Since debuting in Hong Kong in 2010 and mainland China this May, British footwear and accessories brand Rupert Sanderson has been hard at work cracking a market not traditionally associated with understated luxury. Boasting a loyal fan base of A-list celebrities and more than 100 points of sale worldwide, designer Rupert Sanderson’s eponymous 13-year-old label carries with it a strong track record of success.

Entering China at a time when its luxury environment is challenging, to say the least, and as over two-thirds of Chinese consumers make big-ticket purchases overseas, Rupert Sanderson hopes to tap the most sophisticated of sophisticated Chinese shoppers. Enticing well-heeled Shanghainese to buy locally, Sanderson has rolled out three collections exclusively for the new ifc Mall flagship, and has undertaken a deliberate, gradual expansion effort targeting craftsmanship-minded customers who subscribe to a “less is more” design philosophy.

To learn more about Rupert Sanderson’s Asia expansion, growing (and global) Chinese buyer base, and some of the challenges of tackling China, I recently caught up with Sanderson and his Asia partner, Bertrand Mak.

(RS: Rupert Sanderson; BM: Bertrand Mak)

With the boom in Europe-bound Chinese tourists, has Rupert Sanderson seen a natural uptick in Chinese customers in the UK and mainland Europe? If so, which products are they most interested in?

RS: We have seen an increase in Chinese customers and I think they are after very specific things when they come to Europe – they are incredibly well served, particularly in Hong Kong. There is a desire to buy iconic pieces that they can’t find or there is a price issue as well, which can get Chinese customers excited, so there are more Chinese shoppers, which we are delighted to see.

In your stores — whether in Hong Kong, mainland China, or Europe — are you finding that customers are already well acquainted with your brand, or just seeing it for the first time? If it’s the latter, how are you introducing shoppers to your history and heritage?

RS: We have just opened a shop in Shanghai, which is our third in the region (we currently have two in Hong Kong). A lot of awareness work has been done over the last three or four years in Hong Kong, so while we have good awareness in Hong Kong, we still have a lot of work to do in China. We are doing this store by store – the first of which is obviously in the ifc Mall in Shanghai, which is very high profile, it has good traffic and footfall, so that will help us build our name and awareness in that enormously important market. We are also doing marketing and hopefully getting some local celebrity endorsements to help build our awareness and what we stand for.

BM: When we opened our first store 4 years ago on On Lan Street, Central, Hong Kong, 95% of our customers have not heard of the brand. Today, I can say 95% of our local customers are well acquainted with the brand and our products. It’s important to note that the growth of our business in Hong Kong has been reliant on local customers from Hong Kong which takes up some 70% of our clientele. With our store at Elements, Kowloon, Shanghai ifc and the soon to open Harbour City, we are slowly tapping into the mainland Chinese market. Whilst our marketing and PR efforts tell the tale, the driver of our business is still very much word of mouth as our quality and unique product offerings really do speak for themselves. The “GOLD” line, which is only available at the stores in Greater China, has been extremely successful and we are witnessing an ever-growing appetite.

Despite the slowdown in mainland China’s luxury market, in recent months brands such as Michael Kors and Ann Demeulemeester — as well as Rupert Sanderson — have opened new flagships in China. In an increasingly crowded market, what will Rupert Sanderson do to stand out?

RS: What we have found is, well, two things – we have a very entrepreneurial and energetic local partner picking up on the subtleties of the different needs of the Chinese customer, which has stood us in great stead and we have made amendments to certain things for example last fits to suit a Chinese and South-East Asian foot. It is just small things, but important things that show that we are taking an interest in the customer.

We have also introduced innovative, new designs and been building a signifier, which is very important to the Chinese customer, something that is, in the old sense of the word is ‘branded’ but without being slavish to it. And so, to that end, our gold, gilded pebbles are increasingly becoming a stand out piece and sort of iconic footwear, so that helps. And that is how we are talking to the Chinese customer, in a way that hopefully, they will respond to.

You are already active on Chinese social media platforms like Sina Weibo and WeChat. Are you doing anything special to engage fans on these platforms, and how have they reacted so far?

BM: Prior to opening our second store in Hong Kong at Elements, Kowloon and Shanghai ifc, we came up with a series of interactive games with incentives to entice and engage our followers. Usually they are Q&As about the brand, and by tagging a friend and retweeting the posts, potential winners and his/her friends would be rewarded with special edition gifts or vouchers. We also actively update our social media platforms with new product arrivals, celebrity snapshots and editorial features, and would encourage the celebrities we work with to tag us on their posts to help boost awareness.

Rupert Sanderson released exclusive collections to celebrate the opening of the Shanghai flagship. Does the brand plan to tailor collections, or create more special limited edition items, for the Asia market in general and Chinese consumers in particular?

RS: We like to signify the opening of a new store with a specific shoe that is only available in that store or the introduction of a new line in that opening store. We do tailor the product to the market. What we’re trying to do is build a brand from the inside out, rather than necessarily projecting the European luxury brand model on to the customer because those European brands have a huge amount of history and advertising budgets as well as a big retail network in their own home markets. But we’re building this business using the Asian customer as a core of our activity, with their response. They love detail and luxury and craft, which are things that I hold very dear to my heart and ensure that they are core to the Rupert Sanderson offer.

BM: I am essentially the eyes and ears on the ground and by spending a substantial amount of time at the stores, all feedbacks from our customers are directly taken on board and considered. It’s through these interactions with customers that enabled us to develop exclusives such as tailored fits and specific collections available only for our customers in this part of the world.

Founded in 1998, London-based Radley exemplifies the type of affordable luxury brand sought after by China’s twenty-something fashion-lover: light on flash, colorful and light-hearted, and attractively priced. Known for their distinctive colorways and “Scottie Dog” logo, Radley’s handbags and accessories have a devoted buyer base worldwide. Since opening its first store in 2005 on London’s Kings Road, Radley has expanded to 33 standalone stores and 200 points of sale in the UK, and is available at 65 concessions in 10 countries, spanning from Europe to Japan.

Despite having no points of sale in mainland China or Hong Kong (its first franchise in Taipei will open in late May), Radley’s absence has increased the brand’s appeal there. Having turned their attention to affordable luxury alternatives to Coach, Mulberry, Longchamp and others, more Chinese shoppers are embracing the likes of Radley, which offer (relative) inaccessibility in China at an attractive price-point. Thus far, this has fueled a thriving gray-market Radley trade on Taobao, where over 500 Radley bags and accessories – mostly of questionable authenticity – are currently listed.

Recently, China Luxury Advisors caught up with Radley CEO Xavier Simonet to learn a little more about the brand’s growing sales to Chinese shoppers, the enduring appeal of “Britishness,” and what it is that sets Radley apart from the pack.

With the boom in Europe-bound Chinese tourism, has Radley seen a natural uptick in Chinese customers?

We have a lot of Chinese tourists visiting our stores in the UK, particularly in London Covent Garden, London Westfield White City, Bicester Village, and in Cambridge.

We can see that the Radley brand is very appealing to them – the Britishness of course, but also the colours and the affordable luxury price points. We have a high conversion rate with Chinese tourists and transaction values with Chinese customers are higher than our average.

Are you finding that Chinese shoppers are already well acquainted with your brand, or just seeing it for the first time?

They do not know much about the brand – as we are just launching in Greater China, but what attracts them initially is the Radley “LONDON” signage above our stores and then the colours, shapes and price points.

For many British heritage brands, “London-ness” or “Britishness” is a major draw for new customers from emerging markets like China. What do you do feel it is about Radley that sets you apart from the competition?

What sets us apart is Britishness but also our affordable price points, without even mentioning our creativity, great quality leathers and colours. I need to mention that leather products are becoming increasingly popular in China.

Do you localize your marketing efforts for the Asia market, or maintain a consistent message and strategy?

At the moment, our marketing is all done here in London and we always make sure that the Britishness element is well communicated – even “exaggerated” when talking to international customers as it is a critical factor of success for us.

Does Radley have plans to tailor collections, or create special limited edition items, for the Asia market in general and Chinese consumers in particular?

In terms of products, we do special ranges for Japan from time to time and might do more limited editions for Asia in the future.

www.radley.co.uk

Despite the proven purchasing power and attractive spending patterns of traveling Chinese consumers, brands continue to underinvest in this global customer segment in home markets.

Many brands that led the pack in executing China market-entry strategies during recent decades have subsequently missed the opportunity to engage the traveling Global Chinese Demographic in their home markets – precisely where they have the most to offer customers who are ravenous for authentic brand heritage and culture.

Prestige Brand Managers are already closely watching the Chinese consumer, who recently became the number one luxury spender in the world, representing 27% of global luxury purchases (compared to 20% from American consumers) in 2012. This trend is only predicted to deepen, with Bain Consulting predicting that Chinese consumers will account for 33% of global luxury purchases by 2015.

Opening flagship stores in Beijing and Shanghai, signing Chinese celebrities, hosting lavish fashion shows and tailoring products of all kinds to the nuances of Chinese tastes, marketers have made substantial progress in engaging consumers within China. Entering China’s domestic market is not trivial: a thankless pursuit that requires intense investments of management resources and capital.

And despite all this effort, Chinese consumers are largely buying outside of China, driven by the brand awareness that your China counterparts have carefully and expensively cultivated through monumental efforts within China.

Chinese consumers currently make more than 60% of their luxury purchases overseas, representing more than US$28.3 billion in sales. This number is expected to grow by 31% – four times the rate of growth in China’s domestic market (a more modest 7%).

Focused as they are on the tremendous long-term potential for luxury brands within the domestic China market – many luxury brands are missing the more immediate (and larger) opportunity of the Global Chinese Consumer. What should luxury brands be doing better?

Think Globally, Act Locally

Chinese customer relationships are no longer owned by your China group – they are global consumers that need to be attracted, engaged and retained wherever they disembark.

Companies that maintain a silo mentality and miss the opportunity to leverage marketing and CRM-driven customer information across borders will lose in this customer segment. It is imperative to eliminate competition between country groups and incentivise cross border collaboration. Las Vegas casinos figured this out, and haven’t looked back.

Master Your Own Shopping Experience

While your China team may understand the Chinese customer and the nuances involved in service standards, cultural norms, merchandising preferences and negotiating tactics, it is also vital that your store staff around the world quickly get up to speed on this customer group.

A recent McKinsey study noted that more than 50% of Chinese luxury consumer respondents cited in-store experience as the most influential factor in their purchase decision. And with more Chinese consumers spending on “impulse” items (McKinsey cites 37% of respondents purchasing an item less than 24 hours after deciding they wanted the item), your shopping experience is a crucial piece of the puzzle.

Segment Customer Groups

All Chinese consumers are not alike – in fact there are profound differences across geography, age, affluence and wealth creation patterns that manifest not only in brand choice, product choices and shopping habits, but in the way customers dress and act.

Luxury brands that judge the spending potential of Chinese customers based on perceived norms from other customer groups do so at their peril. Brands need to understand the differences in customer preferences and develop systems, partnerships and internal mechanisms for tracking customer relationships and preferences across borders to avoid the “Pretty Woman” debacle.

Utilise Overseas Travel to Build Awareness

In a country in which almost anything can be manufactured overnight, one of the most valuable assets a prestige brand can espouse is its history and heritage. Chinese customers view luxury purchases as investments in brand heritage, much as real estate investors covet prestigious addresses.

Brands should take advantage of Chinese consumers’ newfound obsession with travel to communicate and showcase their brand heritage and culture in ways that are not possible in China, with its glitzy-glass-and-marble retail environments and ubiquitous luxury fashion shows.

Chinese consumers are hungry to learn and experience history and heritage and understand luxury brand quality and workmanship. Utilize these assets to give your customers a truly unique experience that they cannot get in China. They will love your brand all the more for it, and reward you with higher spending across the globe.

China is Not a Simple Equation

Nothing in China is easy and neither is the Global Chinese Demographic. The Chinese travel landscape is incredibly competitive, nuanced and complicated.

Chinese travellers tend to buy what they know in China, the advertising and promotions landscape is crowded and expensive and consumer preferences are changing so quickly that by the time you think you know where you stand, everything changes. There is no “silver bullet” that will conquer this customer.

The brands that have profited the most from this customer have put in the hard work over many years to understand the customer, invest in brand awareness, connect with the customer online with Chinese platforms, train their staff around the world and aggressively reach out to the customer through all means possible.

Like China market entry, the rewards of engaging the traveling Chinese consumer are tremendous for those with the right strategy, patience and attitude.

Fueled by a stronger yuan, high prices at domestic stores, greater ease of travel, and China’s ongoing anti-extravagance campaign, more Chinese than ever headed abroad in 2013—most of whom had their sights set on luxury shopping. Last year, Chinese shoppers accounted for over one-third of all luxury purchases in Western Europe, dedicating 33 percent of their travel budget to shopping alone (compared to 11 percent for the French). Chinese tourists have already surpassed German tourists as the world’s top spenders.

They may have already made their presence felt, but Chinese outbound tourist-shoppers today represent only the tip of the iceberg. Currently, only about 5 percent of all Chinese nationals hold a passport, indicating that brands have only just begun to see the importance of this demographic. CLSA recently predicted that the total number of outbound trips from China will double by 2020 and spending will triple. In particular, trips to the United States are expected to triple by 2020. As Catherine Yeung of Fidelity recently told the Financial Times, “Perhaps China’s largest export in years to come is going to be the Chinese tourist.”

However, brands from Milan to Miami, London to Los Angeles now realize that attracting China’s burgeoning globetrotter is no longer as simple as opening their doors, slapping some Chinese-language signage on the wall, and perhaps hiring a Mandarin speaker or two. The Chinese outbound traveler has proven to be a highly diverse demographic, and demands far more from his or her overseas travel experience. Although the days of the tour bus pulling up in front of the mall or boutique to deposit a couple dozen rabid shoppers may not be exactly be gone, these days are numbered. A rising number of independent travelers represents an unmissable opportunity for brands, as well as a massive challenge.

According to a new report by Jing Daily and China Luxury Advisors, luxury brands can’t afford to underestimate or misread the opportunity presented by Chinese outbound luxury consumers. The report, “Serving the Global Chinese Customer,” notes that Chinese consumers currently make more than 60 percent of their luxury purchases overseas, representing more than US$28.3 billion in sales. This number is expected to grow by 31 percent, four times the rate of growth in China’s domestic market (a more modest 7 percent).

Yet, the report notes, winning over Chinese consumers requires looking at the China consumer opportunity on a global basis, not country by country. For luxury brands, investing in China is not just a single-market decision, it should have a clear strategic vision, led from the top of the organization and executed by coordinated teams in China and around the world.

According to Sage Brennan of China Luxury Advisors, “Now more than ever, it’s clear that luxury brands need to think globally and act locally when facing Chinese consumers. Gone are the days of easy money for major brands—they’ve got to set themselves up to understand and engage Chinese consumers, in all their forms, over the long haul.”

While once content to sightsee from the bus, more and more individual Chinese tourists are taking control of their itinerary and renting cars at their destination.

Leisure driving is taking off as a concept with Chinese tourists—not just overseas where self-driving is the norm, but also in China where the concept of leisure driving for travel is just beginning. Recent initiatives by the Chinese government to loosen tolls during holidays and promote leisure driving within China have contributed to this trend, as well as new highways being built around the country which are beginning to resemble U.S. freeways with rest stops and service stations.

If you look at the type of travel that is being discussed on Chinese microblogging site, Weibo, you can see that both “drive travel” and “individual travel” are experiencing the most buzz, and peak around key holiday seasons.

Accounts from on the ground at key travel destinations validate the data, with reports of some rental car agencies doubling their rentals to Chinese tourists over the last year in key Chinese tourist destinations.

For those Chinese tourists who aren’t comfortable driving in new destinations, they often ask Chinese students or friends and family to drive them around in their rented cars, with many offering to pay Chinese students for their chauffeur services while they are in town.

Consumer Profile #1: A couple in their 30s from Beijing traveled overseas for their third time to visit Las Vegas and Los Angeles. They rented a car and drove themselves throughout the entire stay. They enjoyed shopping while in town, and favored GNC (for vitamins and health products), Louis Vuitton, and Bottega Veneta. Fifty percent of their purchases were for themselves and 50 percent were for friends and family in China. Their favorite activity during the trip was their road trip, and they used Baidu for research on the trip and WeChat for sharing their experiences with friends.

Consumer Profile #2: Two male business partners from Shenzhen visited Los Angeles for business. Both of them had already traveled overseas several times. They rented a car and paid Chinese students $200 to drive them around while they were in Los Angeles. Their favorite activity during the trip was shopping. They purchased IWC, Bottega Veneta, Montblanc, and Piaget during their trip. Eighty percent of their spending was on themselves and 20 percent was for friends and family. They hope to return to Los Angeles again, and also would like to visit Las Vegas.

Best Practices for Targeting Self-Driving Chinese Tourists

Partner with rental car companies: Rental car companies are seeing increased volumes from Chinese tourists in key markets around the world. Find creative ways to partner with these companies to reach Chinese customers with unique and innovative solutions.

Don’t forget Chinese students: Chinese students are a frequently called-upon resource for Chinese tourists visiting a city. Not only are they asked for advice, but they also serve as informal tour guides, going as far as actually driving tourists around during their stay.

Most importantly, don’t assume that all Chinese tourists show up in buses. Companies need to be aware that individual Chinese tourists are acting more and more like other international tourists, renting cars, booking hotels, and traveling by themselves or in small groups. It is important for companies to recognize these tourists, track this data, and find ways to insert themselves into the travel planning process using Chinese internet sites, booking sites, travel forums, and Chinese media. While Chinese tourists are starting to act more and more like other international tourists, their decision making process and purchase influences are dramatically different.

Although the large majority of self-travel booking is done on Chinese platforms and with Chinese travel agents—both online and offline—there is a growing trend of sophisticated Chinese travelers tapping into international platforms for travel arrangements in their destination.

In general, China’s travel landscape is still dominated by offline travel booking or a hybrid of online/offline booking. Market-leading online travel agent Ctrip completes a large percentage of bookings by phone after customers have first used Ctrip’s website to research options and make decisions.

In fact, purely online travel booking as a percentage of the total travel industry in China expanded from just 4.2 percent in 2008 to 6.6 percent in 2012, according to iResearch.

The online travel agent market is dominated by local providers, led by Ctrip. Qunar (the Chinese equivalent to Kayak) also has a massive share of Chinese traveler web traffic and is the top information source for Chinese travelers when self-booking their travel arrangements.

While almost all Chinese tourists use Chinese travel platforms, we have noticed a new trend of savvy, young Chinese travelers starting to book their hotels, rental cars, and even house rentals on international platforms. To provide a better sense of these travelers’ preferences and habits, several individual profiles are included below:

Consumer Profile #1: A 29 year-old woman who works in China’s government came to the U.S. for the first time. She split her time between San Francisco, New York, and Los Angeles, spending two days in each city as well as taking a bus tour to Los Angeles and Yellowstone National Park. She booked her hotels in the United States from Hotels.com and rented a car herself in Los Angeles. Most of her spending on shopping was on leather accessories from Coach as well as cosmetics products from brands such as La Mer and Estee Lauder. In addition to navigating herself, she visited friends in each city who also guided her.

Consumer Profile #2: A 32 year-old woman from China who owns a boutique PR firm recently visited the United States for three weeks to look for business opportunities. She booked lodging on Airbnb.com and rented her car on Hotwire.com. She remained in Los Angeles most of the time, staying in the San Gabriel Valley due to the proximity to Chinese restaurants, although she did take a day trip to San Diego to visit the zoo. She purchased two iPads for friends and family on her trip, and her favorite store she visited was Victoria’s Secret (which is not present in China).

Consumer Profile #3: A 28 year-old woman from Beijing who has been overseas six times traveled with her boyfriend to San Francisco and Los Angeles. They booked a condo in Hollywood on Airbnb.com and flew to San Fransico, where they also rented a car through Expedia.com. Seventy-five percent of their shopping was for themselves and 25 percent was for gifts for friends and family. Their favorite stores in the United States were Forever XXI, Coach, Dior, and Kate Spade. Their favorite experience was driving on the California coast. They plan to go to Europe on their next trip.

Best Practices for Targeting Chinese Travelers Self-Booking on International Sites

Don’t Neglect Traditional Online Channels: Typically, targeting Chinese tourists entails reaching them through dedicated Chinese channels—both offline and online. But, as independent tourists become more savvy, don’t neglect traditional online channels popular in your home market. Find ways to partner with local tourism providers to cater to Chinese customers.

Increase Brand Visibility in Online and Offline Chinese Travel Guides: Although independent tourists sometimes use local providers to book travel arrangements, they still commonly use Chinese-language travel guides (online and offline) to navigate their way around the city. Ensure that you are represented in these guides and resources.
Many local tourism-booking sites do not actively cater to Chinese tourists, and may not even be aware that a user is Chinese. Find creative ways to provide relevant information to this growing group of travelers who are often just getting accustomed to traveling on their own and are searching for information that is relevant and trustworthy.
Brands that can find these individual tourists and delight them by catering to them in unexpected ways will not only win these new tourists, but will gain a coveted spot in the Chinese travel zeitgeist via active online and offline word of mouth networks.