Analysis of the effectiveness of LV’s live broadcast on Xiaohongshu!

Compared with the effect of LV’s live broadcast on Xiaohongshu , what is more worthy of our attention is the brand’s attitude towards the new channel and their direction after the layout of the new channel - to compete for the Chinese market.

Key points:

• Since the beginning of 2020, the digitalization process of luxury brands represented by LV in China has been significantly accelerated, and the impact of the epidemic is only one of the reasons.
• The key for international brands to compete for the Chinese market lies in finding more matching channels, grasping online growth and converting young consumer groups.
• LV chose Xiaohongshu to conduct its first live broadcast based on the fact that Xiaohongshu is in line with the brand in terms of customer base, brand positioning and traffic conversion performance.

Luxury goods are becoming more down-to-earth, at least in attitude.

On March 26, LV conducted its first live broadcast on Xiaohongshu. In people's impression, luxury brands have always presented themselves as aloof. Some brands even chose to refuse the flagship store channels of e-commerce platforms. However, this time they actually used e-commerce live streaming, which looks lively and down-to-earth, which somewhat subverted people's perception.

In addition to LV, well-known brands such as Prada, Dior, Burberry, and Chanel have also recently accelerated their digitalization process, actively entering online channels, cooperating with live broadcast platforms, and conducting live shows for the first time.

The most direct cause of all changes is the epidemic.

Following the blow to the Chinese market, the epidemic has hit the luxury industry's European base. Italy and France have restricted citizens' travel, luxury brand stores have been closed, and European factories have stopped production. The luxury industry, which mainly relies on offline business, has been under great pressure. LV's parent company has even issued a warning that its revenue in the first quarter may fall by 20%.

Under pressure, online channels have become an important outlet for luxury brands.

But the epidemic has only accelerated this process. The more important reason is that in the face of the increasingly important Chinese market and the rapidly changing young consumer groups, luxury brands must make changes if they want to capture consumers.

Data from Bain Consulting shows that by 2025, Chinese consumers will contribute 46% of sales in the global luxury industry, and nearly half of luxury consumption will take place in the domestic market. Increasing investment in the Chinese domestic market has become a consensus in the luxury goods industry.

Therefore, the recent actions of luxury brands are not all "forced" by the epidemic, but also the continued advancement of their China market strategy. LV's live broadcast on Xiaohongshu is a typical example, and it may only be the beginning.

LV at the forefront

Since the beginning of 2020, luxury brands and vertical e-commerce have been making intensive online moves in China, as if they had made an appointment:

• On January 21, WeChat Video Account began internal testing, and then news came out that LV had entered the Video Account. Recently, brands such as Prada, Dior and Burberry have also entered the video account;
• On January 30, Farfetch, a British luxury e-commerce platform, announced that it had received an investment of US$125 million from Tencent and Dragoneer respectively. The partnership with Tencent means that the luxury industry will be further integrated with China's local Internet digitalization.
• In March, Prada, Armani, and MiuMiu, a brand under the Prada Group, successively landed on Tmall;
• Recently, Qudian’s cross-border luxury shopping platform “Wanlimu” was launched, and it launched a luxury price war with the “10 billion subsidy” project.

It can be seen that luxury goods are entering China's Internet channels in an increasingly people-friendly manner, trying to reach Chinese consumers in a more localized way. Take LV, which has always been at the forefront, as an example:

• In 2017, LV opened its official e-commerce business to 12 cities in China;
• In 2018, LV provided purchase and free delivery services to all cities in China and launched a WeChat boutique;
• In 2019, LV cooperated with domestic fashion bloggers to plan the content of the official account and settled in Xiaohongshu, becoming the first luxury brand to open a Xiaohongshu brand account.

This year, LV took its attempt a step further and chose e-commerce live streaming.

In recent years, live streaming of e-commerce has provided astonishing growth for the online shopping industry. According to a research report by China Merchants Securities, the total GMV of live streaming e-commerce in 2019 exceeded 300 billion yuan, and is expected to reach a trillion yuan scale in the future. The promising prospects have attracted platforms such as Xiaohongshu, Douyin, and Kuaishou to join the market, and have also attracted the attention of luxury brands.

What sparks will be created when high-end, grand and upscale luxury goods meet lively, direct and fast live broadcasts?

Judging from LV’s first live broadcast, it’s hard to say that the effect was perfect.

As the first luxury brand to try something new, LV’s first live broadcast was not perfect, with some commentators considering it a failure. The main point of public opinion is that the live broadcast stage and lighting were too casual, failing to show the texture of the product, making the top brands look "rustic", which is a huge contrast.

Compared with the effect of a live broadcast, what is more noteworthy is the brand’s attitude towards the new channel.

"Deep Sound" and "The Rule of Hot Selling Products" learned from Xiaohongshu that the brand LV attached great importance to this live broadcast. For example, the live broadcast address was chosen to be the LV House in Shanghai Henglong Plaza - this is the largest LV store in China and the 16th Louis Vuitton House in the world; and a new set was set up in the store specifically for the live broadcast; the products selected for the live broadcast are all new products of the season, and there are no discounts, which shows how much importance the brand attaches.

The complaints about the first live broadcast mostly come from the unfamiliarity of luxury brands in their first live broadcast. For example, compared with directly using the backdrop, directly using store furnishings and using close-ups combined with store lighting to display products may actually have a better performance.

In fact, from the perspective of gaining experience, LV may have gained a lot from its first live broadcast. For example, judging from the feedback from the live broadcast, the part where the shopping guide taught how to tie a scarf received the best feedback from the entire live broadcast. From the feedback from users, the brand can find that in the live broadcast, the "cloud shopping" mode of letting the shopping guide act as the anchor to introduce the products is better than having celebrities bring the products, because for fans who go for new products, the main demand is to learn as much as possible about the product within an hour.

These experiences are valuable for LV and other luxury brands to make innovative attempts. It is understood that this live broadcast has achieved the cooperation goals.

This is the first live broadcast of new product introduction by LV through the Internet platform in the nearly 30 years since LV entered the Chinese market. Although public opinion has mixed reviews, from a commercial perspective and the final effect of the cooperation, this live broadcast by LV has many implications for both the brand itself and the entire luxury industry.

Digging for Gold in China's Online Market: Channel Selection is the Key

From "lowering their status" to embracing e-commerce platforms (Tmall), to actively entering the latest digital channels (video accounts), and then to trying out the hottest local sales methods, the intensive actions of big brands represented by LV all have a common direction - to compete for the Chinese market.

According to Bain Consulting, global luxury sales reached US$310 billion in 2019, with China contributing 35%, and this share will continue to grow. Last July, at the LVMH 2019 first half earnings call of LV's parent company, CFO Jean-Jacques Guiony said that the Asian market driven by China was growing strongly, with revenue growth rates of 18% in the second quarter and the first half of the year, making it the fastest growing market in the group.

The value of the Chinese market to luxury brands is self-evident. In the Chinese market where e-commerce penetration is extremely high, online sales are an important engine for growth.

According to data from the Yaoke Research Institute, China's online luxury sales turnover in 2018 was US$5.3 billion, accounting for nearly 14% of the sales of the luxury goods market in China, an increase of 37% compared with US$3.9 billion in 2017. In 2019, China's online luxury sales turnover reached US$7.5 billion, and its share of sales in the domestic luxury market increased to nearly 16%.

This proportion is expected to continue to increase. The "China Luxury Report 2019" released by McKinsey shows that the size of China's online luxury market in 2023 will be two to three times that of 2018.

Behind the market size and sales channels, the challenge for luxury brands is how to continue to attract and convert consumers. For most luxury brands that were born in Europe and have a long corporate history, the Chinese market is a brand new challenge - because they are facing a completely new customer base.

The "China Luxury Report 2019" shows that the younger generation represented by those born in the 1980s and 1990s account for 43% and 28% of the total number of luxury buyers, respectively, and contribute 56% and 23% of China's total luxury consumption.

The "2020 China Luxury Report" jointly released by Ruder Finn and Precision Market Research shows that the average age of Generation Z aged 21 to 25 for their first luxury purchase is less than 20 years old, two to three years earlier than the millennials.

Source: China Luxury Report 2019, McKinsey

One obvious trend is that luxury consumption in China is becoming younger.

For international brands represented by LV, the key to competing for the Chinese market lies in grasping online growth and converting young consumer groups. How to efficiently reach consumers through more localized online channels has become the key to determining the extent of growth.

LV's choice, to some extent, represents the collective thinking of luxury brands.

The reason why I chose Xiaohongshu for my first live broadcast is related to the characteristics of Xiaohongshu’s customer base. Founded in 2013, Xiaohongshu was initially positioned as a platform for sharing overseas shopping information and started out with overseas shopping UGC. Its early seed users were a group of users who had the ability to shop overseas and consume luxury goods. At present, Xiaohongshu, which entered the e-commerce business by overseas shopping, has become the only unicorn in the Internet industry with a social + e-commerce model, attracting a large number of vertical users in the luxury goods field.

At present, the number of monthly active users of Xiaohongshu has exceeded 100 million. Although the platform is expanding towards a broader "eating, drinking and having fun" lifestyle, fashion brands are still one of its most influential categories. This group of users is mainly female, who are young, have strong purchasing power and high consumption willingness. This is a unique customer value that is difficult for other platforms to possess.

Xiaohongshu has a lot of notes about luxury brands

Xiaohongshu told "Shen Xiang" and "The Law of Hot Sales" that more than 70% of the platform's users are born after 1990, and live streaming is now in the internal testing stage. The highest average order value has exceeded 10,000 yuan, and the item sold is a skin care device of a Japanese brand - it can be seen that Xiaohongshu's traffic conversion value is very high.

Xiaohongshu’s customer base, brand positioning, and traffic conversion performance are in line with the needs of luxury brands.

At present, nearly 30 luxury brands including LV, Dior, FENDI, GUCCI, Chloe, Givenchy, YSL, and Bulgari have opened official accounts on Xiaohongshu. As one of the first luxury brands to join Xiaohongshu, LV already has 138,000 followers, and there are more than 370,000 notes about LV on the Xiaohongshu site.

Compared with other platforms, Xiaohongshu entered the e-commerce live streaming market relatively early. In June last year, Xiaohongshu conducted an initial live broadcast test. After nearly half a year of trial, Xiaohongshu began internal testing of live broadcast in December last year.

E-commerce live streaming is already a somewhat crowded track, and high-priced products represented by luxury goods may become a significant differentiator for Xiaohongshu’s live streaming. In the communication with "Shen Xiang" and "Hot Product Law", Xiaohongshu stated that there is a high degree of overlap between Xiaohongshu's users and LV's target group, and the conversion efficiency is higher for the brand.

There are doubts in the public opinion that only 15,000 people watched the LV live broadcast, which cannot be compared with other platforms. But if 1,000 people place an order after 15,000 people watch it, compared to only 100 people placing an order after 100,000 people watch it, the former is obviously more valuable to the brand.

Live streaming is not all of LV’s cooperation with Xiaohongshu this time. On April 1, LV’s official corporate account announced that in the next few days, Xiaohongshu blogger Chen Baiyang will temporarily take over LV’s official account to interact with fans about LV’s new products. Judging from the effectiveness and willingness of cooperation, Xiaohongshu’s value to luxury brands has been recognized in stages, and LV’s exploration of online channels also has practical value.

Different from the European and American markets, China's communication environment and shopping methods often have distinct local characteristics. The lively e-commerce live broadcast is a typical example. If international brands want to achieve more growth in the Chinese market, they should find a more appropriate connection with users in the new environment. Such an attempt is not a flattering "down-to-earth" approach. In terms of luxury content, social networking, e-commerce and other dimensions, Xiaohongshu is a more suitable channel.

Author: Hong Jian

Source: Deep Echo (ID: deep-echo)