Which Luxury Brands Really 'Get' Digital Marketing In China?

Supplanting the auto brands that led the way in last year’s ranking, beauty, fashion, and watches and jewelry brands accounted for more than two-thirds of the top 20 spots on the third annual L2 Digital IQ Index: China. Reflecting the speed at which brands have learned from -- and, in many cases, surpassed -- digital early adopters, beauty brands in particular showed the most impressive gains over the past year, with Estée Lauder topping the list of 100 prestige brands through savvy use of social media, digital marketing, and on- and offline synergy.

One of the key points made in this year's study is that China's luxury market continues to become increasingly competitive, fragmented, and global. Though 2012 was a comparatively difficult year for the mainland China luxury market, which only mustered single-digit growth, purchases by Chinese tourist-shoppers outside of China indicated that demand has shown little sign of diminishing. According to Doug Guthrie, Dean of the George Washington School of Business, “While mainland China’s organic luxury sales growth softened to low single digits, Chinese tourist spend was up 58% in Q3 of 2012, suggesting consumer demand is stronger than ever.” This has been particularly good for the fashion, beauty, and watches and jewelry brands that made some of the greatest gains on the new Digital IQ Index. As Jing Daily has previously noted, Chinese outbound tourists have traditionally targeted brands in these segments when traveling to popular destinations like South Korea, France and the U.S., as well as at airport duty-free shops worldwide.

This year's ranking is perhaps more important to watch than ever, as 2012 was arguably the toughest year to date for many luxury brands operating in the China market. Amid a government crackdown on public spending on luxury goods, a backlash against conspicuous consumption in top-tier cities, greater scrutiny of government officials' watches and cars, and more selective buying by consumers spooked by slower macroeconomic growth, spending has been less splashy and consumers have largely trended towards the low-key. Brands have mostly followed suit, with some of the biggest events this year -- such as the Hugo Boss 3D runway show and the launch of Montblanc's Beijing flagship -- having a stronger digital component than in 2011, when brands mostly held exclusive, lavish, star-studded launch events.

Yet even brands that went the extra mile with their digital overtures to China didn't always see success. According to the L2 study, brands like Prada, Harry Winston, Baccarat, Patek Philippe, and Ralph Lauren -- all of which have increased efforts in China this year -- registered some of the weakest performance of all luxury brands. The study also makes clear that what works for one brand in the digital sphere doesn't necessarily work for others. While some highly publicized online events this year (such as No. 37-ranked Armani's eponymous Tweet Talks event) fizzled, others (like No.13-ranked Louis Vuitton's "From Paris to Shanghai" and "L'Invitation Au Voyage" videos) proved exceedingly popular with Chinese netizens.

Though No. 10-ranked Burberry had a mixed year in China, with sales dipping this summer, its digital efforts resonated deeply with Chinese audiences. The Burberry Body commercial racked up nearly 3.5 million views on Youku, while a Burberry Body video featuring chief creative officer Christopher Bailey attracted 58,000 views and popular initiatives on Jiepang and Sina Weibo led to enviable engagement. Among fashion brands, Burberry showed this year that it remains committed to the digital space in China and isn't content to rest on last year's successes.

However, it is starkly apparent that beauty brands have truly broken away from the pack this year in terms of innovation, engagement and e-commerce. Beauty brands account for nine of the top 20 brands on this year's ranking, with average digital IQs 64% higher than the weakest category, fashion. Among the "Flashes of Genius" listed in this year's L2 study by beauty brands are Estée Lauder's highly successful social expansion from three to six platforms and Lancôme's upgrade of the RoseBeauty BBS and a best in class e-commerce-enabled Chinese brand site.

Some jewelry brands also outperformed their competitors, with Hong Kong-based Chow Tai Fook impressing with a strong investment in multi-channel e-commerce and mobile innovation kicking it into the upper echelons of the "Genius"-ranked brands. Among auto brands, Audi maintained its powerful position in the rankings via sustained focus on digital media across all dimensions.

One key finding in this year's report is that brands continue to under-invest in their digital efforts in China despite the opportunity and size of the market -- which, by Bain & Company's estimation, may be the largest in the world. Brands' Chinese sites average abysmal load times of 24.1 seconds, four times as long as their global counterparts. More than half of brands sites have yet to be ICP (government) certified, meaning their pages are at risk of being removed from search results. While brand mobile investment targeting Chinese consumers has risen by double-digits, only 23% of brands maintain a mobile-optimized version of their China site and only a third of these sites are e-commerce enabled. And while China's luxury e-commerce market continues to grow by leaps and bounds, only four brands have launched direct e-commerce since 2011. Clearly, if brands are to take full advantage of the China opportunity and the rise of the inland consumer, they'll have to take a cue from the likes of Estée Lauder, Chow Tai Fook, or Audi and figure out how to get consumers truly interested, engaged, and ready to open their wallets.

To download the full rankings and key highlights from the report, click here.