An analysis of the week’s luxury news highlights

Tech Reality Check

When a tidal wave of innovation collides with the tranquil shores of the status quo, it’s all too easy to get swept away by the sheer force of it all. Such is the danger that the luxury industry faces when trying to make sense of social media and m-commerce. Perhaps now more than ever, understanding the failures and shortcomings of these nebulous digital channels is just as important as studying their success stories.

Fortunately, last week provided a few more clues as to what’s not working in the wider business world and why. Referencing a white paper by the digital marketing agency 360i, the Brand Channel focused on the “disconnect between brands and Twitter.” According to 360i’s research, more than 90% of tweets still come from consumers rather than corporations and only 12% of those mention a brand. More telling was the fact that the majority of these commercial plugs are either about social networking sites themselves, entertainment or technology brands. The report also found that, despite all the advice to the contrary, most brands using the microblogging site still only seem able to listen. A meagre 12% of marketer tweets demonstrate what it calls “active dialogue with consumers”.

In its round-up of the top 5 mobile commerce trends, Mashable presented some interesting data which puts the spectacular rise of total m-commerce and smartphone sales into some perspective for luxury goods firms. According to a survey by the Mobile Marketing Association, only 6% of m-commerce represents a sale of tangible goods (in contrast to buying applications, ringtones and discount coupons). And in other news, the Biz Report outlined the most common reasons that social media campaigns fail by providing caveats from the analytics firm Sysomos.

Exposing Affluent China

China’s enigmatic luxury goods market seems to only truly reveal itself incrementally or in small doses. Although we’re bombarded with daily updates hard and fast, many of the reports are either incomplete or contradictory. One recently released publication that hopes to shed more light on the evolution of lifestyle choices, social attitudes and consumption patterns of HNWIs is China’s new wealth, an insight report by Dr Pierre Xiao Lu in conjunction with FDKG.

The consultancy firm’s CEO, Ken Grant provided LS with a few of the more salient findings from this survey of 800 of China’s entrepreneurs and business leaders spread across 62 cities. Chief among them was the fact that almost 80% of respondents in the communist stronghold now feel that an upper class should exist while less than 9% regarded being upper class as vain. This certainly bodes well for luxury firms as does the growing sense of sophistication found in another statistic. When asked what constitutes a ‘good image’, more than 35% said it was about taste. Less than 7% believe it is a way to show off wealth.

Another figure that stood out was the number of wealthy Chinese who said they give to charity, which stood at more than 90%. This might be surprising for those who know that institutionalised philanthropy only became popular among China’s affluent in recent years but it does seem to confirm other sources reporting on socially conscious consumer attitudes, such as Jing Daily’s piece on the growing importance of a luxury brand’s CSR record.

Other highlights on China from the week include the revelation in SIFY that half of China’s urban residents say they prefer buying luxury items online because prices are more favourable than at mainland stores and Plush Asia’s story on the business opportunities created by the first generation of Chinese who will inherit wealth instead of making it themselves. WWD explored the difficulties in segmenting China’s luxury demographics.

Market Health & Consumer Sentiment

In one of the more tangible signs of luxury market recovery so far this year, LVMH’s recent announcement of first half net profit (a 53% leap) was first analysed by the Wall Street Journal and then chronicled in Retail Jeweller (represented by the firm’s 24% revenue increase in its watch and jewellery arm).

Europe Real Estate explored an optimistic market story on how luxury goods made up more than 23% of new store openings last year, effectively leading growth in the retail sector (according to the latest edition of ‘How Global is the Business of Retail?’ by the real estate adviser CB Richard Ellis).

Meanwhile, Forbes outlined the results of The Survey of Affluence and Wealth in America 2010 (American Express Publishing and the Harrison Group), some of which might help confirm what market observers have been saying about consumers’ loyalty, confidence, bargain buying and their response to new versus more conventional advertising.