LONDON – In a bid to reinvigorate sales in the massive Chinese market, British luxury fashion brand Burberry this year used a strategy that has paid off handsomely: ramping up advertising on China's popular WeChat social media app.
Burberry saw a 4 percent rise in overall sales in the second quarter, more than expected, thanks largely to a resurgence in mainland China, where sales had slowed in recent years.
Analysts note the company boosted spending on the WeChat app, which counts almost a billion users in China and serves as a multipurpose app combining social media and shopping services.
The company said its advertising campaign on WeChat for the launch of a new bag — the DK88, which retails for almost $2,000 — saw its customer reach triple on the app. Sales growth in the country was in the mid-single digits, above the global growth rate.
Ken Odeluga, an analyst for City Index, says that focusing so heavily on WeChat is a strategic move that competitors in luxury goods have yet to make. Some companies prefer to focus on physical stores to preserve the aura of luxury. Also, some online shopping sites have been accused of selling fakes.
Burberry has prided itself on combining digital marketing with sales, such as by allowing shoppers to immediately buy online what they see on the catwalk during a fashion show.
The company said that the WeChat advertising was only part of its overall sales strategy, which included new physical stores.
"The company says they are seeing 'top customers returning' to their stores," said Steve Clayton, fund manager at HL Select UK Growth Shares. "In other words, the Chinese are spending again."
Investors welcomed the results, sending Burberry's share price up 2 percent to 16.11 pounds.
In Europe, Britain led the trend of steady sales growth while demand in the Americas declined, partially due to the brand's reduction of discounted products — an attempt to boost the image of Burberry as a luxury good.
"Burberry is attempting to recapture the magical quality which luxury purveyors strive for — which is brand value," said Odeluga.