Retail & Distribution

Luxury Retail : The Global Shopping Reset

15 March 2021

5 min

Post-crisis Strategies for International Compliance and Reaching Chinese Consumers

In an environment of ongoing travel restrictions, store closures, global restructuring, revised targets and omni-channel selling, luxury brand executives must stay one step ahead of competitors in order to streamline sales and distribution processes, retain loyal high-value customers and reach new ones in new markets. Brands must be prepared to serve customers wherever they are while ensuring compliance with local regulations and best practices, all while upholding hard-won reputations.

Challenges, risks, constraints

While there are several macro trends emerging in the global retail sector, one notable change in terms of buyer sentiment, including that of luxury consumers, has been a gradual shift from global to local, where factors such as country of origin can be key drivers in brand affinity. With travel restrictions looking set to remain in place for an undetermined period, local process and selling adaptations should be a consideration for CEOs and CFOs looking to maintain healthy balance sheets.

“Compliance is becoming more local. Data localisation – where personal data is physically stored and under which regulations – has become much more important over the past few years and will continue to be a major topic.”

Emmanuel Costa


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.

“Tax implications and fiscal compliance are also a matter of reputation. Continuous, real time, data…all these words that surround sales and fiscal compliance mean that digitalisation has become more and more important and is not something retailers can tackle step by step – it’s all the time.”

Emmanuel Costa


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.

“Pop-ups don’t work in China. Brands want to open standalone stores. They’re not speaking about partners – in fact some would like to acquire former local partners in order to kickstart their Chinese enterprise with readymade engagement.”

Sylvain Jauze


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, 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 theyre 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…

For brands considering expansion into China, both Sylvain Jauze and Emmanuel Costa advise allocating budget and investing heavily in social media and influencers to achieve the correct positioning. Just because a luxury brand has a reputation for quality in Europe doesn’t mean it can launch unknown into the Chinese market. Making sure local advocates with local relevance understand your brand and know your target consumer requires a clear strategy and sustainable investment.

Until the current crisis is fully weathered, brands have to, says Sylvain Jauze, “capture the customer where they live – and to do that you must go to where they live.” The self-sufficient Chinese market and its growing economy could become the new luxury HQ.



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