similarity and high-level mutuality”. Prof. Gutsatz added that in any deal, “building trust” is the key to success.

Following the discussion around the capital power in the luxury industry, President of Hermès Greater China Mr. Cao Weiming introduced the audience to looking at possibly the biggest challenge an acquirer has to tackle – how to positively help the acquired company develop and grow without the need to access capital imposing too much on its brand, originality and culture. Cao shared with the attendees how the prestigious Hermès nurtures the young Chinese brand SHANG XIA and helps the latter build up its reputation. “SHANG XIA combines the French knowhow – which is in the veins of Hermès, with a Chinese emotion. ‘Sharing’ is at the heart of Hermès,” he said.

In the session on “Insights into New Industrial Trends”, Mr. Eric Chan, CEO of SECOO Luxe, a ten-year-old luxury e-commerce platform, explained his understanding of the online luxury retail business. Chan believes “luxury” and “online” are not necessarily mutually exclusive, and that “good service” is the secret why SECOO Luxe – whose future was seen as gloomy back in 2008 – soldiered through. “We have a team of more than 60 experts appraising the authenticity of the goods,” said Chan. “We will send our staff to a client’s home or office with three pairs of shoes in 35, 36 and 37, though she only ordered a pair of 36, just to make sure she buys what she is 100% satisfied with.”

Around the topic of “digital”, Director of Global Luxury Goods and Head of Securities Department of BNP Paribas, Mr. Luca Solca offered insights on how digital is reshaping and impacting the luxury industry. First, digital helps boost sales, it breaks physical barriers to sell luxury goods to those who used to be marginalised because of insufficient offline store coverage; digital also empowers brands’ CRM – thanks to the development of mobile internet and big data. Second, digital encourages competition within the industry, and facilitates newcomers through lowering the entry barrier and costs – before brands invested a lot in opening flagship boutiques in expensive locations while now more and more players are moving online. Third, digital is, by its nature, a magnifying lens – with which many problems and possibilities are amplified – brands need to know to adapt to this trend of digitisation.

In the afternoon, the forum looked at Consumers and Brands in the New Competitive Landscape. Partner at Bain Greater China, Mr. Bruno Lannes shared some new trends in consumer behaviour:

- The domestic market outgrew overseas purchases and reached 20% growth in 2017; also, category rebalancing continued with female categories outgrowing those for males;

- New consumers, mostly millennials, have been major contributors to market growth; Millennials are digitally savvy and very knowledgeable about luxury. They like “fashion and casual”, favour designer brands and start buying luxury goods at a young age with relatively high frequency;

- Most brands continue to adjust their footprint with fewer but bigger stores, preferably in shopping malls, which offer an integrated “retailtainment” experience to consumers;

- Digital Marketing is now the “norm” to engage with luxury shoppers, in particular millennials; WeChat is now the leading marketing platform; and

- Outperforming brands focus on ready-to-wear, creating constant “newness” and “freshness,” harnessing the power of digital marketing and adopting a “fast fashion” supply chain model, all of which result in higher store productivity.

Ms. Sophie Wu who is a COO (Chief Customer Officer) at Alibaba Group, and CEIBS Professor of Economics and Finance Xu Bin respectively shared their insights on how to boost a brand’s competitiveness from an experience and economic perspective.

Today’s CEIBS - Jing’an 10th Prestige Brands Forum brought together players from the luxury industry, government and related sectors such as investments, consulting and e-commerce. The day-long event enjoyed insights from Jing’an District officers, and executives from ADORITZ, JALA Group Co., MAGMODE, Tencent, Shenzhen ELLASSAY Apparel Co., Ltd., and Roland Berger. Associate Professor of Marketing at CEIBS and Director of CEIBS-Jing’an International Fashion Industry Research Centre, Jane Wang moderated the forum that was attended by more than 200 luxury professionals and members and friends of the CEIBS community.