Kering ramping up digitalization in China
Amid the outbound travel restrictions due to the COVID-19, prominent luxury house Kering Group has been further leveraging its digital ecosystem to deliver fluid shopping experiences both online and offline in China — its fastest-growing market globally in the first quarter this year — said a top executive.
Gregory Boutte, chief client and digital officer of France’s Kering Group — which manages a series of renowned fashion, leather goods, jewelry and watch brands — said China is a critical market for the group in terms of retail growth potential and digital inspiration.
According to a recent Bain & Co report, a third of global luxury sector revenue comes from Chinese consumers and it is forecast to increase to more than 45 percent by 2025. The Chinese mainland is on a path to becoming the biggest luxury market worldwide.
Prior to the COVID-19 pandemic, a majority of global luxury sales came from Chinese traveling overseas. But with travel restrictions, most of this buying is being conducted within China, said the house that owns Gucci, Saint Laurent and Bottega Veneta. This confirmed its earlier strategic choices and accelerates its adaptation to China’s digital ecosystem, which has led the world in terms of innovation and trendsetting in the digital fashion space.
While the attraction of the Chinese market used to be largely generated from affluent local customers, now it is also becoming increasingly sought after due to its ability to innovate businesses.
“It is a huge opportunity for us because by being relevant with Chinese customers, we are potentially ahead of time for what we have — a peek into what’s going to happen soon in Europe and in the United States,” said Boutte, who heads the group’s digital transformation and the development of e-commerce, customer relations management, data management and innovation.
Kering’s local team in China has been empowered to understand the local market and deliver better experiences for Chinese customers through leveraging technology and merging global tools with local digital tools, he said.
“It’s easier to create one single strategy globally. It’s much more complicated to have that global strategy and also have teams locally that will adapt their own specific strategy. But that’s a strength that enables us to be a group of wide brand portfolios that customers all over the world can aspire to in a way that’s relevant for them,” Boutte said.
In China, Kering has been a leader in digitalization of the luxury sector. In 2017, Gucci was one of the first luxury fashion brands to create its own official Chinese website. Other brands under Kering have gradually set up official websites, WeChat stores and WeChat mini programs, with online campaigns based on various festivals in China like the Chinese Lunar New Year, Chinese Valentine’s Day and the Singles Day — Tmall’s key consumption period.
Recently, several brands of the group have launched livestreaming fashion shows on social media platforms, including Weibo and Douyin to get closer to younger consumers.
Boutte said the online luxury industry is only beginning in China.
Of Kering’s 2020 online contributions to total retail revenue, the Asia-Pacific region grew especially fast last year, doubling from 3 percent in 2019 to 6 percent in 2020.
However, the ratio is still far below Western Europe and the US, which were 22 percent and 24 percent, respectively, in 2020, having also doubled over the year.
“It’s not because Chinese customers are not digitally savvy — on the contrary. It’s just that e-commerce of the luxury sector is still at a very early stage,” he said.
Yet the digital executive said e-commerce is going to continue growing and accelerating in China.
“It (the acceleration) is expected to come from leveraging the specificities of the Chinese digital ecosystem, and also some breakthroughs in some technologies,” Boutte said.
While believing creativity and long-lasting client relationships are the core of the luxury experience and value proposition, the pandemic has confirmed Kering’s consistent investment in e-commerce and digital tools, he said.
Kering’s e-commerce has grown globally and online retail is growing from 67 percent in 2020 to 108 percent in the first quarter, during which 14 percent of its global revenue was also made through online retail, 5 percentage points above what it was last year.
Boutte, whose first decision after joining Kering was to bring all e-commerce activities under the Kering roof, said the firm has developed digital tools to enable sales associates to do distant sales and continue to get engaged with customers during the pandemic. The company has doubled down on developing its dot-com properties, and e-concessions such as Italy’s YOOX Net-a-Porter and Tmall, where they sell to end customers, he said.
On social media, Boutte said, their strategy is further enhancing presence and relevancy with customers through testing and developing programs on social media where customers frequent.
For example, Gucci has signed a contract for a major strategic partnership with Tencent, with multiple implications tailored for the Tencent platform.
The house has also considered more input on virtual try-on functionality at stores and the adoption of artificial intelligence to personalize the experience. And Kering is working on AI to enhance the accuracy of supply chains to improve efficiency and sustainability, Boutte added.
“I’m very optimistic about the growth of e-commerce and digitalization in China. The digital ecosystem and the customers are very open and prone to making those big innovations that are going to continue driving the growth there,” he said.