I saw the new movie Crazy Rich Asians last night. It was fun, escapist entertainment. However, the scenes in the shopping malls had me wonder, is this how the Crazy Rich Asians shop?

Singapore, Hong Kong, and Mainland China are well known for luxurious high-end malls filled with designer shops – which seem never to have anyone in them. Walk past these stores. You will see young, impeccably dressed, saleswomen milling around the store, straightening some item on display, or just looking through the front window. Where are the customers?

I have heard many reasons for this phenomenon. Some say that the malls themselves discount the rents to the name brands to make the mall more luxurious and attractive to potential stores. Others say that the stores are marketing activities to promote the store’s brand names to Chinese luxury consumers. A third theory is that the real shopping takes place by appointment in a private room behind the store or at the client’s hotel room. (The movie illustrated the third theory in a scene where Astrid was shopping for jewelry.)

40% of luxury purchases made by Chinese are made outside of China

The reality is that Crazy Rich Asians shop overseas and on the Internet. This is known as cross-border retail shopping.  A recent study shows that 40% of luxury purchases made by Chinese are made outside of China. Wealthy Mainland Chinese make an average of 5.9 international shopping trips per year. Hong Kong, South Korea, and Japan are the top destinations. Instead of selling to local customers, a recent survey by ContactLabs showed that 90% of all luxury goods sales in Hong Kong and Macau come from foreigners who engage in “touristic” shopping.

Internet shopping is also on the rise for the Chinese. Haito (海淘), buying imported products directly from cross-border vendors over the web, has grown at the breakneck rate of 74.8 percent annually since 2011 and exceeded $657 billion in 2014.

Why don’t Chinese purchase luxury products at home? Chinese consumers engage in cross-border shopping to get higher quality products (67%), to avoid counterfeits (45%), and to take advantage of lower prices (35%), according to Frost and Sullivan.

Fakes are so prevalent in southeast Asia that cross-border products have a higher chance of being the real thing.

Those of us who live in the West may worry that when we engage in cross-border shopping that we will get knock-offs. But, fakes are so prevalent in southeast Asia that imported products have a higher chance of being the real thing.

Hefty import tariffs and consumption taxes also raise prices for luxury goods in Mainland China. In 2016, the price for the Longchamps “Pliage” bag was France €76. In Beijing, it was 1100RMB (€150), double the price. (China is in the process of lowering tariffs for many products in 2018.)

Luxury brands are struggling to cater to the cross-border luxury customer. Her customer experience expectations are very high. McKinsey & Company states that the Chinese luxury customer expects:

  • “Being individually recognized by the store staff in every store of their favorite brands they walk in(to).”
  • “Experiencing a similar level of familiarity with sales staff as if they were in their preferred stores, like color preferences…”

Luxury brands focus on customer experience cross-border shopping

In response, luxury brands focus on customer experience cross-border shopping. For example, Burberry, which is well-known as an early adopter in customer experience, has reportedly hired 150 Mandarin speaking sales associates across popular travel destinations in Southeast Asia just for the Chinese traveler. (Chinese customers account for a third of the worldwide cross-border spending on luxury goods, and that percentage is growing rapidly. By 2025, McKinsey & Company forecasts that Chinese luxury consumers will account for 44% of the global market.)

However, placing Mandarin speakers in a store that does not solve the problem of recognizing your best customers in every store around the world. To do that, the sales associate needs to be able to retrieve all the relevant information about the shopper.

Data silos” are significant problems that impede the sharing of customer information between countries. They are databases that occurred naturally when a geographic division automated their operations before a global plan was created. These well-established and independently designed databases are difficult to link together.

The key for luxury retailers is to create a “system of reference”

The key for luxury retailers is to create a “system of reference” that enables all of the data silos to submit (and synchronize) information that can be used to get a complete 360 customer view from any store.

The problem of creating a system of reference is not just a technical or connectivity one. The issue is that customer data cannot be matched easily. For example, every customer record should contain the name of the customer. But, what happens if she has different names in different databases?

For example, in her home country, the name of a Chinese person is likely recorded in Chinese characters. However, outside of these markets, Chinese characters may not be supported at all. In those cases, a Romanized name is often used. However, Chinese names entered into Western systems are not always entered in the same way by data entry personnel.

Chinese surnames Wang, Huang, and Wong all refer to the same surname

For example, the Chinese surnames Wang, Huang, and Wong all refer to the same surname. In Singapore and Hong Kong, the Romanized name might be the surnames given in their dialects, as recorded by British officials at the time. Some Chinese even change their names to a Westernized name or initials to make it easy to transact business overseas. This means that a name in the database might not be at all related to the Chinese name at all.

At Global-Z International, my employer, we use a technique known as “cascading” to identify customers. Cascading uses information across multiple records to identify customers, even when data conflicts or is missing. (How to match records in data silos.)

Cascading helps us to identify those Crazy Rich Asians and assemble the information needed for a complete 360 view of each customer.

NOTE: My employer, Global-Z International has been a significant part of building the customer to brand relationship strategy for global luxury brands for over 25 years and in the People’s Republic of China since 2003.

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