Bulgari CEO Jean-Christophe Babin On China Expansion, E-Commerce, Innovation

“If we absorb our digital learning from China in our other markets, we will be better competitors in the rest of the world,” Bulgari CEO Jean-Christophe Babin said in an interview in Chengdu on April 30.

The importance of Chinese consumers to the luxury industry was underscored anew in a report by McKinsey last month that put that group on track to account for 40% of the market by 2025. Some 65% of new purchases by 2025 will come from Chinese spenders, the consultancy said.

No segment of the Chinese market is more important than the millennial and Gen Z shoppers.  Owing to China’s one-child policy, many have no siblings and benefit from dotting, financial and other support from their parents and two sets of grandparents.  Their tastes are global and lives are fully interwoven with the Internet.

That landscape presents ample room for new business and innovation for Bulgari, a leading jewelry and watch brand under global luxury leader LVMH.  To learn more, I spoke with Bulgari’s Rome-headquartered CEO Jean-Christophe Babin when he was in the central China city of Chengdu last week. Babin, 60, one of the world’s top luxury jewelry industry leaders, previously worked as CEO at TAG Heuer before joining Bulgari in 2013. Edited excerpts follow.  (See related story about LVMH in China here.)

Q. How often do you visit China?

A. Generally speaking, at least four or five times a year. It’s a key market. We’re already a strong brand in China, but it will continue to be one of the major engines of luxury in the five years to come, given the demographics, the economics, and the consumer’s appetite to discover the world through luxury brands, experience or tourism.

Q.  Is China your biggest market?

A. Historically, Japan was our number one market, like many luxury brands many years ago. We arrived in China not so long ago — about 15 years ago, so we have been quite recent by some standards in China. This year mainland China should become our number one market — even bigger than Hong Kong and Macau. If I aggregate all three, it’s already by far the number one market.

Q. What have been some of the biggest changes here since 2013 when you joined Bulgari?

A. We knew that there would be a lot of affluent, highly educated young people in the market who would become wealthy spenders. It’s a unique case in the world that’s inherited from the one-child policy. They are supported by six adults. We also knew they were connected to the outside world because of the digital Internet. We bet on that. We were right.

We have built a comprehensive network of stores during the last 15 years in China. We have started a very proactive e-commerce business last year with our Bulgari.cn and with WeChat. We (mostly) don’t work with platforms. We want to control distribution on digital in the same way we control it in the brick and mortar.

Our vision for the Chinese region right now has a mix of boutiques. Today, it’s 30; maybe one day it will be 40, but not 100. Probably, we’d like to open in three-four-five new cities in the years to come, but not 15 cities. It will remain around 30-40, and the rest will come from the growing Internet and e-commerce penetration which will allow citizens living in certain cities to access us around 24 hours a day, seven days a week, and have delivery very quickly because logistics in China is very quick and efficient.

Q. How do you drive traffic to your website, if you’re not working with the big e-commerce platforms?

A. We’re investing a lot in marketing in China, and a lot of the investment is by segment. When you search jewelry on a search engine, the Bulgari name will come first. And this drives you to the site. With those platforms, you benefit in the same way as mall traffic. The platform is like a mall. It’s a virtual mall, but it’s a mall.  A web site is more like a standalone boutique in the high street. But like for a standalone boutique in a high street, you have ways to promote it.

Therefore, we have very active campaigns on search engines. When you look for jewelry, you often find Bulgari on the front page. We are buying many key words so that we appear in the first page immediately. It’s a battle between the brands and all about marketing investment, but we believe that this is the right way.

I’m not excluding working with the likes of Tmall or JD.com. We already worked with them on fragrances. Bulgari is, on the one hand, jewelry, watches and accessories which are very high end, and then we also have perfumes which target more millennials and have a much broader distribution. On perfumes, we have been working with Tmall and envisioning (more of that) because this is typically where the younger generation looks for perfume. When it comes to jewelry, we know by experience that people usually like to browse on the official brand website to clarify their ideas, and then to visit a store.

In our system, you can book for an appointment in a store to try a certain kind of jewelry. And then you go to the site, and maybe order from the sight. And then, maybe pick it up in the store. Jewelry isn’t a commodity like some cosmetics or perfume. It’s more of an intimate art piece which you have on your neck or on your finger. It’s a timeless precious metal, so people often feel the need to try before buying. It’s more omni-channel than e-commerce or brick and mortar purely. It’s really intertwining the two.

In China, we need to educate our staff in the boutiques that they are becoming omnichannel managers and not boutique managers. They are offering the client a seamless experience from Internet platforms or WeChat to the brick and mortar (location), so that the client gets a superior experience through the different touch points.

Q. In this kind of market in China, how much room is there for innovation and new thinking? And how do you encourage that?

A. There is a lot of room for innovation. In the area of communications, this is the No. 1 digital country worldwide, and its importance cuts across generations. It’s not only millennials in China that use mobile communications to do everything — it’s everyone.  WeChat in China is a good example of an application that is much more advanced than what’s in the Western world. If we absorb our digital learning from China in our other markets, we will be better competitors in the rest of the world. Communication is important because we have a very specific population.

The “one kid, many parents” pyramid that I mentioned is the opposite of Europe. These clients were born 25-30 years ago with the Internet and an opening to the world which their parents could not even imagine. They are very open-minded but they are not shaped by old luxury. They are very much into the mix-and-match culture. They are also very casual and appreciate authentic, high quality craftsmanship.  On the other hand, they are not really loyal to a brand and surely not mono-brand. Because they buy Chanel shirts, they won’t necessarily buy the brand’s trousers. They could combine with Levi’s jeans. They are pretty informal, relaxed clients. And so in the way we introduce ourselves, we have to be — as jewelers even high jewelers — much cooler. This fits well with Bulgari because Bulgari is Roman. We have this kind of sense of warmth and hospitality that I think is a bit more humorous then the French, so we connect quite well culturally with Chinese.

Our stores also have to become more interactive, and we have to provide new experiences. Look for instance at the exhibition we did here at the Chengdu Museum.  Ten years ago in the U.S., people would come in with a black tie and beautiful jewels. They would be equally, equally interested in the art and jewelry. Here, everyone is expecting an experience not only to discover jewelry. So we gave a very nice concert, mixing Chinese ballet and classical violin. And (yet) it was when you enter the main room, you are likely to feel you’re entering a disco lounge at the museum.  The authorities were a bit skeptical, because they’re used to a more formal approach to art and music. But this is exactly what the younger generation expects — art being an experience, not only a kind of silent respect. And we tried to offer that. The exhibition is very interactive and very surprising in the way you see few jewels.

Q. How are the improved atmospherics between Italy and China affecting your business?

A. President Xi Jinping is very keen to work closely with Italy. Generally speaking, when we have a project in China, we immediately get support. In Chengdu, we received very strong support from the local authorities. Since I took over the company six years ago. China has been a country where we have been benefiting constantly from very enthusiastic, positive support.

–Follow me @rflannerychina