Fashion brand in China
In episode 91 of our China business vlog, we share insights from Olivier Vérot of Gentleman Marketing Agency (GMA) on the ROIs from marketing campaigns, which Chinese platforms to sell on and he discusses key business partners for establishing fashion brands in China.
Full transcript below:
Welcome to Daxue Talks, a show powered by Daxue Consulting, a China based strategic market research company founded in 2010. With Daxue Talks you will stay up to date with all the latest business updates in China, every day you will learn from China based experts who share their knowledge about the Chinese market in 2-5 minutes.
I’m Olivier Verot, I’m the founder of Gentleman Marketing Agency – GMA, we’re a digital marketing agency focused on performance, we are based in Shanghai.
Based on different platforms, what kind of ROI’s are there for fashion brands?
The ROI is extremely difficult to calculate in fashion because there is many data that as marketer we don’t have. The first data that we don’t have its what we call the conversion rate. So, if we drive 100 traffic, how many people can buy? And this is difficult to know because it will change in the time. So, if you’re a new brand your ROI is extremely low, because you’re new and people don’t trust you. If you’re a brand that is quite famous, it can be 1-3% for example on Tmall and if you are a brand that is already very famous and doing very well, it can reach 5-10%. So, the first data, it’s complicated, it’s the conversion rate.
The second data that basically we don’t have also as well is the recommendations or it’s like – if the people buy a product, will they re-buy? Will they recommend it? So, it’s basically something that is really matters to the brand and the quality. So, we have some brand we work with, their buying rate is very low, but when people buy it, it’s so niche and it’s so good, that they will recommend this basically to their friends and to their circle.
So, we have a watch brand that basically only focuses on watch and their buying rate, their conversion rate is very low. So, it’s almost like 0.5%, but their recommendation rate its high. So, the cost of the acquisition of one user is low, but they can recommend to more users.
So, usually for us we know that during the first six months all the brands if they’re doing ecommerce, they’re losing money on one of the platforms they will use. Oaky. Between six months to one year they need to adapt and usually between 1 year to 1.5 year they arrive to the breaking point. Okay.
So, I would like to say at the beginning the ROI will be like 1 -0.5, so $1 invested – 0.5 is basically the income that they can get. After six months to one year they can reach 1-1 usually in fashion. And after one year, one year and a half is where they really start to make money and we see this everywhere basically in the world. If you work on other platforms, it’s always like this, the conversion rate is increasing if the trust, work and basically, it’s because we also know the last thing – it is what we call a star product.
I’ll give you an example – like all the brands they have a range of different products but actually only 1, 2 or 3 products will catch 80% of all of their sales. So, if you know what it is, you just communicate on this one. If you work with Dior, you’ll only focus on the perfume Dior – if you work with – I don’t know with like Lancôme – you will only focus on one specific cream. So if you work with like a Luis Vuitton you only focus on the brands, because that’s what brings all the sales and usually it takes a little bit of time to know that, because when you speak to a brand, most of the client what they want – they want to sell everything. But actually, if you want to sell everything, you sell nothing. You need to focus on what really the clients want and what they want will drive the sales to the other.
So, that’s also why the increase of the ROI increases with the time because the brand loyals, we know about their consumer, about what they think and basically, it’s also the time to adapt.
What are the key partners you need to consider when you want to introduce a fashion brand online in China?
It’s a good question – I think you need to have a – to be successful with the fashion brands you need to set up your brand image and you need to have a partner really focused on that. So, the brand image can be visual, can be the creation of the visual intensity, a specific positioning, a specific niche – so I would like to say – this is the first part.
The second part is like to have the brands really focused on – the first partner focus on your reputation, so to focus more on your word of mouth, your reputation online. That is basically your core, what people – when they search what they will find.
The third partner is to focus on your visibility or what we call the brand awareness. So, it’s basically like influencers, ads, it’s basically social media, it’s like how can I make my brand as visible as possible, and the last factor is an ecommerce partner. So, it can be a distributor, you can do by yourself, it can be an ecommerce agency, and this partner will be in charge of selling your products, so managing basically your store.
So, to manage your store they need visibility, they need a specific branding, positioning and they also need visibility and I would like to say – the last one its more focused on the distribution. So if the brand wants to develop their distribution they can develop distribution offline by stores, or finding distributors that would resell for them, or also to find online distributors, a lot of distributors or resellers or affiliate or whatever you call it, to resell your brand.
So, the last part takes more time, usually the brand they do it internally but they can also find some partner to do that and I’ll anticipate your next question – where we can help the brand for that – its working on the reputations. Its working on the visibility and also doing basically the ecommerce part. Usually for the first part its more company like yours, Daxue – and for finding distributors and develop this part is more doing by themselves via trade fair and have their own sales team that basically are contacting all the different partners everywhere.
Any questions? We will find an expert to answer them. Drop your questions in the comments or send us an email at dx@daxueconsulting.com
