L2 Digital IQ 2012 – China (EXCERPT)

China© L2 2012 L2ThinkTank.com

December 18, 2012

SCOTT GALLOWAYNYU Stern

dOuG GuThrieThe George Washington School of Business

Distribution of this report violates copyright, trademark and intellectual property laws.

exCerpT from the 2012 digital iQ index®: China To access the full report, contact [email protected]

http://www.l2thinktank.com

http://www.l2thinktank.com/research/digital-iq-index-china/

This half-day, three module clinic hosted at NYU Stern will look at opportunities and trends that brands will face in 2013.

Topics include China, the Changing Landscape of Retail, and The Enterprise Effect. Industry experts will discuss new

opportunities for prestige brands in China, brand case studies will highlight effective strategies of dealing with trends

in retail and L2 will present data on how the Enterprise Effect can be a friend and a foe to prestige brands.

Co-hosted by:

JANuArY 24, 2013 | NYu STerN

FOCuS 2013NYC

Tentative Agenda

MODULE 1: China

(featuring)

Scott Galloway FoUNdER L2

Doug Guthrie dEaN The George Washington School of Business

Vimla Gupta & Andra Mielnicki VICE PRESIdENT oF GLoBaL MaRkETING ExECUTIVE dIRECToR oF GLoBaL CoMMUNICaTIoNS BeautyBank

MODULE 3: The Enterprise Effect

(featuring)

Maureen Mullen dIRECToR oF RESEaRCh & adVISoRY L2

Sonia Marciano CLINICaL FULL PRoFESSoR oF MaNaGEMENT aNd oRGaNIzaTIoNS NYU Stern

MODULE 2: Changing Landscape of Retail

(featuring)

SapientNitro presents Connected Experience: a GLIMPSE INTo ThE hIGhLY PERSoNaLIzEd ShoPPING ExPERIENCE

Alisa Gould-Simon Co-FoUNdER & VP oF CREaTIVE PaRTNERShIPS Pose.com

http://www.l2thinktank.com/event/focus2013/

3

Inquire about your brand’s ranking: [email protected]

© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd


Q3

Q2 Q

4

Q3

Q1

Q2

34%

2011

16%

2012 21%

2012

47%

2011

26%

2011

6%

2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

81% 80% 53% 88% 92% 75% 73% 43% 41% 52% 44%

181% 209% 233% 199% 237% 206%YoY Percent Growth B2C E-Commerce

YoY Percent Growth E-Commerce

178% 164% 99% 143% 124%

2010

13.6

1.49

16.3

1.93

18.3

2.62

25.9

4.08

26.0

5.02

28.4

5.91

31.7

7.26

36.9

10.75

36.6

9.98

43.1

14.35

45.6

16.23

2010 2010 2010 2011 2011 2011 2011 2012 2012 2012

DoubtFor the first time in a decade, China is a question mark for the prestige industry.

1. “Investor Question Series: Will political change in China be a catalyst for growth?,” Barclays, November 16, 2012.2. Global Blue Q3 data.3. HuRun Report 2012.

A midst slowing growth and political uncertainty, luxury executives

are questioning whether the deceleration is temporary or the

beginning of the end. We continue to believe China offers more

upside, often linked to digital, than any other luxury market. However, there

is also more complexity and barriers to realizing return:

• While Mainland China’s organic luxury sales growth softened to single digits,1

Chinese tourist spend abroad increased 58 percent in Q3 2012,2 suggesting

consumer demand remains robust.

• In the next three years, Chinese e-commerce sales are projected to triple.

However, two thirds of online sales will remain on C2C channels such as

Taobao. Poor fulfillment infrastructure, security concerns, and nascent payment

systems pose challenges to traditional direct e-commerce businesses.

• Pricing arbitrage continues to threaten fledging e-commerce businesses.

U.S. and European retailers ranging from Neiman Marcus to House of Fraser

ship to China and advertise products at a fraction of the domestic price.

• Sixty-one percent of Chinese high-net-worth individuals indicate the Internet

is a primary source for brand information, more than any other channel.3

However, while digital, social media, and video platforms may be the best

places to reach Chinese consumers, the landscape is fragmented, with

players emerging and declining in importance each year.

Quarterly Chinese Luxury retail Sales Growth YoY Fixed exchange rate

Q2 2011–Q3 2012

Chinese e-Commerce Transaction Volume Q1 2010–Q3 2012

Total Online Shopping (Billion USD)

B2C Online Shopping (Billion USD)

Sou

rce:

Bar

clay

s E

quity

Res

earc

h

Sou

rce:

iRes

earc

h

Watch the China Video Click to Play

mailto:info%40l2thinktank.com?subject=Brand%20Ranking

http://l2thinktank.com


http://www.l2thinktank.com/video/china-2012/

4




Visible handAttempting to ease public concern regarding the widening wealth gap, the

Chinese government continues to place restrictions on traditional luxury

advertising. Just as errant attempts to legislate tobacco companies from

television in the U.S. resulted in a surge of innovation (e.g., CRM, point of purchase

investment, better packaging), the visible hand of the Chinese government has

inspired a wave of innovation in digital marketing via tighter regulation of traditional

media. Chinese digital marketing spend is set to double over the next three years.4

The increased investment and online innovation will inspire consumer exploration and

purchase that may supplant traditional methods, transforming the Chinese digital

ecosystem into the global role model, versus the fast follower.

The Same, but differentMany viewed digital as an agent of integration into the global community.

However, while economic integration marches on, China’s digital landscape

is becoming more distinct. The “Great Firewall of China” has strengthened as

government control over Internet and mobile content tightens, fostering a “Wild

East” mentality resulting in local entrepreneurship and innovation. In this year’s

Index we saw the emergence of several forces: So.com, in a few short months,

has captured greater market share than Google, Pinterest-like curation platforms

Meilishuo and Mogujie are gaining traction, and Tencent-owned WeChat, a mobile

messaging service, has skyrocketed to 200 million users.

underinvestment?Despite opportunity, digital investment remains modest. Brands’ Chinese sites

register average load times of 24.1 seconds, four times their global peers. One in five

prestige brands host their site in China and just over half display prices in RMB. While

Sina Weibo adoption by prestige brands has reached 91 percent, and the industry

has registered double-digit increases in mobile, social, and search engine marketing

adoption, just four brands have launched direct e-commerce since 2011. Third party

players, including Western retailers, are filling the void and offering brands a trusted

platform. However, in exchange, brands sacrifice control and a direct relationship with

the end consumer.

China: Average Time Spent vs. percentage of Ad Spend 2011

Source: Ipsos via Zenith Media and CMMS Summer 2011.

2.8

2.5

0.7

0.3

40%

18% 19%

9%

TV Internet Newspapers Magazines

51%

Percentage of High Net Worth Individuals Who Claim as Source of Product Info

61% 43% 50%

% of Total Ad Spend

Average Time Spent (Hours)

digital iQ = Shareholder ValueOur thesis is that the success of prestige brands in China is inextricably

linked to digital competence. This study attempts to quantify the digital

performance of 100 iconic brands in China. Our aim is to provide a robust tool to

diagnose digital strengths and weaknesses and help managers achieve greater

return on incremental investment.

Like the medium we are assessing, our methodology is dynamic, and we hope

you reach out to us with comments that improve our approach, investigation, and

findings. You can reach us at [email protected] and [email protected].

SCOTT GALLOWAY

Professor of Marketing, NYU Stern

Founder, L2

dOuG GuThrie

Dean, The George Washington

University School of Business

Founder, Guthrie & Associates

4. “Q2 2012 Global Digital Advertising Update,” Adobe, July 2012.




mailto:scott%40stern.nyu.edu?subject=Digital%20IQ%20Index%3A%20China%202012

mailto:guthrie%40gwu.edu?subject=Digital%20IQ%20Index%3A%20China%202012

5




digital iQ ClassesGenius 140+digital competence is a point of competitive differentiation. Successful multi-channel, digital campaigns; functional sites that cater to local needs; strong social presence and integration across platforms.

ABOuT The rANKiNG

Gifted 110–139Brands are experimenting and innovating across their site, mobile, traditional and emerging social media platforms.

Average 90–109digital presence is siloed by dimension.

Challenged 70–89digital efforts lack.

Feeble <70Investment does not match opportunity.

The Methodology

30% SiteLocalization of site features • Technology: Load Time, hosting Location

• Customer Service & Store Locator

• Product Page

• E-Commerce & Checkout

• Integration of Chinese Social Media

• Innovation: Product Customization, BBS/Microsites, Category-Specific Functionality

20% Digital M

arketing

Search, digital m

edia, and

email marketing efforts

Search

• Traffic

• Web authority

• SEo & SEM:

Baidu, So.com, Google

Advertising & innovation

• online & offline Synergies

• Cross Platform Initiatives

• Emerging Social Platform adoption (WeChat, Meilishuo & Mogujie, iQiyi, Jiepang)

BBS, Social, and Baidu Buzz

• Mentions

• average daily Searches

email

• Frequency

• Language

• Content

• Chinese Social Media Integration

SNS

• Sina Weibo

• Tencent Weibo

• kaixin

• Renren

• douban

Video Sites

• Youku

• Tudou

• Page Size & Growth

• Post Frequency

• Reposts & Comments

• Tabs & applications

• Engagement Rate

• Views

• Number of Uploads

• View & Subscriber Growth

• Viral Videos

Brand presence, community size, content and engagement30%

Social Media

20% Mobile

Mobile Site

• Compatibility of China Site

• Functionality

• Transaction Capability

iOS Applications

• availability in China

• Popularity

• Functionality

Compatibility, optimization, and marketing on smartphones and tablets

Android Applications

• availability in China

• Popularity

• Functionality

Note: Brand’s were scored based on effectivenees on platforms they participate on




KeY FiNdiNGS

6© L2 2012 L2ThinkTank.com. REPRodUCTIoNS aNd dISTRIBUTIoN PRohIBITEd


diGiTAL iQ rANKiNGdiGiTAL iQ rANKiNG

RANK BRAND DIGITAL IQ

5 138

6 136

6 136

8 133

9 129

10 124

11 120


11 120

13 118

13 118

15 117

16 116

17 115

18 113

The Estée Lauder Companies

1

2

3

4

RANK DIGITAL IQ

156

152

151

142

Chow Tai Fook Enterprises

L’Oréal

Volkswagen Group

GeN

Ius

GeN

Ius

GIFT

eDGI

FTeD

GIFT

eDGI

FTeD

Zhejiang Geely Holding Group

General Motors

BMW Group

Tata Motors

LVMH

Burberry Group

Clarins Group

Shiseido

LVMH

LVMH

Chanel

Tata Motors

L’Oréal

Shangri-La International Hotel Management

GeNIusEstée Lauder

AudiChow Tai Fook

Lancôme

GIFTeDVolvoBMWBuick

Land RoverBenefit Cosmetics

BurberryClarins

ShiseidoLouis Vuitton

Sephora ChanelJaguarKiehl’s

Shangri-La Biotherm

CoachSK-II

Cartier

AVeRAGeHerborist

Mercedes-BenzSwarovski

CadillacClinique

FerrariTiffany & Co.Bobbi Brown

GucciOrigins

PorscheJaeger-LeCoultre

Marriott Infiniti

ArmaniHilton

InterContinental

CHALLeNGeDDior

Van Cleef & ArpelsRaymond Weil

Westin M.A.C Cosmetics

St. Regis L’Occitane en Provence

GuerlainDolce & Gabbana

IWC SchaffhausenMaseratiYue-Sai

Four Seasons Hugo Boss

Mandarin Oriental Park Hyatt

The Ritz-Carlton

FeeBLeAston Martin

Wyndham Sofitel Luxury Hotels

Alfred DunhillBulgariOmega

RolexLonginesValentino

LexusKempinski

FairmontPiaget

The Peninsula HotelsBottega Veneta

MontblancTAG Heuer

BallyHublotAcura

Calvin KleinPandora

Elizabeth ArdenLamborghiniPorts 1961Balenciaga

Waldorf AstoriaErmenegildo Zegna

ChloéGivenchy

ConradSalvatore Ferragamo

De BeersDiane von Furstenberg

HermésVacheron Constantin

FendiVersace

Shanghai TangPrada

Harry WinstonBaccarat

Patek PhilippeRalph Lauren



KeY FiNdiNGS



diGiTAL iQ rANKiNGdiGiTAL iQ rANKiNGdiGiTAL iQ rANKiNG


19 112

20 111

20 111

22 110

23 107

24 106

24 106

GIFT

eD

L’Oréal

Procter & Gamble

Coach

Compagnie Financière Richemont

Shanghai Jahwa Group

Swarovski

Daimler


33 93

34 92

34 92

36 91

37 90

37 90

37 90

Volkswagen Group

Marriott International


Nissan Motor Company

InterContinental Hotels Group

Giorgio Armani

Hilton Worldwide


26 105

27 101

28 98

28 98

30 97

31 96

32 94

GIFT

eDGI

FTeD

Estée Lauder Companies

Tiffany & Co.

Fiat


Gucci Group (PPR)


General Motors

GeNIusEstée Lauder

AudiChow Tai Fook

Lancôme

GIFTeDVolvoBMWBuick


BurberryClarins



Shangri-La Biotherm

CoachSK-II

Cartier

AVeRAGeHerborist


CadillacClinique


GucciOrigins


Marriott Infiniti

ArmaniHilton

InterContinental

CHALLeNGeDDior








The Ritz-Carlton

FeeBLeAston Martin




LexusKempinski

FairmontPiaget


MontblancTAG Heuer

BallyHublotAcura

Calvin KleinPandora



ChloéGivenchy




FendiVersace

Shanghai TangPrada



GIFT

eDGI

FTeD

GIFT

eDGI

FTeD

GIFT

eDGI

FTeD







47 76

48 75

49 73

49 73

49 73

52 72

53 71

LVMH

Dolce & Gabbana


L’Oréal

Fiat

Four Seasons Hotels

Red & Black Holdings

CHAL

LeN

GeD

CHAL

LeN

GeD

CHAL

LeN

GeD

CHAL

LeN

GeD


40 88

40 88

42 84

43 81

44 80

44 80

46 78


Raymond Weil

Starwood Hotels & Resorts Worldwide

Starwood Hotels & Resorts Worldwide


L’Occitane International

LVMH

FeeB

LeFe

eBLe

CHAL

LeN

GeD

CHAL

LeN

GeD


53 71

53 71

56 70

57 69

57 69

59 67

60 66

Hyatt Hotels

Mandarin Oriental Group

Marriott International

Aston Martin

Wyndham Worldwide

Accor


GeNIusEstée Lauder

AudiChow Tai Fook

Lancôme

GIFTeDVolvoBMWBuick


BurberryClarins



Shangri-La Biotherm

CoachSK-II

Cartier

AVeRAGeHerborist


CadillacClinique


GucciOrigins


Marriott Infiniti

ArmaniHilton

InterContinental

CHALLeNGeDDior








The Ritz-Carlton

FeeBLeAston Martin




LexusKempinski

FairmontPiaget


MontblancTAG Heuer

BallyHublotAcura

Calvin KleinPandora



ChloéGivenchy




FendiVersace

Shanghai TangPrada





Key Findings




60 66

60 66

60 66

64 65

64 65

66 64

67 62


68 61

68 61

70 59

71 58

71 58

71 58

74 57


74 57

76 56

77 55

77 55

79 54

79 54

79 54


The Swatch Group

Valentino Fashion Group

Toyota Motor Corporation

Kempinski Hotels

The Hong Kong and Shanghai Hotels


Gucci Group (PPR)

LVMH

Labelux Group

Pandora

Volkswagon Group

Elizabeth Arden

Ports Design

LVMH

Honda Motor Company

PVH

FeeB

LeFe

eBLe


Fairmont Raffles Hotels International

FeeB

LeFe

eBLe

GeNIusEstée Lauder

AudiChow Tai Fook

Lancôme

GIFTeDVolvoBMWBuick


BurberryClarins



Shangri-La Biotherm

CoachSK-II

Cartier

AVeRAGeHerborist


CadillacClinique


GucciOrigins


Marriott Infiniti

ArmaniHilton

InterContinental

CHALLeNGeDDior








The Ritz-Carlton

FeeBLeAston Martin




LexusKempinski

FairmontPiaget


MontblancTAG Heuer

BallyHublotAcura

Calvin KleinPandora



ChloéGivenchy




FendiVersace

Shanghai TangPrada



LVMH

FeeB

LeFe

eBLe

The Swatch Group

Rolex



FLASH OF GENIUS




96 31

97 30

98 29

99 27

100 26

Prada

Harry Winston Diamond Corporation Harry Winston

Patek Philippe

Baccarat

Ralph Lauren

FeeB

LeFe

eBLe


82 53

83 51

84 49

85 48

85 48

87 46

88 44

Hilton Worldwide

Ermenegildo Zegna Holditalia

LVMH


Hilton Worldwide

Salvatore Ferragamo Italia

FeeB

LeFe

eBLe

Gucci Group (PPR)

diGiTAL iQ rANKiNG


89 41

89 41

89 41

92 40

93 39

94 34

95 32

Diane von Fürstenberg

LVMH


LVMH

Gianni Versace


FeeB

LeFe

eBLe

Hermès

GeNIusEstée Lauder

AudiChow Tai Fook

Lancôme

GIFTeDVolvoBMWBuick


BurberryClarins



Shangri-La Biotherm

CoachSK-II

Cartier

AVeRAGeHerborist


CadillacClinique


GucciOrigins


Marriott Infiniti

ArmaniHilton

InterContinental

CHALLeNGeDDior








The Ritz-Carlton

FeeBLeAston Martin




LexusKempinski

FairmontPiaget


MontblancTAG Heuer

BallyHublotAcura

Calvin KleinPandora



ChloéGivenchy




FendiVersace

Shanghai TangPrada





Key Findings

11




5. “China’s Social-Media Boom” McKinsey & Company. April 2012.

e-CommerceIn 2011, China’s luxury e-commerce market was 15 billion

RMB (2.4 billion USD) and is expected to reach 20 billion RMB

(3.2 billion USD) in 2012.5 Pricing transparency, counterfeits,

operational hurdles and poor customer service remain

challenges for prestige sales online.

However, amid challenges and market uncertainty,

e-commerce adoption increased little year-on-year, and only

four brands launched online shops.

The Beauty category continues to lead in site sophistication.

All but two Beauty brands in the Index (Elizabeth Arden and

Guerlain) sell through their Chinese brand sites. In the past

year, Bobbi Brown and Shiseido launched native e-commerce.

Lancôme and Herborist removed links to Chinese third-party

e-tailers, focusing efforts on their direct business.

The Fashion category is gaining momentum. In November

2012, Coach launched e-commerce following a month-long

trial store on Tmall in December 2011. Bally, Dolce & Gabbana,

and Armani are selling through brand sites powered by

YOOX. Other brands rely on third-party partners. Ermenegildo

Zegna (until recently) and Salvatore Ferragamo partnered with

thecorner.com, the latter diversifying its consumer reach by

partnering with Chinese local third-party e-tailer, Xiu.com.

Chloé links to multiple third party e-tailers, including sister

company NET-A-PORTER. This year, the brand added Hong

Kong-based Lane Crawford, which offers Chinese language

and payment support. Shanghai Tang, more popular among

Western consumers interested in a taste of Chinese culture,

removed the Chinese version of its e-commerce site but still

ships to China through its English-language site.

Shipping and returns policies percent of e-Commerce Sites (excluding hospitality Sites) Offering the Following

October 2012, n=21

Returns Free Shipping No Minimum

Free Shipping with Minimum

Average Minimum: RMB 485 (77 USD)

e-Commerce penetration by Category October 2012

100%hospitality

n=17

89%Beauty

n=18

41%Fashion

n=27

5%Watches & Jewelry

n=22

1

2

3

4




Key Findings

12




Site FunctionalityLow e-commerce penetration and a preference for social

media render sites less important. However while only 19

percent of Chinese consumers visit an official brand site,6 48

percent say these sites influence their intent to purchase.7

The adoption of Web 2.0 tools, including social media

sharing, user reviews, and live chat, has increased year-on-

year in China. Beauty brands are most likely to feature live

chat and user reviews but fail to provide international store

locators for global travelers.

With the exception of Rolex, all brands provide store

locators, but 41 percent do not have a centralized Chinese

customer service number. Non-e-commerce sites (e.g.,

Automobiles) are more apt to publish prices on their sites.

E-commerce brands that do not publish prices may be

missing an opportunity as Chinese consumers often

research prices before traveling abroad.

6. “The World’s Next E-Commerce Superpower,” The Boston Consulting Group. November 2011. 7. Ipsos China. 2012.

Site Functionality YoY Comparison percent of Brands employing the Following

2011 vs. 2012, n=77

Site Functionality by Category percent of Brands Within each Category employing the Following

October 2012

Store Locator for China

96%94%

64%61%53%

10%

44%38%

18%10% 13%

6%

International Store Locator

Product Sharingvia Chinese Social

View Price in RMB

User Ratings/Reviews

Live Chat

Watches & Jewelry (n=22) Hospitality (n=17) Fashion (n=27) Beauty (n=18) Auto (n=16)

2011 2012

Store Locator for China View Price in RMB Wishlist User Reviews/Ratings Live ChatInternational Store Locator Customer ServiceNumber for China

99%of Index

56%of Index 38%

of Index 23%of Index 13%

of Index

65%of Index 59%

of Index95%

100%

100%

100%

100%

95%

88%

85%

22%

13%

94%

37%

94%

75%

18% 9%100%

33%

83%

81%

69%31%

63%75%

0%

9%29%

4%

0%83%

5%12%7%

0%44%




Key Findings

13




SearchLaunched in August 2012, So.com leapfrogged established

players to become the second largest source of search traffic

in China.8 Leveraging its popular browser and Internet portal,

So.com has captured 10 percent of the Chinese search

market, leaving Google with less than five percent. Baidu

remains dominant, but has dropped to 73 percent market

share, down from 81.7 percent in August 2011.9

Google has ceased to be relevant for Chinese consumers.

As its market share has dwindled, organic visibility for

Chinese sites on the platform is down significantly year-on-

year, with Hong Kong and Taiwanese sites maintaining the

greatest visibility.

So.com has promised improved search results, but has yet

to match Baidu’s performance. Only 19 percent of the 100

Chinese brand sites appear first in organic search results on

So.com versus 34 percent on Baidu. In addition, 52 percent

of Chinese brand sites appear outside the top three organic

search results on So.com.

8. “360 Search Now No.2 Largest Web Search Engine in China, Here Is Why,” Technode, August 22, 2012.9. “Search engine usage analysis reports,” CNZZ, November 2012.

Share of Organic Search real estate on Search for Brand Term Baidu vs. Google vs. So.com

November 2012

20%

41brands

28brands

27brands

20%

20%

10%

9brands

35brands

31brands

10%

10%

30%

38brands

23brands

16brands

30%

30%

40%

8brands

5brands

20brands

40%

40%

60%

1brand

2brands

3brands

60%

60%

70%

2brands

1brand

70%

70%

80%

80%

80%

50%

2brands

5brands

2brands

50%

50%

90%

90%

90%

100%

100%

100%

Bobbi BrownThe Ritz-Carlton

Fairmont

Chow Tai Fook

Kempinski

Gucci

Shangri-La

Chow Tai Fook

Longines

DVF

The Ritz-Carlton

The Peninsula

Park Hyatt

Hilton

Estée Lauder

InterContinental

Bobbi Brown

The Peninsula

Average Brand Share of Organic Search Real Estate: 20%



On average, brands held 12% of real estate in Paid Search:

On average, brands held 14% of real estate in Paid Search:

InterContinental is the sole brand engaging in Paid Search




http://technode.com/2012/08/22/360-search-now-no2-largest-web-search-engine-in-china-here-is-why/

http://engine.data.cnzz.com

Key Findings

14




100%

100%

82%

85%

94%

29%

39%

68%

52%

56%

41%

50%

14%

26%

19%

91%of Index

12%

28%

14%

0%

38%

6%

17%

18%

11%

38%

6%

11%

5%

7%

19%

6%

22%

32%

15%

0%

16%of Index

17%of index

9%of Index

20%of Index

51%of Index

29%of Index

Sina Weibo Youku Kaixin Tencent WeiboDouban RenrenTudou

Sina Weibo

88%

60%

26% 23% 21% 18%10%8% 3% 6%

16%8%9%

18%27%

64%

Youku Kaixin Tudou Douban Tencent Weibo Renren Jiepang

Three Month Traffic Growth (September–November 2012)*

Registered Users (Millions)+

+6.0% -4.8% +2.2% -1.5% +5% N/A -19.6% -1.8%

400 263 130 227 60 373 162 3

Social MediaChina is home to the world’s most socially active online

population. Ninety-five percent of Internet users in Tier 1, 2

and 3 cities are registered on at least one social media site

and more than half use microblogs.10 Forty percent have either

read or posted a product review, and nearly 80 percent use

social media to learn more about luxury brands and products.11

Social media adoption by prestige brands is now ubiquitous.

Only five brands in the Index have no social presence. Ten

are present on more than five platforms, compared with just

two brands last year. The social media ecosystem in China

remains fragmented and increasingly competitive with a

plethora of new entrants.

10. “China’s Social-Media Boom“ McKinsey & Company. April 2012. 11. “The World’s Next E-Commerce Superpower” Boston Consulting Group. November 2011.

Social Media Adoption YoY Comparison percent of Brands on the Following platforms

October 2012, n=77

Social Media Adoption by Category percent of Brands present on the Following platforms

October 2012, n=100

Watches & Jewelry (n=22) Hospitality (n=17) Fashion (n=27) Beauty (n=18) Auto (n=16)

Source: Alexa

2011 2012

*Source: Alexa+Source: Platform Q3 Press Releases




http://www.mckinseychina.com/wp-content/uploads/2012/04/McKinsey-Chinas-Social-Media-Boom.pdf

Key Findings

15




MobileWith more than a billion mobile phone users, China is the

world’s largest mobile market. Search, social networking,

and shopping are popular activities on smartphones.

Mobile is becoming an increasingly influential path to

purchase and point of purchase. Ninety-seven percent

of Chinese smartphone users research products on their

phone and 59 percent have made a purchase.12 Still in its

infancy, mobile shopping accounts for 5.5 percent of digital

commerce.13

This year has seen double-digit increases in mobile

investment targeting Chinese consumers. Still, just 23

percent of brands maintain a mobile-optimized version

of their China site, and only a third of these sites are

e-commerce enabled.

12. “Our Mobile Planet: China,” Ipsos/Google, May 2012.13. “GMV of Mobile Shopping Quadruples to 15.64 Billion Yuan in Q3 2012,” iResearch, November 16, 2012.

14. “China at Your Fingertips,” Group M, July 2012.15. “China Internet Development Report,” CNNIC, July 2012. 16. “China at Your Fingertips,” Group M, July 2012.17. “Our Mobile Planet: China,” Ipsos/Google, May 2012.

Chinese smartphone users spend an average of 5 hours a day on their devices, checking them every 6 minutes.14

There are now more than 388 million Chinese mobile internet users, surpassing the number of desktop internet users for the first time in July 2012.15

38 percent of mobile web users in China access the internet solely through their mobile phones.16

With 3G penetration lingering at just 25 percent, China is second only to India for the world’s slowest mobile internet speed.17

1

2

Chinese Mobile Site implementationOctober 2012 (n=100)

Mobile Optimized

Broken Site/ Flash

HTML5

Non-HTML5

23%

7%

43%

22%

5%

Redirects to English Mobile Site




http://services.google.com/fh/files/blogs/our_mobile_planet_china_en.pdf

http://www.iresearchchina.com/views/4556.html

http://www.youtube.com/watch?v=UGlfQ0xqC7I

http://www.youtube.com/watch?v=UGlfQ0xqC7I

http://services.google.com/fh/files/blogs/our_mobile_planet_china_en.pdf

16




TABLe OF CONTeNTSClick to Jump To:

5 Methodology

6 Digital IQ Rankings6 Genius

7 Gifted

8 Average

9 Challenged

10 Feeble

14 Key Findings14 Estée Lauder: In the Company of Genius

15 Pulling Away

16 Biggest Winners & Losers

17 E-Commerce

19 Site Functionality

20 Payment & Load Times

21 Brand Owned BBS Sites

22 Third Party BBS Sites

23 Social Media

24 Sina Weibo

26 Social Media Buzz

27 Video

28 Video Localization

29 Declining: Kaixin, Renren

30 Jury Is Still Out: Tencent Weibo, Jiepang, Douban

31 Emerging: WeChat, Meilishuo & Mogujie, iQiyi, Xiaozhan

32 Search

34 Mobile

36 Email

37 Flash of Genius37 L’Oréal: Multi-brand E-Commerce/Sampling

38 Chow Tai Fook: Multi-Channel Commerce

39 Benefit Cosmetics, Lancôme, Chow Tai Fook: Singles’ Day

40 Gucci, Burberry: Social Media Sampling

41 Dior, Chanel: Online Magazines

42 Gucci, Four Seasons, LVMH: Online Magazines Continued

43 Louis Vuitton, Chanel: Offline + Online

44 Swarovski: Sparkling Secrets

45 Lancôme: Doll Eyes Bar

46 Audi, Buick: Driving Online Engagement

47 Shangri-La: Mobile

48 L2 Team

49 About L2




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