BrandWatch by Michel Gutsatz

Mobile payment: the revolution comes from China

WeChat has just launched its 'Wallet' - on a model very close to that already offered by Alipay, the mobile payment app from Alibaba.What does it consist of?  A real revolution – when compared to mobile payment methods available in Europe and the US.
Firstly, you find the usual mobile payment functions - credit cards, a wallet topped up by credit card and the option allowing you to make a quick payment using this wallet. This last function, 'Quick Pay' is new: it generates a QR code that can be scanned by the vendor thus allowing you to pay for the purchase.

 

Then there is a section "Powered by Tencent" (Tencent is the parent company of WeChat, Alibaba's strongest competitor in digital) regrouping 10 apps developed by Tencent:

• 'Transfer' - Transfers money from the 'wallet' to any of your contacts on WeChat.
• 'Mobile Top Up' - Replaces prepaid telephone cards.
• 'Wealth' - Invests your money by clicking on the offers whose returns are displayed and guaranteed.
• 'Buy-QQ Coins' - A virtual currency used in online games.
• 'Utilities' – To pay telephone, gas, water and electricity bills.
• 'Public Services' - To access public services (different in each city) such as: making doctors' appointments / paying fines / display of information about air quality / incidents, displays the traffic situation via road cameras, etc.
• 'Card Repay' - To send money to cover overdrafts on credit cards and avoid bank charges.
• 'Red Packet' – Concretises the Chinese tradition of 'Red Envelopes' when you wish to make gifts to relatives or employees.
• 'Go Dutch' – To share a restaurant bill with friends.
• 'Tencent Charity' - To make donations to philanthropic organizations linked to Tencent.

Illustrated below, is how one makes an appointment with a doctor using the app:

And investment offerings proposed daily:

You can also access 5 other functions outside Tencent:

• 'Order Taxi' - To order a taxi - via the joint Tencent and Alibaba app DidiKuaidi.
• 'Rail & Flights' - To order train and plane tickets.
• 'Specials' - This function accesses the e-commerce site JD.com and finds offers at preferential prices.
• 'Movie Tickets' - To buy cinema tickets.
• 'Group Buy' - To make bulk purchases at bargain prices.

If one word could sum up the Chinese mobile payment approach, it is: INTEGRATION. You have within your 'messenger' (think Facebook or WhatsApp Messenger) all payment functions that so far have been available on as many different apps (that of your bank, your electricity supplier, your telephone company, your favourite taxi or VTC service, etc.). So rather than juggling 10 or even 15 different apps, WeChat offers all these facilities in one place, a place where the Chinese spend the most time each day: the private social network. An extraordinary example of work conceived to solve the concerns of the consumer who seeks, above all, 'convenience' and 'user-friendliness'. The future of digital is being prepared in China.

The new boutiques of beauty brands

The discovery of the new Giorgio Armani Cosmetics boutique in Hong Kong (see Brandwatch of 26 January) and the new format of the Chanel Beauty boutique (see Brandwatch of 8 September 2013) prompted me to look closely at what luxury brands are preparing as new retail concepts for their beauty offers.  As it often happens, these new concepts are tested and developed in Asia, as near as possible to the most demanding market ... with the greatest potential.


• HONG KONG: 

  A Beauty Gallery has opened in Pacific Place where, alongside brands already well ensconced in retail (La Prairie, La Mer, Nars, Natura Bisse) we see new players - including Chanel, Burberry, and two L'Oréal brands (Giorgio Armani, YSL). This clearly speaks for itself: luxury brands are opening beauty boutiques, thus arming themselves with new distribution channels, in addition to their corners in department stores. This allows them access (at long last) to the final consumer, until now exclusively handled by Sephora, Marrionaud and other multi-brand retailers. The battle for consumer databases and the implementation of serious "precision marketing" has begun.
  
  
  
  
  
  
  
  

• MUMBAI:

  India is still in many ways a mission territory for luxury brands.  Yet you can already find beauty boutiques there.  I found two - Chanel (at the Palladium Mall) and Lancôme (at the Grand Galleria outside the Palladium) – in Mumbai. But what was even more interesting was the L'Oréal Paris boutique I discovered, dedicated to makeup!  I earlier mentioned the L'Oréal Paris Institute boutique on a Costa cruise ship – and we realize that the work begun by Jean-Paul Agon in the USA, where he opened boutiques for the brand, is now continuing in Asia.  We can expect the opening of L'Oréal Paris boutiques worldwide - reinforcing its current strategy of moving upmarket and its "exit" from supermarket shelves...
  
  
  
  
  
  
  

An Armani House in Hong Kong

Luxury brands have so much at stake in Asia that their new concept stores are tested and developed there.  They arrive in Europe much later (take, for example, the Chanel Beauty boutiques that have been present in Japan and Hong Kong for a long time and are just opening in France).

A fascinating example is the new Armani concept store in Hong Kong at the Chater House.  There is a very different offer from that proposed in Milan - no hotel or Armani/Casa, but a range of specialities adapted to the social life of Hong Kong: fashion, beauty, restaurant, lounge, desserts, flowers ... Armani is building a complete lifestyle brand right before our eyes.


Most of the lines of the brand can be found here ... and a few surprises:

• Four fashion stores:
• Giorgio Armani
• Emporio Armani
• EA7
• Armani Junior

• A boutique presenting the brand's Beauty products:  Giorgio Armani Cosmetics

• A flower shop: Armani/Fiori

• An Armani/Dolci boutique devoted to pralines and chocolates

• A restaurant, Armani/Aqua, the encounter between East and West - between Italian cuisine and Japanese cuisine, with two chefs and two kitchens.


• A lounge dedicated to the art of the cocktail: Armani/Privé.

 

Angela Ahrendts at Apple: Two lessons

This year, Gilles Auguste and I co-authored the book 'Luxury Talent Management', published by Palgrave Macmillan. Two of the subjects we approached were the combination Designer / CEO, accounting for the success of certain luxury brands (such as Burberry), and the challenges facing retail. It turns out that both these subjects are at the core of the recent changes in the top echelons of Burberry.  We offer you an analysis.

The print and internet media have amply commented on the departure of Burberry's President who left for Apple - to take up the post of VP in charge of its stores and e-commerce networks. We would like to throw some light on two other aspects that seem essential:

1. Christopher Bailey was appointed CEO of Burberry - and combines this function with his current role as Creative Director (CCO).  Many critics were surprized, and expressed doubts about this 'unusual' choice.  However, it is not the first time that such a combination has occurred:  the most recent being at the beginning of 2013, when Nicolas Bos, until then CCO of Van Cleef & Arpels (and CEO of Van Cleef & Arpels, North America), became the CEO of the jewellery brand, replacing Stanislas de Quercize who left to manage Cartier.  He combines this office with that of Creative Director.  We think very interesting that two important brands amongst the most creative, chose a new management model, where the architect of the brand's success takes over the reins. To us, this shows the increasing importance of design and creation in the development of luxury brands - with the arrival of a new generation of creators perfectly aware of the business and capable of creating products that sell extremely well.  It is perhaps important to point out that Christopher Bailey's arrival at the head of Burberry was preceded by John Smith's appointment as COO of the brand.  He is not a stranger to the company.  As a member of the Board since 2009, he is fully aware of its ins and outs.  Furthermore, hailing from the BBC, he knows the media very well – we are reminded of what Christopher Bailey said recently: "Burberry is now as much a media-content company as we are a design company because it’s all part of the overall experience".


2. Angela Ahrendts thus leaves for Apple to handle its network of boutiques and e-commerce.  The creation of Apple stores in 2001 was one of essential elements of Apple's new business model - too often taking a backseat to its products and design and technological innovation.  The Apple stores were a real revolution in the world of retail, introducing large, non-commercial spaces, offering 'hands-on' products, making service an essential element of its concept.  Today, more than 18% of the brand's sales are made through this channel, and sales per square metre are equal to those of … the best luxury brands (46,000 €/sq. m).  A large number of luxury brands are unable, in spite of their efforts, to offer a client experience like that of Apple.  However, this concept has not changed for over 10 years, and it needs to evolve.  In a recent interview, Tim Kobe, founder of the design studio, Eight Inc., who developed the Apple Store concept with Steve Jobs, was very critical of them: "Apple's momentum has slowed down... It's imperative Apple shifts again. They should really refresh [their retail offering] every five years".  He argues rightly that a retail concept, no matter how powerful it is, needs to be revisited every 5 years at the risk of losing its advantage.  And the Apple Store concept has not changed in the last 10 years.  We can thus assume that one of Angela Ahrendts's tasks will be to give it an overhaul.  Recently, she often spoke about the future of retail, explaining how important it is for online and offline experiences to be "seamless".  Apple is already well advanced in this domain, but a lot of progress still has to be made.  We can reasonably think that she will be its architect.
   
   

Beauty: Brands open their own stores

Quite a long time ago, I predicted that beauty brands would make changes to their business model - they needed to add BtoC distribution to their traditional BtoB channels.

In fact, all brands need direct access to the final consumer, at the moment drawn by distributors (Sephora, Douglas, Marionnaud, perfumeries, etc.), while the real challenge in the coming years will be to establish a direct relationship with the final customer (and thus build a customer database that is as comprehensive as possible).  On Brandwatch, we tracked several initiatives in this direction: the Nivea Haus, the L’Oréal Boutiques in the U.S., the L'Oreal Salon on a Costa cruise ship, Dove spas, Chanel Beauté boutiques (pop-ups and Asian boutiques), etc.

But brands are now intensifying their initiatives in matters of distribution - all of them on the same lines! Here is a short review of the most noteworthy:

• Chanel moved out of its boutique in Hong Kong – a boutique of about 30 sqm which opened both on to the street and the luxury Lee Gardens shopping mall - to the ground floor of Hysan Place, a less luxurious shopping mall but with a much higher footfall (facing an Apple Store), with a boutique of over 100 sqm!
  
  
  

• Caudalie, after opening two boutiques in New York, opened in Paris, rue des Francs-Bourgeois.  Thus having grown in the pharmacy network (and now in Sephora USA), the brand is opening its own boutiques. Milan and Hong Kong should follow.
  
  
  

• Bourjois has just opened (March 2013) its first boutique (41 sqm) in the Passage du Havre in Paris: here we find all the references of the brand and services at one small price (manicure, make up, eyebrow shaping, etc.).
  
  

• Benefit follows in the footsteps of Sephora USA: the brand has installed cosmetic vending machines in 24 airports in the U.S. These include the 30 bestsellers of the brand.  The machines are built ​​by ZoomSystems (company that has worked with Coty and Sephora), with a touch screen that offers tips on makeup and care.
  
  

Warby Parker: Birth of a business model

Because one of his friends lost a pair of sunglasses worth $ 700 on a plane, in 2010 Neil Blumenthal decided to create a new American brand for spectacles with a desire to provide consumers with really high quality products at affordable prices. The result was Warby Parker. To compete with Luxottica (owner of Ray-Ban and Oakley and licence holder of several luxury brands) which has 7,000 stores in the U.S. (under different brand names), Warby Parker decided to do a complete rethink on the business model for spectacles.

• A brand where the style and message evoke the American ideal of the 50s and 60s, revisited 21st century: simple frames in muted colours, "preppy" names... As one Bentley professor put it: "They have a nerdy cool appeal. It taps into the Kendall Square/Silicon Valley/New York City metrosexual vibe. They're not sturdy, but they've got brains. They're like the nerdy guys in the movies who end up with a beautiful woman”.

• Positioning at a uniform price: $ 95, and $ 145 for titanium frames. This uniform price is intended to allow customers to make choices based solely on the design and their own personality.
• Innovative distribution:
  • The brand was launched on the Internet - but when customers started asking whether they could come personally to buy the glasses, WP set up a showroom at its headquarters. It receives 1,000 customers every Saturday, and sales per square foot attain those of a luxury brand!
  • WP then set up shop-in-shops in other stores and other unusual places, like hotels. The concept is different each time and consistent with the location.
  • A remodelled ambulant bus sells the product in cities where the brand has not yet set up sales points.
    
    
    
    
  • Warby Parker has just opened its first boutique in New York, in Soho.
    
    
• A strong social dimension (which we find in another young American brand, TOM'S): for each pair purchased, a pair is given to a person in need. For the founders in their thirties, giving their business this dimension of social responsibility is normal: One should give back to society what it has given us.
  
  

Galeries Lafayette & Printemps: a store check

Last week I was with a client at the Galeries Lafayette and Printemps in Paris, when they opened at 10 a.m.  Two things struck me:       

1. While the aisles of the Printemps were empty, those of Galeries Lafayette were already filled with people.  A very particular type of crowd: they were all Chinese tourists.

   
   
   
   
   Lining up at the Chanel counter was a queue similar to the one I saw in Hong Kong a few months ago.

   

   

   This confirms what Bain stated in their study "2012 China Luxury Study": 25% of luxury product customers are Chinese (the first nationality ahead of the U.S.) and 60% of them purchase products outside China (of which about 30% buy in Europe and the USA).

   Today, with the Chinese, the Galeries Lafayette is capitalizing on the strategy for receiving foreign tourists that it launched several years ago to cater to the Japanese.  The Printemps – which wishes to focus on an international clientele - obviously still has some way to go to attain the same impact the Galeries has.


2. The Printemps that follows an upmarket strategy since 2006 - making it a luxury hotspot in Paris – develops, together with the brands, a very interesting approach: many brands have two or three locations in the store. This is the case of course with Louis Vuitton, which, in addition to a duplex store, has a corner for silk (oh Hermès!). It is the case with Guerlain, and also the Frédérique Constant watch brand, which can be found on the first floor among luxury brands, and in the basement with mid-range brands.  Ladurée is a case that is even more interesting: after opening a tearoom on the 1st floor (the luxury brands floor), Ladurée has added corner counters at two of the Boulevard Haussmann entrances.
   
   

Beauty innovates in retail

Beauty brands advance step by step towards what will likely be their future distribution model: their own boutiques. The only experiences they have had in self-distribution until now were corners in department stores. Institute brands, for their part, develop beauty salons in their name (Clarins had 38 worldwide, including 27 of its own in 2007).
Several brands are developing retail concepts in Asia - a region that has become a luxury laboratory.  You find three boutiques in Hong Kong within a radius of 20 metres: Chanel, Estée Lauder, Shiseido. They are very well located strategically:

• Boutiques at street level - located in a busy street near Forever 21 and the large Hysan Place shopping mall (with Gap, Hollister, etc.)
• Close to one of the luxury shopping malls (Lee Gardens) - the Chanel boutique is also part of it with two separate entrances (see photos).

Chanel lays emphasis on makeup and perfumes - skincare is relegated to the rear of the boutique.

On the contrary, the Estée Lauder store - which is also a beauty salon - emphasizes skincare (and to a lesser extent, makeup and perfume). It has placed its bestsellers at the entrance (which makes purchasing easier for customers who are less aware of its various collections - and reassure them):

As for the Shiseido boutique, it is dedicated to skincare.

These initiatives should be put in perspective with the Chanel pop-up store that the brand installed in London during the Olympic Games: entirely dedicated to makeup (with a minor presentation of fragrances), it is located in Covent Garden - currently one of the most lively areas in London where mass and premium brands are positioning themselves (a few months ago Tommy Hilfiger had a pop-up store here as well).  We thus perceive a choice of quality shopping areas frequented by a young public that is interested in brands.

However, we may question Chanel's strategy, which, in these two cases, highlights makeup (the youngest category and one that makes for the most interesting displays) and perfumes (the 'historical' category that has made the brand famous) leaving skincare largely in the background. This third axis really deserves greater importance!

Vuitton - present on all fronts

Last month, Louis Vuitton opened a boutique of 150 sq. mts. exclusively for jewellery at the Place Vendôme – also installing its jewellery atelier on the first floor. This initiative has been hailed as proof of the upmarket progression of the LVMH brand which - with a location in the emblematic site of luxury French jewellery and its own workshop - acquires a stamp of legitimacy in a category where Cartier and Van Cleef & Arpels (the direct competitors of the brands of the Richemont group) shine.

Louis Vuitton - in this year of transition, which will see the departure of its iconic Managing Director, Yves Carcelle - is present on all fronts. I will focus on four major initiatives:

1. The opening of the first shop-in-shop for shoes (September 2012) at Saks Fifth Avenue: as usual, the brand will self-manage this space. For the occasion, a limited-edition shoe design will be created and sold exclusively in this shop-in-shop. Louis Vuitton again reinforces its legitimacy in a category where it has been present only for the last few years.
   
   
2. The launch of the first LV perfume: In January this year, the brand recruited a perfumer, Jacques Cavalier - creator of Eau d'Issey (Issey Miyake), Midnight Poison (Dior), Acqua di Gio (Armani), Opium pour Homme (Yves Saint Laurent) and Poème (Lancôme). Like its glasses and watches, the perfumes will be sold exclusively in the LV boutiques – and not through specialized distributors. The brand launched perfumes previously (Heures d'Absence/ Je Tu Il / Eau de Voyage) in the 1920's/1930's. For Louis Vuitton, it is here again a question of investing in a category that is essential today in order to build up the legitimacy of a luxury brand AND to boost its operating margins.
   
   
   
   
3. The artistic and commercial collaboration with the Japanese artist, Yayoi Kusuma - in the form of 7 pop-up stores (the first opened on 10th July in the Soho boutique in New York - the eve of the opening of the retrospective Whitney Museum dedicated to the artist - others will follow at Printemps Paris, at Selfridges in London in late August, at Pacific Place, Hong Kong, Ngee Ann City in Singapore and Isetan in Tokyo). These temporary boutiques, designed by the artist, will sell a collection of ready-to-wear created by Yayoi Kusuma for Louis Vuitton. These products will later be available in all the brand's boutiques. Vuitton thus follows its logic of collaboration with contemporary artists (Takashi Murakami, Stephen Sprouse, Richard Prince, among others) to the end: this is the first time it opens several pop-up stores exclusively dedicated to collaboration of this type.
   
   
4. The "Voyage" theme returns: the "Louis Vuitton Express" is the common theme of the new advertising campaign of the brand and displayed at the newly-renovated Plaza 66 boutique in Shanghai. A film and a mini site allows Louis Vuitton to dramatize the imagery linked to the brand - the voyages by train during the 19th century ...
   
   

 

Louis Vuitton - with these numerous initiatives - confirms that it is one of the most innovative, modern and active luxury brands. It strengthens its business model (an exclusive distributor with its own network), its legitimacy as a global luxury brand (by entering new categories), its status as an active and creative brand (its collaboration with contemporary artists), ... and its presence in China, currently the largest luxury market. Yves Carcelle's "reign" will therefore end in a blaze of glory - but LVMH has announced so many successors over the last 10 years that some still doubt whether he will really be leaving!

IWC innovates in retail

 

 

 

 

 

 

 

 

IWC (the Richemont Group) - like a number of other watch brands (Vacheron Constantin, Breguet, Corum, Hublot, Hermès ...) - built a network of boutiques (25 in 2009) that one may call classically elegant, in other words, very 'chic' places where one can go and buy watches. As a result, all the watch brand boutiques resembled each other.
But now IWC has just broken that similarity by taking inspiration from stores that sell luxury brand accessories:  It first opened a flagship store in Hong Kong in 2009 then a second in New York on Madison Avenue last month. What an enormous change!
The boutique is a true "lifestyle store" of 300 m2 where all the collections are presented in an environment that evokes the powerful universes to which these six collections pertain to: books, accessories, navigation instruments, Santoni bracelets, shoes, calligraphy tools, chess boards, diving equipment, a flight simulator.... most of which are for sale. A limited edition collection - the IWC Collection, exclusive to the flagship stores in Hong Kong and New York - is also sold here.

These boutiques are really successful.  Let us hope that they serve as an inspiration to other watch brands...