LUXURY BRAND BUILDING AND REBRANDING THROUGH DIGITALISATION: THE CASE OF ITALIAN BRANDS IN CHINA

다국어 초록 (Multilingual Abstract)

The main purpose of this paper is to investigate how a luxury brand may be affected by the variables associated to a new market entry as the Chinese and how those new market variables are integrated in the process of rebranding in the new geographical context. In doing so, the paper will review the existing literature in the field and following three derived propositions through a qualitative approach, it will analyse the successful brand strategy of three Italian luxury brands. The luxury brands considered in our investigation are three international ones with a specific consolidated brand heritage and with a multisectorial positioning. The methodological approach chosen in the analysis is the case-study method (Yin, 1984) with the specific purpose of focusing on a particular phenomenon instead of generalising (Schramm, 1971). Following the case-study methodology, this paper will explore and analyse the specific luxury brand building and rebranding process adopted by three Italian luxury brands to enter the new market and specifically through the digitalisation of the brand. The abstract will report a summary of one case as a reference sample. The empirical research will evidence the positive impact of digitalisation for successful luxury branding and rebranding in entry market strategy and justify its adoption in the exclusive luxury sector by the socio-cultural context-related factors of the new market. It will provide specific orientations and recommendations as well as best practices for luxury corporations on the specificities of branding and digitalisation of luxury in China. The research will show a successful model path for luxury branding when entering the Chinese market and the key impact of the “luxury digitalisation” strategy - usually associated to high accessibility - with respect to a traditional “luxury retailing” strategy - associated to the exclusivity of the luxury sector. Introduction The increasing interest in luxury brands in the fast growing economies of Asia, with particular attention towards China, has supported the growth of the luxury market in the last years. China, the global second largest economy, with the global largest consumer market, has reached a role of an undisguisable strategic leader in the luxury market. Far from theexponential double digit growth rates characterizing China’s growth in the past decades - as high as 14.2% in 2007 – at the moment it is entering a different phase of growth. A recent trend is tending to see China as the source of a multiplicity of diversified aspects impacting the global luxury market scenario – despite the fact that luxury industry market situation is not simply China related. The ongoing Chinese growth in the last decade has been associated with a decrease in European and US markets. In addition to this, further issues have negatively affected the market grow more related to Chinese market specificity. Chinese exponential luxury market growth has negatively influenced the exclusivity aura associated to luxury goods and consequently disrupting non-Chinese luxury customers and Chinese top spenders luxury brands orientation. In relation to the economic crisis in consolidated markets, international luxury brands have focused their interest towards fast growing economies. As a result, global brands have focused their attention on attracting fast growing economies with a specific growth in affluent consumers interested in foreign brands and in an augmentation in global consumption (Le Monkhouse et al., 2012). As a consequence, China has attracted much attention by significantly contributing to balance the sales decline in consolidated economies that in 2013 accounted for 28% of the €212 billion global luxury consumption (Schiliro, 2013). In the new luxury oriented Chinese context, local shoppers have started to become brand aware of what they were in the past and with a specific focus on luxury fashion brands (Bruce & Kratz, 2007). However, it would be too limited to simply consider that the volumes of the market and focus on luxury brands is resulting only from consumer intentions to purchase luxury brands. A multiplicity of factors and in particular context related factors affecting shoppers luxury brand perception and luxury goods purchasing experience must be considered and as a consequence those context related factors that may affect the branding process itself. China's culture is different from Western cultures (Henriksen, 2009), and thus, Chinese luxury consumption may not follow the trends of the Western world. The Chinese perceive luxury brand value in terms of China's unique cultural background and as a consequence of the Chinese economic development, the Chinese luxury lifestyle is gradually evolving and beginning to show its own distinct characteristics. Although prior research related to luxury examines different cultures and markets such as the US, Indian, European, the Chinese luxury context and its impact on luxury brand when entering this market have not been examined sufficiently. Literature review Luxury Brands, Rebranding and the Chinese Context Literature teaches us that “luxury” is used to denote the main category of highly prestigious brands (Vigneron & Johnson, 2004). In the same way, luxury brands are related to wealth, exclusivity and power and are related to the fulfilment of nonessential desires (Brun et al., 2008 and Dubois and Gilles, 1994). “Luxury brands” comprises highly quality, expensive and nonessential goods and services that are symbols of rarity, exclusivity, prestige, and authenticity in for their consumers and they can provide highlevels of symbolic and emotional value (Tynan, McKechnie, & Chhuon, 2009). Vigneron and Johnson (2004) and later Wiedman et al. (2007) defined the concept of luxury as the physical and psychological values provided by prestige of luxury brands and consequently highlighting the symbolic and conceptual dimension associated to luxury. However, it was evidenced how the dimension is strongly associated to the cultural values and to the social environment by considering luxury goods representatives of individual and social identity (Vickers & Renand, 2003). These elements of exclusivity, prestige, rarity as well as individual and social identity are the key values distinguishing luxury from nonluxury brands (Tynan et al., 2009). In the same perspective, Kapferer (1997, p. 334) highlighted the importance of those luxury brand values in evidencing that brand memory and brand values should not be abandoned when the brand is revised suggesting that rebranding is an incremental process in contrast to a radical change. The Digitalisation of Luxury Brands and the Chinese Market In the western countries, the elder people mainly compose luxury customers, while luxury consumers become younger (about under 40 years old) in China. The increasing number of middle-level class has been the main force of online luxury consuming. The consumption concept of younger customers are huge different from that of traditional customers. Solomon (2009) expressed that customers’ behavior is a dynamic concept because they are influenced by the outer factors and inner elements (Solomon, 2009). A survey from McKinsey & Company indicates that there are almost 90% of Chinese Internet users living in tier1, tier2 and tier 3 cities have enrolled in a social-media site and Chinese people can be regarded as the world’s most active social-media population, around 91% of respondents telling they visited a social-media site in the previous six months, followed by 70% in South Korea, 67% in the United States and 30% in Japan (Chiu, Lin, & Silverman, 2012). The Chinese social and cultural context is increasingly becoming “digitally savvy” and Chinese citizens are more likely to gain information from Internet when they would make shopping decisions. First Proposition Indirect orientation for the first proposition comes from Vickers and Renard (2003) conceptual development that evidences that the conceptual dimension of luxury is strongly influenced by cultural elements and by the social context. Consequently it derives that the digitalisation of luxury as a part of the social and cultural variables of contemporary Chinese consumers’ market will be conceptualised in the rebranding process for luxury brands when entering the Chinese market. Second Proposition Specific support for our second proposition comes from Kapferer (1997) theory highlighting that successful luxury rebranding has to keep least certain core brand elements to have a proper transition from the existing luxury brand to the revised luxury brand in the new Chinese market. The digitalisation process for rebranding will evidence the core elements kept as a part of the brand heritage and identity.In the re-branding process new market segments may be touched or even new markets (Kapferer, 1997). Successful luxury rebranding may require meeting the needs of new market segments. As a consequence, in our third proposition it is assumed that new attributes to the brand may be required to satisfy the new market and in particular the Chinese digitally savvy” segment. These principles of rebranding applied to our Chinese luxury context refers to the existing literature relating to re-create the brand vision to entry the new Chinese market. Research questions and methodology This research aims to analyse the impact of cultural and social variables of a new market, the Chinese one, in the redefinition of a luxury brand and in particular: - the evolution towards a new digital orientation as a response to the needs of the new customer segments - the specific socio-cultural characteristics of the new Chinese market customer segments In order to provide specific responses from the field, the empirical research methodology is based on the case analysis method (Yin, 1984). The luxury brands cases considered in the research have been kept anonymous in order to keep the confidentiality of the data collected and consequently referred as A, B and C. It has been based on interviews carried out in China and in Europe with the management of the luxury brand, with a sample of its customer segments and also on the published data of the corporation. The Case of an Italian Luxury Brand in China The A case: Rebranding through Digitalisation for Successful Entry in the Chinese Market Out of the three cases, A is an Italian global luxury brand with an established brand image and heritage internationally. Its positioning as authentic luxury brand worldwide specifically focus its image on exclusivity, originality and innovative design. China, which was entered lately with respect to the other geographical markets in their global strategy, has now become clearly the main focus. Its entry strategy has been oriented towards a progressive reinforcement of relations between brand and market, in particular in relation to the digitalisation of the market and its consumption mode. The brand started opening the main flagship store in the Mainland China capital Beijing and following with the fashion centre Shanghai at the beginning of 2006. After a few years of gradual expansion and monitoring of the market evolution, the brand can nowadays count on a consolidated flagship store network adding value to the brand awareness. Counting on the younger Chinese luxury market segments, the brand had a remarkable immediate growth in the market as a result of its brand core values and image as well as of its own digitalisation of the brand development strategy. The growth and consolidated positioning allowed the brand to start a brand expansion strategy by introducing the cosmetics line in department stores after clothing and apparel and perfumes. Conclusion A luxury brand focused on a specific rebranding as entry strategy for the Chinese market through the integration between the socio-cultural variables associated to the local context and the core components of the brand. A transferred the brand to the Chinesemarket by maintaining its own young style and image, specifically suitable for the young Chinese luxury market. In the initial phase of the Chinese market entry, A focused on reinforcing the brand image and awareness in the local socio-cultural context by developing their retail and distribution in particular by having key premium locations, fundamental to communicate the brand identity and core values. However, the retailing network was not perceived as sufficient to create “a social buzz” in the Chinese young socio-cultural context that is specifically influenced by digital media in this geographical environment. The analysis of the brand and its entry strategy in China have clearly shown that they entry and kept expanding in China from first to third tier cities and to different targeted segments by developing an intelligent digitalisation of the brand. Starting from developing a Chinese version of the brand name, A brand modified its brand name as a main strategy to giving meaning to the brand in the Chinese socio-cultural context, as well as emphasizing the heritage of the brand and creating a strong position in the mind of the Chinese consumer and creating a strong advantage in the digital search positioning. Furthermore, in analysing the market socio-cultural digital trends and the decreasing reach of conventional media and the increasing one of the digital ones, A decided to focalise on a diversified use of digital media in their entry strategy - through online video advertising and the growing digital out of home as well as local search engine as Baidu or local social networks, BAIDU Sina.com Wechat Youku and in particular online influencers and BBS, Bullet Board Systems – by clearly choosing to rebrand through the digitalisation of their luxury brand in compliance with the socio-cultural variables and trends of the market. The sample case will be reported and the model path for branding and rebranding in the Chinese context will be presented.