Balenciaga Report: Marketing for Generation Z in China

BALENCIAGA report

Generation Z and dominating the Chinese market

2023

Putting Balenciaga on the MAP

Balenciaga is a luxury fashion house founded by Spanish designer Cristóbal Balenciaga in 1919. The brand is renowned for its innovative and bold designs that have significantly impacted the fashion industry through the years; placing the brand as A pioneer for the luxury market. Over time Balenciaga has been worn by many influential fashion figures such as Audrey Hepburn and Grace Kelly; continuing into the 21st century with the brand being publicly represented by iconic celebrities like Kim Kardashian and Lady Gaga. The brand is currently led by creative director Demna Gvasalia, who has brought a fresh and modern perspective to the brand; continuing to release striking new innovative designs that often have a more experimental edge than other luxury brands.

The Audience Who and

Audience and Why? ? ?

The NEXT Generation

The Z Generation

Generation Z, those born between 1997 and 2012, is the first generation to grow up with technology fully integrated into their daily lives. They are quickly becoming a larger portion of the consumer market; with a Bloomberg report from 2021 detailing that Generation Z has a combined 360 billion dollars in disposable income (Bloomberg, 2021). These figures will grow as time goes on and so therefore it is important for Balenciaga to understand their preferences and habits now in order to effectively market to them going forward. There exist four main trends in regards to generation Z consumers which need to be appealed to by Balenciaga in order to retain this audience. These trends are a focus on innovation, an insistence on convenience, an underlying desire for security and a tendency towards escapism (Wood, 2013). Each of these desires can be appealed to through an incorporation of innovative technology strategies from the brand, creating new and innovative experiences for the new generation. This report aims to explore the characteristics of Generation Z and the ways in which fashion companies can use technology to appeal to this demographic.

ZGen Z has significant potential to drive growth for Balenciaga within the luxury market. A report by Klarna found that Gen Z is catching up to millennials in terms of luxury purchases; with 60% of Gen Z purchases being on luxury items compared to the 63% of millennials (Klarna, 2022). Generation Z consumers have a strong preference for experiential luxury, with a focus on authenticity and uniqueness. They are more likely to prioritize the experience of luxury rather than the traditional status symbols associated with luxury brands that were previously valued by consumers. Balenciaga needs to create a unique experience surrounding their brand alongside incorporating exclusivity as an aspect of their brand. Generation Z have an increased desire to obtain items that are considered ‘rare’ or ‘limited edition and have a high desire for brands that commit to ethical and sustainable practices, following the newest mega-trend of positive consumerism (Mason et al., 2015). The consumer wants to feel secure, as if they are making a positive impact with their purchase to commit their loyalty to a brand. To do this, sustainable practices should be highlighted, integrating technology to make its supply chain as transparent as possible.

Generation Z’s main purchasing presence is through digital channels due to their more frequent engagement with them than other generations through mediums such as social media and online marketplaces. If Balenciaga taps into these channels, it will be well positioned to capture this lucrative demographic.

Balenciaga

To do this it must recognise the highly tech-savvy nature of the consumer and value their desire for convenience and speed within their shopping experience. Therefore, Balenciaga should consider implementing ideas which speed up the shopping process for this consumer and put efforts into adding innovations like same-day delivery which will help appease the generations desire for instant-gratification.

Trendwatch Gen Z

Sustainability

Generation Z are more worried about problems relating to our environment (Tiseo, 2019) such as global warming and social issues. These growing concerns tie in to their purchasing power, as 62% of generation Z said they prefer to buy from sustainable brands (FirstInsight, 2019). Brands must appease to this new mega-trend in which consumers want to shop ‘guilt-free’ (Mason et al., 2015).

Convenience

Convenience is a dominant desire for generation Z in their shopping choices (Thangavel et al., 2019). Therefore stores must account for streamlining the shopping process to account for this desire. Some ways a store can do this is through quick instant delivery and flexible return policies.

Made in China and sold there too

Generation Z consumers in China are part of a rapidly growing middle class with increasing disposable income; their annual luxury online penetration increased by 10% from 2019 to 2020 (Bain & Company 2020). They are currently spending more than any other country’s generation Z on luxury brands and so are a great initial market for Balenciaga to set up their new ideas within.

China’s generation Z is characterised by the high frequency of impulsive purchases. 47% of Chinese generation Z consumers interviewed said they ‘buy products on the go’ (Zhou et al., 2020) often living pay check to pay check or spending more than their allocated budget. This shows a lucrative market in which Balenciaga can take advantage of experiential shopping to create more impulsive purchases towards their brand through use of improving their in-store channels as well as strengthening the efficiency of online channels. On top of this, the use of limited-edition clothing or experiences will help to drive this impulsiveness due to the scarcity created.

Whilst generation Z are overall less loyal to brands (Bergh & Pallini, 2018), Chinese generation Z have a high level of loyalty once engaged by a brand. 47% of Chinese generation Z said they stick with a brand that they like and 43% said they’d choose a brand they know over one they haven’t heard of. (Zhou et al., 2020) This goes against the overall trend of niche brands rising in popularity amongst global generation Z and therefore places China as a great country for Balenciaga to implement their new strategies to build on this brand loyalty.

Generation Z consumers in China are highly influenced by social media and online reviews during their purchasing decision process. Chinese consumers have a 40% chance to use omnichannel shopping experiences in comparison to the 15-30% within other countries (Zhou et al., 2020). Therefore, Balenciaga need to focus on rebuilding and strengthening their social media presence after the recent events and should work to encourage reviews as a key part of any ideas implemented to appeal to the cautious nature of this demographic. Chinese consumers said they enjoyed browsing in store and purchasing online; therefore the in-store experience should be made to have a focus as an exciting event rather than the final purchase point. This would encourage Chinese generation Z to come for the event and consequently browse the clothes. Furthermore, the experience when going home after the event should seamlessly tie-in allowing the customer to quickly and easily purchase any items that they saw within the store

Market Current

Market Analysis Current Luxury

Luxury fashion brands are recognisable through their high quality products and matching high prices. Consumers are drawn to these brands through their exclusivity and crafts manship. The luxury fashion market had a value of over 200 billion pounds in 2021 (MaximizeMarketResearch, 2021). The market for luxury fashion is only expected to grow through time with an estimated growth to over 275 billion pounds by 2029 (MaximizeMarketResearch, 2021) and so therefore brands like Balenciaga have minimal worries for the future market.

Luxury

It is important to account for the effects of the pandemic on the luxury shopping experience. Post-pandemic consumers are less likely to visit physical retail stores, with 62% of consumers in a survey stating they visit luxury stores less as a result of Covid (Sangha, 2020). Therefore it is important to either incentivise visiting the store through unique experiences or strengthen the online channels. On top of this, the experience in store should be optimized; as customers have become much more likely to walk out of stores due to waiting in queues or for services post-pandemic (Sangha, 2020).

Online experience is an important avenue for luxury retailers to invest in. In recent years online retail has sky-rocketed in sales; seen with the online fashion retailers Shein doubling its valuation from 10 billion pounds to 21 billion pounds within a single year (Econsultancy, 2021). On top of that Chinas luxury online penetration increased from 13% to 23% in 2020 and continues to grow (Bain & Company, 2020). The main motivations for online luxury purchasing are independent browsing, personalised communication, products accessibility and conven- ience (Halwani, 2020). Therefore any luxury brands working within online channels need to appeal to the appropriate desires of consumers through methods like empowering the consum er within the browsing process and shortening search times.

Fashion

E-Commerce

Physical stores are still an essential touch-point for luxury brands. Large thought must go into the experience to create memorable moments and differentiate a brand from the large rows of luxury fashion stores filling the streets. Experiential story telling can create brand loyalty or introduce new customers to a brand. Whilst online retail has become a large play- er, a store experience is unbeaten. Gucci has proven that a brand can still leverage their retail channels. It grew sales in north America by 24% in 2021 (Giorgini, 2021) by introducing an in- store experience that combined art, mu sic and cinema to create a truly unique -------------------------- experience.

Gucci

Gucci is a iconic luxury fashion brand originating in Italy. Like Balenciaga it offers high quality clothing products for higher prices. Gucci differs from Balenciaga in its slightly higher price range and features less experimental clothing designs most of the time Gucci releases a constant flow of new items into the Chinese market regularly and focus on their multi channel marketing. It has innovated through the use of its WeChat mini programs to bring new technological experiences to China using apps that are already recognisable to the country.

On top of this, Gucci made Xiao Zhan their brand ambassador. He is well known in China due to his large acting and singing career. This brought new attention to Gucci and may have gained brand loyalty from fans of the singer.

Gucci work hard to appeal to generation Z. Through hiring Harry Styles as a brand ambassador and running a ‘meme campaign’ in 2017 they effectively captured the attention of the younger generation. A study by Ypulse found Gucci as the number one luxury brand that young people want to own (LuxeDigital, 2023).

Gucci own over 40 retail stores in China and were ranked their 4th most popular luxury brand overall in 2021 (DaxueConsulting, 2021).

Chanel --

Chanel was founded in Paris by Coco Chanel in 1913. It houses many recognisable iconic designs using high quality material The main difference between chanel and balenciaga is their material usage and designs. They both share similar price ranges and a strong heritage in the fashion world.

Chanel has a huge presence in China, being the most active brand on popular Chinese messaging app WeChat (Douglass, 2023) and being ranked as the number one most popular luxury brand in 2021 (Hall, 2021).

Chanel uses tactics like reducing their prices within the Chinese market and hosting China-Exclusive events such as the exposition held in the National Art Museum of China of Beijing in 2011. These help bring brand loyalty from chinese consumers and retain their number one position in the country.

Chanel work to drive sales within Generation Z, being their most searched brand in 2021 (Fashionphile, 2021). It has created buzz for the brand amongst the younger generation by appealing to their love for vintage, releasing 90’s themed sillhouettes.

BALENCIAGA Where they are

Current efforts

Balenciaga has already made considerable effort to appeal to the Generation Z crowd through multiple collaborations and as well as its generally bold and unique designs. Its iconic design for the ‘Triple S’ sneakers featuring an oversized and chunky silhouette which has become popular amongst younger consumers due to the unique and avant-garde aesthetic. Recently it has collaborated with popular game service ‘Fortnite’ to feature its designs within the game world which has worked to raise brand awareness among the new generation. The designs featured in the game were released alongside a real life line; leading to many young consumers wanting to buy clothes so they could match their in-game avatars. Another recent collaboration involved working with popular TV cartoon ‘Simpsons’ to create a collaborative short film that premiered in 2021 during Paris fashion week. Through these methods Balenciaga has inserted itself into pop culture allowing for more people to be aware of who it is and what the brand is about even if they did not already have an interest in the fashion industry. This will help bring in and keep generations to come; allowing the brand to withstand the test of time.

Recent Controversy

It is not unusual for a company to face controversy within the widespread world of social media word-of-mouth.

Within 2022 Balenciaga faced a large controversy surrounding one of its photo shoots. The controversy spouted from its use of child-models within photos that contained ‘bondage-bears’ of which the public agreed was an inappropriate juxtaposition. Balenciaga swifty apologised on their social media channels and launched a lawsuit aimed at the production company behind the photo shoot. This controversy has left Balenciaga in a dark light within public image and it needs to aim to regain public trust. Generation Z care less about brand history and more about the brands morals, with a new Zeitgeist shifting young consumers focus onto how ethical a brands supply chains are and what their environmental impact is like. They are the least loyal consumer base and choose carefully in the brands they commit too (Bergh & Pallini, 2018). This makes it harder for luxury brands to reach the same market as smaller independent brands which have easier access to creating a clean supply chain due to their ‘tabula rosa’ nature. Therefore it is more important than ever to recover from this recent blunder. Balenciaga should also be careful with any new products or innovations launched following this controversy, making sure not to remind the public of what has happened in any way.

Suggestions

Innovating

Suggestions Innovating for Balenciaga

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Generation Z love technology and digital experiences. 92% of Generation Z said they would want to use technology such as AR within their shopping experience (Snap, 2022). Ai is another avenue of technology that could be used to improve the shopping experience for this generation and it has currently not been tapped into by any Luxury brands. Ai is currently improving at a great rate with the introduction of Ai such as Dalle-2 which generates art based on user prompts. Through utilization of these new Ai’s within Balenciagas shopping systems; it can appeal to Generation Z’s love for technology whilst providing a more individual and engaging shopping experience for each consumer.

Ai Driven Clothing Ai Driven Ai Driven The Future

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The Ai can be utilized to analyse a customers past purchases and personalised recommendations to suggest items more suited for only analyse purchases from Balenciaga; but from all clothing mean that the consumer would be given the perfect outfit that pages all day long. Not only would it ease the purchase process pany through allowing customers to be recommended an item they site. To improve the Ai even further it can be given access to Balenciaga’s trends. This would improve the Ais ability to recommend relevant desires.

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Introducing an Ai clothing suggestion perfectly ties into the ideals found amongst Generation Z consumers. Generation Z have a desire to save time and effort due to their busy schedules (Thangavel et al., 2022). The desire for convenience will be fulfilled using this Ai by drastically cutting down on any browsing time needed to find items that fit all their styles and preferences. It could also be used to show the consumer items that fit there sustainable preferences; contributing to the mega-trend of positive consumerism (Mason et al., 2015).

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Clothing Clothing Driven Clothing

Future Of Choice

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and preferences which would allow it to provide heavily for a customer. With customers permission it could not sites the consumer has previously used. This would fits all their loves and wants, without having to browse process for consumers, but it would boost sales for the comthey might not have found through browsing the webBalenciaga’s past purchase data to analyse all past sale relevant and unique material that will match the customers

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To further appeal to the generation systems; the Ai should be anthropomorphic. voice much like Cortana or Siri standable to the consumer, fulfilling (Wan & Chen, 2018). The Ai can behind Balenciaga and consequently ly as consumers form a psychological reira, 2021). Within Balenciaga of the Ai to integrate the physical to the Ai system. The Ai should person model; in which the person dations as to what they should site to create an omnichannel miss out on this new experience come in-store to use and experience on social media. quickly spread over consumers to

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generation Z audience and to add a tactile element to the anthropomorphic. By giving the Ai a personality and a it would become much more relatable and underfulfilling a human desire for comfort and self-identity can be given a large personality that fits the ideals consequently come to represent the brands image positivepsychological bond with the Ai (Hernandez-Ortega & Ferstores in China they can insert physical versions physical and digital channels whilst adding tactility should be given a fun and recognisable design for its in person can talk to the ai in store to ask for recommenshould buy. This model would then be used on the web omnichannel approach. This means that no customer will experience but will still encourage audiences to take pictures with the robot, posting their media. The news of this new Ai would then social media, bringing in more Chinese to make use of this new feature.

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One idea Balenciaga could use to innovate is advertising through 3D billboards. 71% of respondents in a survey cited that digital billboards stand out more than online advertising (Mediasources, 2021) and it can be assumed that there is a higher percentage for 3D billboards.. These are a new trend that have been scarcely used but has gained large attention from generation Z due to social media posts showing the billboards on platforms such as TikTok. These billboards use technology such as holograms and projection mapping to create a fully three-di mensional visual experience which captures the attention of passers-by and leaves a lasting impression. These billboards use videos that are animated in such a way to often show something moving within these 3D space such as a creature jumping towards the passer-by to advertise ‘Resident Evil’. Balenciaga could combine this with the image of its new iconic Ai to present their Ai moving around and waving at passers-by on the Chinese high street. By creating these ads Balenciaga would stand out in the crowded advertising landscape of Chinas high streets and enforce a social media trend. In addition to this, the adverts can involve interactive experiences such as games or quizzes in which people on the street can interact with the billboard. One way this could be done is to show a live poll on the screen, which people can vote on through scanning the sign with the Balenciaga app on their phone. This means many new users will end up downloading the app to take part in these questions or games and the ads will appeal to generation Z’s desire for interactive, engaging experiences.

Whilst implementing these ideas alone would bring in many more generation Z consumers who would help spread the news through word of mouth; Balenciaga could further bring in the Chinese market using advertising. Rather than solely relying on traditional advertisement campaigns; Balenciaga should aim to also innovate how they make adverts to further differentiate their brand outside of the store.

Another innovative method Balenciaga should use for advertisement is through creating completely personalised ads for users. Utilizing the new Ai; Balenciaga can make sure the perfect product is shown for each user in each advert. Users will feel more invested in the product due to this personalised factor and it will also lead to them seeing products in ads that they would actually buy more often. On top of this the ads could utilize ai speech programs using customer data and locations to create an ad that resonates with the user; addressing them by name and talking to them so

To Summarise What

Summarise

What have we learned BIBLE OF BALENCIAGA

Concluding...

Balenciaga has the potential for massive growth by appeasing to the Chinese generation the business strategy. Balenciaga need to innovate from their recent controversial Through use of an anthropomorphic Ai they can make consumers see Balenciaga racy of the overall shopping experience in each channel. Balenciaga can overtake through creating this seamless, personalised experience. It can work to appease Word will spread of the new innovation and people will flock to the stores, online lizing new technological advancements in advertising will show Balenciagas commitment Ai.

generation Z market through an incorporation of Ai technology into controversial photo shoot and be brought into a positive public perception. as a friendly brand again whilst innovating the speed and accuovertake the competitors that are already rooted in the Chinese market appeal to the ever-evolving generation Z ideals of convenience. online and offline, to try out the new technology. Alongside this, uti commitment to innovation and further spread the word of their new

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