L2 Digital IQ – China 2012 study ranks the 100 prestige brands for the digital competence in China.

1. Excerpt from the 2012 Digital IQ Index ®
: China
To access the full report, contact membership@L2ThinkTank.om
China
December 18, 2012
SCOTT GALLOWAY
NYU Stern
doug guthrie
The George Washington
School of Business
Distribution of this report violates copyright, trademark and intellectual property laws. © L2 2012 L2ThinkTank.com

2. Co-hosted by:
NYC
FOCUS 2013 JANUARY 24, 2013 | NYU STERN
This half-day, three module clinic hosted at NYU Stern will look at opportunities and trends that brands will face in 2013.
Topics include China, the Changing Landscape of Retail, and The Enterprise Effect. Industry experts will discuss new
opportunities for prestige brands in China, brand case studies will highlight effective strategies of dealing with trends
in retail and L2 will present data on how the Enterprise Effect can be a friend and a foe to prestige brands.
Tentative Agenda
MODULE 1: China MODULE 2: Changing Landscape of Retail MODULE 3: The Enterprise Effect
(featuring) (featuring) (featuring)
Scott Galloway SapientNitro presents Connected Experience: Maureen Mullen
Founder A Glimpse into the Highly Personalized Director of Research & Advisory
L2 Shopping Experience L2
Doug Guthrie Alisa Gould-Simon Sonia Marciano
Dean Co-Founder & VP of Creative Partnerships Clinical Full Professor of
The George Washington School of Business Pose.com Management and Organizations
NYU Stern
Vimla Gupta & Andra Mielnicki
Vice President of Global Marketing
Executive Director of Global Communications
BeautyBank

3. Inquire about your brand’s ranking: Info@L2ThinkTank.com
Excerpt from the 2012 Digital IQ Index ®
: China
To access the full report, contact membership@L2ThinkTank.om
Watch the
Doubt
China Video
Click to Play
For the first time in a decade, China is a question mark for the prestige industry.
A
midst slowing growth and political uncertainty, luxury executives Quarterly Chinese Luxury Retail Sales Growth
are questioning whether the deceleration is temporary or the YoY Fixed Exchange Rate
Q2 2011–Q3 2012
beginning of the end. We continue to believe China offers more
34%
upside, often linked to digital, than any other luxury market. However, there
is also more complexity and barriers to realizing return: Q3
2011
• While Mainland China’s organic luxury sales growth softened to single digits,1
%
47
Q2
26
Chinese tourist spend abroad increased 58 percent in Q3 2012,2 suggesting
1
201
%
Q2411
Source: Barclays Equity Research
consumer demand remains robust.
0
• In the next three years, Chinese e-commerce sales are projected to triple.
However, two thirds of online sales will remain on C2C channels such as
201
Q3
2
Taobao. Poor fulfillment infrastructure, security concerns, and nascent payment
Q112
6 %
20
%
systems pose challenges to traditional direct e-commerce businesses. 2012
21
• Pricing arbitrage continues to threaten fledging e-commerce businesses. Q2
16%
U.S. and European retailers ranging from Neiman Marcus to House of Fraser
ship to China and advertise products at a fraction of the domestic price.
Chinese E-Commerce Transaction Volume
• Sixty-one percent of Chinese high-net-worth individuals indicate the Internet Q1 2010–Q3 2012 45.6
is a primary source for brand information, more than any other channel.3 Total Online Shopping (Billion USD)
43.1
However, while digital, social media, and video platforms may be the best B2C Online Shopping (Billion USD) 36.9 36.6
31.7
places to reach Chinese consumers, the landscape is fragmented, with 28.4
25.9 26.0
players emerging and declining in importance each year.
18.3
16.3 16.23
13.6 14.35
10.75 9.98
Source: iResearch
7.26
4.08 5.02 5.91
1.49 1.93 2.62
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012
YoY Percent Growth E-Commerce
81% 80% 53% 88% 92% 75% 73% 43% 41% 52% 44%
YoY Percent Growth B2C E-Commerce
1. “Investor Question Series: Will political change in China be a catalyst for growth?,” Barclays, November 16, 2012. 181% 209% 233% 199% 237% 206% 178% 164% 99% 143% 124%
2. Global Blue Q3 data.
3. HuRun Report 2012.
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4. Inquire about your brand’s ranking: Info@L2ThinkTank.com
Excerpt from the 2012 Digital IQ Index ®
: China
To access the full report, contact membership@L2ThinkTank.om
China: Average Time Spent vs. Percentage of Ad Spend
Visible Hand 2011
2.8
Attempting to ease public concern regarding the widening wealth gap, the
2.5
Chinese government continues to place restrictions on traditional luxury
advertising. Just as errant attempts to legislate tobacco companies from 40% % of Total Ad Spend
Average Time Spent (Hours)
television in the U.S. resulted in a surge of innovation (e.g., CRM, point of purchase
investment, better packaging), the visible hand of the Chinese government has
inspired a wave of innovation in digital marketing via tighter regulation of traditional
media. Chinese digital marketing spend is set to double over the next three years.4 19%
18%
The increased investment and online innovation will inspire consumer exploration and 0.7
purchase that may supplant traditional methods, transforming the Chinese digital 9%
0.3
ecosystem into the global role model, versus the fast follower.
The Same, but Different
Many viewed digital as an agent of integration into the global community. TV Internet Newspapers Magazines
However, while economic integration marches on, China’s digital landscape
Percentage of High Net Worth Individuals Who Claim as Source of Product Info
is becoming more distinct. The “Great Firewall of China” has strengthened as
51% 61% 43% 50%
government control over Internet and mobile content tightens, fostering a “Wild
Source: Ipsos via Zenith Media and CMMS Summer 2011.
East” mentality resulting in local entrepreneurship and innovation. In this year’s
Index we saw the emergence of several forces: So.com, in a few short months,
Digital IQ = Shareholder Value
has captured greater market share than Google, Pinterest-like curation platforms
Our thesis is that the success of prestige brands in China is inextricably
Meilishuo and Mogujie are gaining traction, and Tencent-owned WeChat, a mobile
linked to digital competence. This study attempts to quantify the digital
messaging service, has skyrocketed to 200 million users.
performance of 100 iconic brands in China. Our aim is to provide a robust tool to
Underinvestment? diagnose digital strengths and weaknesses and help managers achieve greater
Despite opportunity, digital investment remains modest. Brands’ Chinese sites return on incremental investment.
register average load times of 24.1 seconds, four times their global peers. One in five Like the medium we are assessing, our methodology is dynamic, and we hope
prestige brands host their site in China and just over half display prices in RMB. While you reach out to us with comments that improve our approach, investigation, and
Sina Weibo adoption by prestige brands has reached 91 percent, and the industry findings. You can reach us at scott@stern.nyu.edu and guthrie@gwu.edu.
has registered double-digit increases in mobile, social, and search engine marketing
adoption, just four brands have launched direct e-commerce since 2011. Third party
players, including Western retailers, are filling the void and offering brands a trusted
platform. However, in exchange, brands sacrifice control and a direct relationship with
Scott Galloway Doug guthrie
the end consumer.
Professor of Marketing, NYU Stern Dean, The George Washington
Founder, L2 University School of Business
Founder, Guthrie & Associates
4. “Q2 2012 Global Digital Advertising Update,” Adobe, July 2012.
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5. Inquire about your brand’s ranking: Info@L2ThinkTank.com
Excerpt from the 2012 Digital IQ Index ®
: China
To access the full report, contact membership@L2ThinkTank.om
ABOUT THE RANKING
The Methodology
Mobile Site Android Applications
20% 30%
• Compatibility of • Availability in China
China Site • Popularity
• Functionality • Functionality
Mobile
• Transaction
Capability
Site
iOS Applications Localization of site features
• Availability in China • Technology: Load Time, Hosting Location
Compatibility, optimization, and
• Popularity • Customer Service & Store Locator
marketing on smartphones and tablets
• Functionality • Product Page
• E-Commerce & Checkout
• Integration of Chinese Social Media
• Innovation: Product Customization, BBS/Microsites,
30%
Category-Specific Functionality
Brand presence, community size,
content and engagement
SNS
• Sina Weibo • Page Size & Growth
Social Media g
Search BBS, Social, and Baidu Buzz
0%
• Post Frequency
tin
• Tencent Weibo
• Traffic • Mentions
• Reposts & Comments
e
rk
• Kaixin
2
• Web Authority • Average Daily Searches
• Renren • Tabs & Applications a
• Douban • Engagement Rate
ta lM nd
• SEO & SEM: Email
igi
a Baidu, So.com, Google
ia, • Frequency
Video Sites
D ed Advertising & Innovation • Language
• Views lm ts
• Youku
ita effor
ig g • Online & Offline Synergies • Content
• Tudou • Number of Uploads
,d n
• View & Subscriber Growth rch rketi • Cross Platform Initiatives • Chinese Social Media
S ea a • Emerging Social Platform Integration
m
ail
• Viral Videos
Adoption (WeChat, Meilishuo
em & Mogujie, iQiyi, Jiepang)
Note: Brand’s were scored based on effectivenees on platforms they participate on
Digital IQ Classes
Genius 140+ Gifted 110–139 Average 90–109 Challenged 70–89 Feeble < 70
Digital competence is a point of competitive differentiation. Brands are experimenting and innovating Digital presence is siloed Digital efforts lack. Investment does not
Successful multi-channel, digital campaigns; functional across their site, mobile, traditional and by dimension. match opportunity.
sites that cater to local needs; strong social presence emerging social media platforms.
and integration across platforms.
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6. GENIUS
Estée Lauder
Audi
Excerpt from the 2012 Digital IQ Index ®
: China
Chow Tai Fook
Lancôme
GIFTED
To access the full report, contact membership@L2ThinkTank.om Volvo
BMW
Buick
Land Rover
Benefit Cosmetics
Burberry
Clarins
Shiseido
Louis Vuitton
DIGITAL IQ RANKING
Key Findings
Sephora
Chanel
Jaguar
Kiehl’s
Shangri-La
Biotherm
Coach
SK-II
Cartier
AVERAGE
RANK DIGITAL IQ RANK BRAND DIGITAL IQ RANK BRAND DIGITAL IQ Herborist
Mercedes-Benz
genius
GIFTED
GIFTED
Swarovski
1 Cadillac
Clinique
Ferrari
5 138 11 120
Tiffany & Co.
Bobbi Brown
Gucci
156 Shiseido
Origins
Porsche
Zhejiang Geely Holding Group Jaeger-LeCoultre
Marriott
Infiniti
Armani
Hilton
InterContinental
The Estée Lauder Companies
6 136 13 118
CHALLENGED
Dior
Van Cleef & Arpels
Raymond Weil
2 BMW Group LVMH
Westin
M.A.C Cosmetics
St. Regis
L’Occitane en Provence
Guerlain
Dolce & Gabbana
152 IWC Schaffhausen
6 13
Maserati
136 118 Yue-Sai
Four Seasons
Hugo Boss
Mandarin Oriental
General Motors LVMH Park Hyatt
The Ritz-Carlton
FEEBLE
Volkswagen Group Aston Martin
Wyndham
Sofitel Luxury Hotels
3 8 15
Alfred Dunhill
133 117 Bulgari
Omega
Rolex
Longines
Tata Motors Chanel Valentino
Lexus
Kempinski
151 Fairmont
Piaget
The Peninsula Hotels
Bottega Veneta
9 129 16 116 Montblanc
TAG Heuer
Bally
Hublot
LVMH Tata Motors Acura
Calvin Klein
Chow Tai Fook Enterprises Pandora
Elizabeth Arden
Lamborghini
Ports 1961
4 10 124 17 115
Balenciaga
Waldorf Astoria
Ermenegildo Zegna
Chloé
Givenchy
Conrad
Burberry Group L’Oréal Salvatore Ferragamo
De Beers
142 Diane von Furstenberg
Hermés
Vacheron Constantin
Fendi
11 18
Versace
120 113 Shanghai Tang
Prada
genius
GIFTED
GIFTED
Harry Winston
Baccarat
L’Oréal Clarins Group Shangri-La International Hotel Management Patek Philippe
Ralph Lauren
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7. GENIUS
Estée Lauder
Audi
Excerpt from the 2012 Digital IQ Index ®
: China
Chow Tai Fook
Lancôme
GIFTED
To access the full report, contact membership@L2ThinkTank.om Volvo
BMW
Buick
Land Rover
Benefit Cosmetics
Burberry
Clarins
Shiseido
Louis Vuitton
DIGITAL IQ RANKING
Key Findings
Sephora
Chanel
Jaguar
Kiehl’s
Shangri-La
Biotherm
Coach
SK-II
Cartier
AVERAGE
RANK BRAND DIGITAL IQ RANK BRAND DIGITAL IQ RANK BRAND DIGITAL IQ Herborist
Mercedes-Benz
gifted
GIFTED
GIFTED
GIFTED
Swarovski
Cadillac
Clinique
Ferrari
19 112 26 105 33 93 Tiffany & Co.
Bobbi Brown
Gucci
Origins
Porsche
L’Oréal General Motors Volkswagen Group Jaeger-LeCoultre
Marriott
Infiniti
Armani
Hilton
InterContinental
20 111 27 101 34 92 CHALLENGED
Dior
Van Cleef & Arpels
Raymond Weil
Westin
Coach Estée Lauder Companies Compagnie Financière Richemont M.A.C Cosmetics
St. Regis
L’Occitane en Provence
Guerlain
Dolce & Gabbana
IWC Schaffhausen
20 28 34
Maserati
111 98 92 Yue-Sai
Four Seasons
Hugo Boss
Mandarin Oriental
Procter & Gamble Fiat Marriott International Park Hyatt
The Ritz-Carlton
FEEBLE
Aston Martin
Wyndham
Sofitel Luxury Hotels
22 110 28 98 36 91
Alfred Dunhill
Bulgari
Omega
GIFTED
GIFTED
Rolex
Longines
Compagnie Financière Richemont Tiffany & Co. Nissan Motor Company Valentino
Lexus
Kempinski
Fairmont
Piaget
The Peninsula Hotels
37
Bottega Veneta
23 107 30 97 90 Montblanc
TAG Heuer
Bally
Hublot
Shanghai Jahwa Group Estée Lauder Companies Acura
Giorgio Armani Calvin Klein
Pandora
Elizabeth Arden
Lamborghini
Ports 1961
Balenciaga
24 106 31 96 37 90 Waldorf Astoria
Ermenegildo Zegna
Chloé
Givenchy
Conrad
Daimler Gucci Group (PPR) Hilton Worldwide Salvatore Ferragamo
De Beers
Diane von Furstenberg
Hermés
Vacheron Constantin
Fendi
24 106 32 94 37 90
Versace
Shanghai Tang
Prada
gifted
GIFTED
GIFTED
Harry Winston
Baccarat
Swarovski Estée Lauder Companies InterContinental Hotels Group Patek Philippe
Ralph Lauren
© L2 2012 L2ThinkTank.com. REPRODUCTIONS AND DISTRIBUTION PROHIBITED 7