The ‘digital IQ’ of premium brands

So how are the world's major premium brands riding these trends? Branding agency Labbrand in partnership with the L2 think tank, recently released a 'digital IQ ranking,' which finds that most prestige brands have largely ignored the digital phenomenon in China.

Labbrand quantified the digital aptitude of 100 global prestige brands in China, six of which are of Chinese or Hong Kong origin. In ranking the companies, Labbrand assessed their websites, search engine optimisation, social media presence and digital marketing efforts.

Lancôme, BMW and Estée Lauder took the top three spots. Most of the other brands that broke into the top 10 also sold either beauty and skincare products or cars, and they are all global brands. The only exception is Chinese liquor brand Wuliangye, which ranks 10th.

Twenty of the brands in the study do not have a Chinese language site and only 10 are e-commerce enabled. Only four brands have invested in branded 2.0 online communities.

And, while there are an estimated 745 million mobile phone subscribers in China, only 42 per cent of the brands had mobile-enabled sites.

"Most global luxury brands do not do much e-commerce and those that do are more likely to do so in the US and Europe, rather than in China," says Deirdre McGlashan, chief executive officer of wwwins Isobar.

When they do go into China, global brands tend to just translate their global assets and use the same digital tactics that they use in Western countries.

Companies of Chinese or Hong Kong origin can market with no Western preconceptions, which often gives them the freedom to do more. In general, the Labbrand study finds that local Chinese brands outperform their global peers by an average of 11 IQ points.

Also, while European countries and the US have online luxury boutiques like NET-A-PORTER and YOOX, this is a sector that is just starting to develop. "This means global brands are missing a trick in China," says McGlashan.

Very often, global brands fail to recognise local nuances. Laker Chen, managing director of iProspect China, points out that around 30 per cent of luxury brands do not have a Chinese name. On Baidu, the local search giant that boasts more than 60 per cent of market share, the search visibility of many global brands is very poor. "It is vital that global brands have a search strategy in China that addresses the algorithms of local search engines such as Baidu," says McGlashan.

Chris Reitermann, president of OgilvyOne China and O&M Group Shanghai, points out that several luxury brands have recently hired digital agency staff to build digital capabilities. "A key reason why they are only now starting to invest in digital is because in the past, most of the attention was focused on developing mass brand awareness and distribution. Another reason is that the digital environment was very fragmented and did not really portray a premium image," he says.

Another issue in China is the dominance of traditional retail and distributors, as well as the grey imports in some categories that make operating an e-commerce store difficult from a pricing and product perspective.

"Brands that work through distributors cannot offer competitive or lower prices than retail, and therefore have a hard time putting together a compelling e-commerce proposition," says Reitermann.

This article was originally published in the 12 August 2010 issue of Media.