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2013 Digital IQ Index: China - Beauty Supplement
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2013 Digital IQ Index: China - Beauty Supplement

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The Digital IQ Index®: China Beauty Supplement benchmarks the digital competence of 20 global beauty brands in the Chinese market and looks at the trends and best practices unique to that region.

The Digital IQ Index®: China Beauty Supplement benchmarks the digital competence of 20 global beauty brands in the Chinese market and looks at the trends and best practices unique to that region.
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2013 Digital IQ Index: China - Beauty Supplement 2013 Digital IQ Index: China - Beauty Supplement Presentation Transcript

  • ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.comJanuary 22, 2013SCOTT GALLOWAYNYU Sterndoug guthrieThe George WashingtonSchool of BusinessBeautySupplement China © L2 2012 L2ThinkTank.com 1
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com Mao’s Rouge Banned by Mao and his political heirs until the 1980s, global beauty and cosmetics brands are relatively new to the Chinese market. Just 30 years later, China is the epicenter of growth for the industry as young women armed with increasing disposable income spend 10 to 15 percent of their annual income on beauty products.1 Despite a slowing Chinese economy, the $17 billion domestic beauty industry is up 16.5 percent year–over–year through the first ten months of 2012.2 Growth in the high-margin prestige segment has outpaced mass brands as women continue to trade up.3 E-Commerce Explodes Challenges Remain If China is the epicenter of growth in beauty, e-commerce is ground zero. Although the numbers are big, the majority of sales occur on Taobao and With sales of more than $8 billion in 2011, China is the largest online beauty market other C2C channels and often feature gray market or off-price products. 4 Counterfeit sites and products continue to be an issue. The jury is out on Tmall, in the world, nine times that of the U.S. Online beauty sales are projected to top $20 billion by 2016, and have registered year-on-year growth of almost 200 percent Taobao’s B2C platform. SK-II and Yue-Sai launched brand stores on Tmall in 2012, between 2006 and 2012. In 2012, approximately 17 percent of luxury cosmetics in 5 while Benefit Cosmetics exited the platform in June. Lancôme and local brand China were purchased online versus four to six percent in mature markets. Shiseido 6 Herborist removed links to Chinese third-party e-tailers, focusing efforts on their and Bobbi Brown launched e-commerce in 2012, and all but two brands in this direct businesses, though the latter continues to sell on Tmall and 360buy. year’s Index (Elizabeth Arden and Guerlain) sell online in China. Much of the volume is incremental as e-commerce enables beauty brands to extend their reach to Tier 3 and Tier 4 cities. In 2012, Estée Lauder reported that 70 percent of online sales in China come from cities with no brick-and-mortar distribution.7 1. Cosmetics and Jewelry in China,” Jeffrey Hayes, Facts and Details, December 2012. 2. National Bureau of Statistics of China, November 2012. 3. “Beautifying China Is L’Oreal And Estee Lauder’s Big Opportunity,” Trefis Team, Forbes, May 31, 2012. 4. ibid 5. “Online Beauty Sales Slated to Top $20 Billion in China by 2016, Reports Kline,” Kline & Company , April 23, 2012. 6. Ruder Finn/Ipsos China Luxury Forecast 2012, August 2012. 7. “Estée Lauder taps small Chinese cities,” Warc, November 5, 2012.© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 2
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com E-Commerce as a Percentage of Total Retail Sales: Beauty & Skincare 2005­­–2010 Student Becomes the Master 16% Digital platforms are more than just a sales channel, and much of the Beauty industry’s digital marketing innovation is coming from China. 14% Brand BBS sites, including Lancôme’s RoseBeauty and Estée Lauder’s EL-Lady, provide robust consumer engagement platforms to manage sampling, content, 12% and consumer data capture. Seven brands maintain these brand-specific 10% E-Commerce Percentage communities. CRM and loyalty initiatives in China are often the model for the rest of the world and include a drive-to-retail component often managed through a consumer’s mobile device. In addition, robust China-specific social media 8% programs inspire robust participation, tapping into the Chinese consumer’s 6% desire for self-expression. Digital IQ = Shareholder Value 4% This report is a supplement to our 2012 Digital IQ Index : China and ® attempts to distill trends, best practices, and case studies in Beauty for 2% the China market. Our aim is to provide a tool for identifying areas of strength and weakness, helping brands achieve greater return on digital investments. Like 0% the medium we are assessing, our approach is dynamic. Please reach out with 2005 2006 2007 2008 2009 2010 suggestions to improve our findings. You can reach me at scott@stern.nyu.edu. Source: “The World’s Next E-Commerce Superpower,” The Boston Consulting Group. November 2011. Chinese Beauty Market Retail Sales Growth Scott Galloway Professor of Marketing, NYU Stern Founder, L2 % 19%1 % 17 1 17 2* 2 01 0 20 01 2 * First ten months Source: National Bureau of Statistics of China, November 2012.© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 3
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com ABOUT THE RANKING The Methodology Mobile Site Android Applications 20% 30% • Compatibility of • Availability in China China Site • Popularity • Functionality • Functionality Mobile • Transaction Capability Site iOS Applications Localization of site features • Availability in China • Technology: Load Time, Hosting Location Compatibility, optimization, and • Popularity • Customer Service & Store Locator marketing on smartphones and tablets • Functionality • Product Page • E-Commerce & Checkout • Integration of Chinese Social Media • Innovation: Product Customization, BBS/Microsites, 30% Category-Specific Functionality Brand presence, community size, content and engagement SNS • Sina Weibo • Page Size & Growth Social Media ng Search BBS, Social, and Baidu Buzz 0% • Tencent Weibo • Post Frequency eti • Traffic • Mentions • Reposts & Comments • Kaixin k ar 2 • Web Authority • Average Daily Searches • Renren • Tabs & Applications • Douban • Engagement Rate ta lM an d • SEO & SEM: Email igi , Baidu, So.com, Google • Frequency dia Video Sites • Views D lm e ts Advertising & Innovation • Language • Youku ita effor ig g • Online & Offline Synergies • Content • Tudou • Number of Uploads ,d n • View & Subscriber Growth rch rketi • Cross Platform Initiatives • Chinese Social Media S ea a • Emerging Social Platform Integration m ail • Viral Videos Adoption (WeChat, Meilishuo em & Mogujie, iQiyi, Jiepang) Note: Brands were scored based on effectivenees on platforms they participate on Digital IQ ClassesGenius 140+ Gifted 110–139 Average 90–109 Challenged 70–89 Feeble < 70Digital competence is a point of competitive differentiation. Brands are experimenting and innovating Digital presence is siloed Digital efforts lack. Investment does notSuccessful multi-channel, digital campaigns; functional across their site, mobile, traditional and by dimension. match opportunity.sites that cater to local needs; strong social presence emerging social media platforms.and integration across platforms.© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 4
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com DIGITAL IQ RANKINGGeniusRANK BRAND DIGITAL IQ DESCRIPTION GENIUS Estée Lauder Lancôme GIFTED • Expanded social presence from three to Benefit Cosmetics six platforms Clarins1 156 • EL-Lady BBS features evergreen sampling Shiseido Sephora campaigns with fan reviews Chanel* • Optimized for local search. Outperforms all Kiehl’s brands on emerging search engine So.com Biotherm Estée Lauder Companies SK-II AVERAGE Herborist Clinique Bobbi Brown Origins CHALLENGED Dior* • Upgrade of RoseBeauty BBS cements M.A.C Cosmetics leadership position L’Occitane en Provence2 142 • Shanghai version of Rouge in Love TVC Guerlain outperforms global edition Yue-Sai • Tapping the popular female-dominated social FEEBLE media platforms Meilishuo and Mogujie Elizabeth Arden L’Oréal© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 5
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com DIGITAL IQ RANKINGGiftedBeauty overall BRAND DIGITAL IQ DESCRIPTION Beauty overall BRAND DIGITAL IQ DESCRIPTION GENIUS Estée Lauder Successful sampling campaigns on Lancôme Presence on seven social platforms; 3 9 129 best-in-class email marketing 10 20 111 Sina Weibo and Youku generated GIFTED 100,000+ participants Benefit Cosmetics LVMH Procter & Gamble Clarins Shiseido Sephora Strong e-commerce mobile site 4 11 120 features in-store sample redemption Chanel* Kiehl’s Clarins Group Average Biotherm SK-II AVERAGE “Discover China Beauty” UGC contest One of two brands to launch Herborist 4 11 120 e-commerce in 2012 11 23 107 allows fans to vie online, offline, and via Clinique mobile to win a trip to Paris Bobbi Brown Shiseido Shanghai Jahwa Group Origins CHALLENGED Dior* Multiple campaigns on popular third- Popular on third-party BBS, but brand 6 13 118 party BBS drive traffic to brand site 12 27 101 doesn’t maintain its own M.A.C Cosmetics L’Occitane en Provence LVMH Estée Lauder Companies Guerlain Yue-Sai Classroom section on site features FEEBLE Movie star Zhou Xun boosts brand’s 7 15 117 online and offline buzz 13 30 97 extensive beauty advice from local Elizabeth Arden “beauty consultants” Chanel Estée Lauder Companies Custom tabs on Douban and a 19,000 virtual trees were planted 8 17 115 dedicated page on the site attract fans 14 32 94 on the brand’s BBS to support its to games like design-your-own-skeleton ecological mission L’Oréal Estée Lauder Companies Sampling campaign includes microsite 9 19 112 and iPhone app and teaches Chinese guys how to “Live Like A Man” L’Oréal* Chanel classified as “Fashion” brands in cross-category Digital IQ Index®: China.© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 6
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com DIGITAL IQ RANKINGChallenged FeebleBeauty overall BRAND DIGITAL IQ DESCRIPTION Beauty overall BRAND DIGITAL IQ DESCRIPTION GENIUS Estée Lauder Brand-owned BBS is stronger than Lancôme Haute couture show in Shanghai and Chinese brand site and includes social 15 40 88 Chinese version of DiorMag 20 79 54 integration, local campaigns, and GIFTED product information Benefit Cosmetics LVMH Elizabeth Arden Clarins Shiseido Dynamic e-commerce site and Sephora 16 44 80 best-in-class email marketing don’t Chanel* Kiehl’s compensate for subpar social media Biotherm Estée Lauder Companies SK-II AVERAGE Active Sina Weibo page launched in Herborist 17 46 78 July hosts frequent contests Clinique Bobbi Brown L’Occitane International Origins CHALLENGED “Little Black Dress” fragrance microsite Dior* 18 47 76 included giveaway of 10,000 samples M.A.C Cosmetics and links to Sephora e-commerce L’Occitane en Provence LVMH Guerlain Yue-Sai FEEBLE Brand page on Meilishuo, the Chinese 19 49 73 Pinterest, drives traffic to Tmall Elizabeth Arden L’Oréal* Dior classified as “Fashion” brands in cross-category Digital IQ Index®: China.© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 7
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com Site Functionality Key Findings Percent of Beauty Brands Emplying the Following October 2012, n=20 E-Commerce 100% 90% Except for Elizabeth Arden and Guerlain, and lifestyle brands 75% 75% 65% 55% 40% 30% Chanel and Dior, all Beauty brands sell online in China, with Bobbi Brown and Shiseido launching in the past year. Ninety percent of Beauty brands have customer service for China, Store Locator for Customer Service User Reviews/Ratings View Price in RMB Wishlist Sharing Product Live Chat International Store three quarters show prices in RMB and have user reviews and China Number for China to Chinese Locator ratings, and 40 percent offer live chat. The Beauty category has Social Media the fastest average site load times at 14.2 seconds, compared with 24.1 seconds across all categories. Free Shipping Options Across E-Commerce Sites The majority of e-commerce-enabled brands support free Beauty Brands shipping with an average minimum order value of 485RMB October 2012, n=14 ($78). Three brands provide free shipping with no minimum. Clarins is the only brand that does not currently provide any free shipping options. Only five brands allow customers to choose samples during checkout, versus 58 percent of Beauty brands in the U.S. Only Clarins and SK-II support m-commerce sites. Four brands (Benefit Cosmetics, Herborist, Lancôme, and Shiseido) maintain e-commerce- Free Shipping Free Shipping No Free Shipping enabled iOS apps. with Minimum with No Minimum Localization is robust, all Beauty brands support at least one local Chinese payment method. In addition, 79 percent of brands offer a formal government-issued receipt Payment Options Across E-Commerce Sites (fapiao) to confirm purchases and track tax payments.8 In Percent of E-commerce Enabled Beauty Brands China, fapiao are key to consumer trust and the perceived October 2012, n=14 legitimacy of purchase.9 Alipay 100% China UnionPay 93% Cash on Delivery 79% Fapiao 79% 8. “Doing Business In China: What is a Fapiao and why is it so important?,” TheMIGroup, February 2011. 9. “The Importance of Chinese Fapiaos When Doing Your Accounts,” China Briefing, International Credit Card 7% February 21, 2011.© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 8
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com Key Findings Social Media Ninety percent of Beauty brands are on at least two platforms. Benefit Cosmetics increased its social presence from four to seven platforms, and Estée Lauder is present on six. All beauty brands maintain a presence on Sina Weibo, but communities are much smaller than on Facebook. Beauty brands in the Index average 167,953 followers on Sina Weibo, Beauty brands in the Index average 167,953 followers versus 1.86 million on Facebook. Despite the smaller page sizes, the engagement rates on Sina Weibo (0.051%) still lag on Sina Weibo, versus 1.86 million on Facebook. behind those registered on Facebook (0.071%). Sina Weibo added several Facebook-like features in 2012, including custom tabs and pinned posts. However, only 10 beauty brands utilize pinned posts, and just six feature custom tabs. Five brands showcase products on these custom tabs, yet just three include pricing and none has full e-commerce integration. Chinese Social Media Adoption Percent of Beauty Brands Present on the Follow Platforms: 91% October 2012, n=20 of index 51% of index 29% 20% 17% of index 16% of index of index 9% 7% 100% of index 45% 50% of index of index 35% 25% 15% 10% 5% Sina Weibo Youku Kaixin Tudou Tencent Douban Renren Jiepang Weibo© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 9
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com TABLE OF CONTENTS Click to Jump To: 5 Methodology 1 9 Lancôme: Doll Eyes Bar 2 0 L’oréal: Multi-Brand E-Commerce/Sampling 6 Digital IQ Rankings 2 1 Benefit and Lancôme: Singles’ Day 6 Genius 2 2 Sephora: Only Lady & Sephora Beauty Awards 7 Gifted 2 3 Dior and Chanel: Online Magazines 7 Average 2 4 Social Media Sampling 8 Challenged 8 Feeble 2 5 Herborist: “Discover China Beauty” 11 Key Findings 26 L2 Team 9 On Top 27 About L2 1 0 E-Commerce 1 1 BBS Sites 1 2 Social Media 1 4 Other Social Media Platforms 1 6 Video 1 7 Search 1 8 Mobile 19 Flash of Genius© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 10
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com L2 is a think tank for digital innovation. Upcoming Events We are a membership organization that brings together thought leadership from C l i n i c :  foc u s 2 0 1 3 academia and industry to drive digital marketing innovation. January 24, 2013 · New York City cl i n i c :  br an d s as m e d i a com pan i e s January 31, 2013 · Paris R esearch Digital IQ Index : The definitive benchmark for online competence, Digital IQ Index reports score brands ® ® L U N C H :   M O BI L E L U N C H 2 0 1 3 against peers on more than 600 quantitative and qualitative data points, diagnosing their digital strengths February 5, 2013 · New York City and weaknesses. L2 Collective®: Series of benchmarking reports designed to help member brands better understand resources, human capital, budgets, and priorities supporting digital strategies. Upcoming Research EVEN T S Forums: Big-picture thinking and game-changing innovations meet education and entertainment. D i g i tal I Q In d e x ® R e p o rts : The largest gatherings of prestige executives in North America. Hotels 300+ attendees Automotive Haircare Clinics: Executive education in a classroom setting with a balance of theory, tactics, and case studies. c r oss - p latfo r m : 120 –180 attendees Mobile APAC Working Lunches: Members-only lunches led by digital thought leaders and academics. Topic immersion in a relaxed environment that encourages open discussion. L 2 C oll e ct i v e ® R e p o rts : 40–80 attendees Social Media Omni-Channel Commerce consulting Advisory Services: L2 works with brands to garner greater return on investment in digital initiatives. Advisory work includes Digital Roadmaps, Social Media Strategy, and Organizational Strategy engagements. MEMBERSHIP For membership info and inquiries: membership@L2ThinkTank.com© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 11
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com A Think Tank for DIGITAL INNOVATION 51 East 12th Street, 2nd Floor New York, NY 10003 © L 2 2013 L 2 ThinkTank.com Reproductions Prohibited L2ThinkTank.com This report is the property of L2 Think Tank. No copyrighted materials may be reproduced, redistributed, or transferred©info@L2ThinkTank.comREPRODUCTIONS AND DISTRIBUTION PROHIBITED L2 2013 L2ThinkTank.com. without prior consent from L2. L2 reports are available to L2 Members for internal business purposes. 12
  • Inquire about your brand’s ranking: Info@L2ThinkTank.com ExcerptDigital IQ Index ® : China Beauty Supplement To access the full report, contact membership@L2ThinkTank.com© L2 2013 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 13