Luxury Retail : The Global Shopping Reset

Emmanuel Costa cites the complexities in the segmentation of data regulation in Europe and the US, as well as the increased layers of compliance required in China.

There is a new regulation stating that all transactional data must not leave China. This is why Cegid has opened a new Point Of Delivery Cloud in this country in 2021. “Where it’s not even about where the data should be stored, it’s more to do with who has authority to maintain it – Chinese people working for Chinese companies operating in China”, explains Emmanuel Costa.

Add this benchmark level of data security – subject to different regulations in different regions – to the privacy issues around personal data for certain VIP luxury consumers and you’re dealing with very particular sensitivities. The amount of personal data collected and maintained in luxury retail is huge, and the ramifications of it being compromised potentially devastating, says Emmanuel Costa, with a handful of embarrassing high-profile data breaches making headlines for all the wrong reasons.

Navigating the constraints of changing regulations in an increasingly digital retail landscape will continue to be an ongoing challenge, and international players should be well prepared to proactively adapt.

Digitalisation and data

VIP consumers who habitually travel will be among the first to return to luxury shopping destinations when conditions allow. Until then, they will also expect luxury retailers to respond to their demands, wherever they happen to be – with appropriate compliant taxation. For example, says Emmanuel Costa, ‘send-to-send’ sales whereby sales assistants can take an order from a customer then remotely request the item to be sent to the customer’s local store, who then sends it on to the customer. At each step in this process, the item is potentially subject to tax.

China, the place to be

According to a 2019 study by McKinsey, young Chinese consumers were expected (pre-pandemic) to boost growth in luxury fashion and accessories by 65% globally. And while Europe and the US continue to be largely off-limits to this high-value customer segment, smart global luxury brands should bring their goods to them.

Sylvain Jauze, Director of Worldwide Sales and International Operations at Cegid, says that some European retail brands currently faced with closing stores in Europe and the US are now looking to develop their business in Asia and mainland China. Alongside omnichannel presence, Sylvain Jauze says that physical stores are also vital in establishing brands that are new to the Chinese market.

Sylvain Jauze adds that a single store isn’t enough to establish a reputation in a country the size of China and that investing in social media and the right influencers – people who know the market and who know how to sell luxury in that market – is equally important.

A different market

In terms of business practices, operating in China is very different from operating in Europe or the US, says Sylvain Jauze. He notes that consumers are driving ‘O to O’ – online to offline – as a major trend in China, and retailers understand that big online marketplaces such as TMall (formerly Taobao Mall, owned by Alibaba) are a vital part of the sales ecosystem. While Chinese consumers do like to shop in store, they also trust ‘speed platforms’.

A number of exclusive luxury platforms, including TMall’s Luxury Pavilion, JD.com and even WeChat offer ecommerce shop windows for hundreds of luxury brands to mainly young, digitally focussed Chinese consumers.

Global goes local

A potent example of the desirability of the Chinese market is the recent acquisition of Shang Xia, the 10-year-old China-based brand founded by Hermès and Chinese designer Jiang Qiong Er, by the Agnelli family’s Exor holding company. While Hermès itself has been established in China since 1996, the company saw an opportunity to capitalise on Chinese craft and techniques, Chinese traditions and Chinese materials. “It’s true that the Chinese people are very focussed on money and on value,” says Sylvain Jauze. “But they’re also very focused on quality, which is why Hermès as a brand works so well in China – they use top-quality leather, make top-quality bags and employ the very best artisans.”.

US $2.7 million

Hermès flagship store in Guangzhou’s Taikoo Hui shopping centre has been very successful and brought in US $2.7 million in sales on its reopening day after the first lockdown in 2020…