The outbreak of Covid-19 has roiled the luxury industry worldwide. In China, which has reported more cases than any other country at 80,000, coronavirus has created unstable terrain for local and foreign brands operating in the country. Logistics, manufacturing and sales have all been impacted. Store closures, a decline in retail footfall and changes in consumer sentiment have prompted companies including Burberry, Apple and Capri Holdings to revise their annual forecasts.
Weighted by the seriousness of the outbreak, mounting uncertainty and long-term changes in customer habits, brands have halted their marketing initiatives, postponed investment in the country and cancelled events.
“All our clients paused their February and March campaigns, and even for April they are not sure if those will launch,” says Elijah Whaley, CMO of Chinese influencer marketing agency Parklu, which works with international clients including Shiseido, Guerlain and Rebecca Minkoff.
WARC’s Global Advertising Trends report, which doesn’t include the impact of Covid-19 in its forecast, estimated that China’s advertising spending will grow 9.7 per cent to $98.5 billion in 2020. According to James McDonald, managing editor of WARC Data, a slowdown in economic output won’t necessarily translate into reduced advertising investment, but the sector is feeling jittery.
“Anecdotally I hear that advertising volumes have plummeted, the reason being that there is really little point in advertising for a brand when no one is going shopping,” says Charles Lankester, VP and general manager, Hong Kong, of communication consultancy Ruder Finn. “That had a dramatic impact on the level of media spend in Asia generally at the moment.”
Under these circumstances, the struggle for many businesses is balancing the need to engage with customers, with ways to contain their economic losses and be present in the pockets of consumption left. As a result, donations and expressions of support have become common. All the while, sensitivity should be front of mind, especially given brands’ track record of showing a lack of understanding of cultural and geopolitical issues in the past.
“Going forward national sentiment is going to be even higher than it was pre-outbreak, so brands really have to be prepared and be particularly watchful,” says Marie Tulloch, senior client services manager at Emerging Communications.
Corporate communications take the lead
As the outbreak grew in intensity and reach, many luxury and beauty companies, including LVMH, Kering and Estée Lauder, were swift in issuing messages of support and donations for medical supplies and prevention work. While publicising donations could backfire as a marketing ploy, these initiatives were mostly well-received. “You can’t be seen to ignore China at a time like this,” says Tim Payne, senior partner, head of Asia, Hong Kong, at public relations firm Brunswick. To avoid misallocation of funds, another risk connected with donations, the firm made a “tight list” of receiving organisations that were relatively secure reputationally, both in their actions and among local social media networks.
According to Oliver Mann, partner at communications consultancy Kekst CNC, internal comms are also key for crisis management, including keeping employees and customer service teams informed at all times. While CEOs and companies might be tempted to avoid communicating risks, being clear about the challenges the business is facing with employees, stakeholders and consumers makes difficult but necessary decisions, including lay-offs, more understandable.
“As long as you are clear about the parameters you are facing then people can be very understanding,” says Payne. “If you are cavalier about it until the last minute, there is a real chance of backlash.”
Investing in community building and adapting to new needs
The outbreak of Covid-19 has accelerated trends that were already developing fast in China, including investments in e-commerce, gamification and live streaming. According to consulting firm Boston Consulting Group, L’Oréal pulled offline advertising in February and reinvested it online. After Shanghai-based cosmetics brand Forest Cabin temporarily shut around half of its 337 stores in China, it used live streaming to engage with consumers. According to Alizila, Alibaba Group’s news hub, after initially dropping 90 per cent, the brand’s sales went up 45 per cent year on year.
Brands also may redistribute their investment in key opinion leaders and influencer marketing to focus more on key opinion consumers and retention marketing. As highly engaged, everyday customers, KOCs have the advantage of appearing more trustworthy and relatable than KOLs, while requiring less spending from brands.
“A KOC is a brand advocate that’s leveraged online for word of mouth, multi-level marketing and user-generated content initiatives, which increase the customer’s lifetime value beyond purchases,” says Parklu’s Whaley. “KOC are the cornerstone of brand communities.”
According to Whaley, as brands focus less on brand awareness and sales campaigns during the outbreak, community building activities are a safe way to interact with consumers and remain front of mind. “When they start spending again they are going to spend with you,” he says.
Similarly, brands also have the opportunity to use their campaigns to directly address the outbreak and to show their support. According to Tulloch, local beauty brands have been particularly aware of consumer concerns, giving suggestions about how to use products to remedy skin issues caused by the prolonged wearing of face masks and highlighting antibacterial benefits. It’s an effective strategy that Chinese consumers have responded to.
Yanxuan, the marketplace owned by internet technology company NetEase, repurposed a number of outdoor advertising billboards it had purchased to advertise a promotion in Hangzhou to tell consumers to stay home and wait for spring. The ad reads: “Don’t look at this ad anymore. This was originally our promotional advertisement from 2.23-2.29, but it has been temporarily replaced. Although everything is on the right track, we still recommend that you don’t gather in public places and don’t stop for too long in front of this ad. Stay home, take care and wait for spring.”
According to Tulloch, the ad struck between engaging and moving while still being light-hearted. “It has been talked about a lot and quite positively,” says Tulloch. “Chinese consumers tend to be quite resilient, so they try to look at things in a light-hearted way most of the time.”