Think BR: Go East - the opportunity for luxury brands in China

China is tipped to be the world’s largest market for luxury brands within five years, so everyone is thinking about what their strategy will be.

Success depends on many factors, but marketing and customer service are critical and can represent a key point of difference from competitors.

When setting up online in China there are some questions that you need to ask yourself before embarking on all-out attack on the luxury market there.

What are some of the regulations that will affect online trading?

Operating an online operation with a local .cn URL requires that the following requirements have been met:

• Allocation of a Chinese business license, which can take up to a year and requires significant transfer of funds to a local account
• A retail license, which can only be applied for once a business license is obtained
• A wholesale license
• Registration as a Wholly Foreign Owned Enterprise
• Registration of the online operational detail

The whole process can take in excess of a year and needs to be factored into the planning stage.

What do you need to consider around fulfilment and returns?

Achieving the desired customer service levels and operational economics might require a local logistics operation. This in turn requires consideration of fulfilment issues, such as the clearance of goods into China, the lease of a warehouse and the recruitment of a team to operate the warehouse.

Equally, local delivery partners need to be selected not just on their level of national coverage, but also on their ability to meet local expectations, such as the handling of cash for cash transactions, and the handling of returns.

How will you manage customer service?

While it is relatively easy for a contact centre to manage a global customer base, there is a balancing act between the ability to recruit sufficient numbers of Mandarin speakers for a centralised proposition, versus the time to train a new team in China.

Do you need a local marketing team?

The nuances of the Chinese market, both in terms of cultural differences but also in terms of different digital marketing partners and tools, means that traditional western marketing strategies do not apply.

For example Chinese consumers prefer to use Chinese search engines instead of the international search engines that are predominant in other markets. Google, for example, covers only 15% of web traffic in the country.

To utilise local search engines like www.baidu.com requires not only understanding of its algorithms for search optimisation but demonstrable legal ownership of the website as well.

Recruiting a local marketing team to cover social media, paid search and natural search (although this is of limited relevance in China) becomes another imperative.

Why invest in a local site?

One of the biggest challenges when devising a local commerce site is the 'Great Chinese Firewall', a consideration which is imperative for delivering acceptable performance without extensive investment in a local Chinese presence.

The Asian market offers luxury retailers and brand owners significant revenue and growth opportunities.

Using popular Chinese online marketplaces to test local demand is often a good first step on the learning curve but ultimately, the goal must be to build significant local presence that you control, given the size of the market and the speed with which it is growing.

Debbie Bond, director insight services, eCommera