Prestige brands underinvesting in digital in South Korea and Japan

The reports, titled Digital IQ Index: Korea 2013 and Digital IQ Index: Japan 2013, studied the digital performance of 95 global and five local prestige bands in South Korea and Japan, based on evaluations of their websites (30 per cent), social media (25 per cent), mobile (25 per cent) and digital marketing (20 per cent).

In South Korea, global brands face tough competition from local players, and, as a result, account for only 15 per cent of the country’s beauty market, according to Korea Pharmaceutical Traders Association (KTPA) and Korea Cosmetics Association in August 2012.

However, global brands’ online sales have grown at least 11 per cent annually in South Korea since 2006, accounting for 13 per cent of retail sales in 2012, more than double the share in the US, according to the statistics from Euromonitor International this year.

The L2 reports show while 60 per cent of global prestige brands host local sites in South Korea, only 16 per cent offer e-commerce and only 8 per cent, including all beauty brands, link to online retailers.

In Japan, less than 20 per cent of luxury consumers are “less interested” in spending on luxury goods, and nearly three-quarters of luxury CEOs report that the macroeconomic climate has had no effect on Japanese sales, according to McKinsey & Co in June 2012. This is driven by 20-something consumers and men, 68 per cent of whom own a smartphone or tablet and spend more time on social media platforms.

E-commerce

L2’s findings show Japan’s e-commerce, fuelled by local player Ratuken and Amazon Japan, controls 40 per cent of the market in 2012. While 87 per cent of global brands maintain a Japanese-language version, Japan boasts the highest e-commerce penetration across Asia-Pacific, with 45 per cent offering direct-to-consumer e-commerce. However, no brands link to local B2C behemoth Rakuten.

The report says despite high e-commerce penetration, many Japanese sites lack advanced functionality beyond a store locator, with only 56 per cent of prestige brands providing sharing via social media and only half the brands offering a dedicated customer service number.

Compared to Japan, all the brands that maintain South Korean sites have localised functionality, including slightly more than half featuring a local customer service number and 44 per cent featuring local pricing on their sites.

Search

Naver, South Korea’s local search engine, dominates the market with 66 per cent share, but only 15 per cent of prestige brands take advantage of the platform, with one third of them purchase “Brand Search Ads” on Naver.

Due to language differences and robust local infrastructure in Japan, Yahoo.jp captures 53 per cent of the market versus Google’s 40 per cent. Half the brands, significantly more than in other APAC markets, are buying search ads in Japan at substantially higher cost per click prices, compared to other markets across device types.

The report points out Amazon and Rakuten, which together account for 40 per cent of Japan’s B2C e-commerce market, are purchasing against two fifths of prestige brand terms, while the leading South Korean B2C e-commerce sites, Gmarket and 11st, are purchasing against 37 per cent and 43 per cent of brand terms, respectively.

Email

Email remains the dominant medium for business communication in South Korea, with 70 per cent of consumers making a purchase based on a marketing email, according to e-Dialog. However, L2’s findings show only a third of brands provides the opportunity to opt in to email marketing and average just 0.42 emails per week, versus 0.64 per week in Japan, where 48 per cent of brand sites provide email sign-up and 52 per cent offer account creation.

Social media

The report says South Korean Facebook pages are the fastest growing in Asia-Pacific, while Twitter accounts are on average more common and have slightly higher growth than other countries in the region. However, most brands have struggled to generate traction on YouTube, averaging just 473 views per day across South Korean channels.

On the other hand, despite Japan’s low social media penetration, 39 per cent of prestige brands have a Japan Facebook page and more than a third have a Japanese Twitter account.

Also, the Japanese are among the world’s leading online video consumers, viewing 1.5 times the global average number of online videos, according to comScore’s video metrix in June 2012. However, L2 finds only 15 per cent of brands boast a dedicated Japanese YouTube channel.

Mobile

South Korea’s smartphone penetration doubled to 79 per cent in 2012, according to eMarketer. However, the L2 report shows only 23 brands host a dedicated mobile site, and more than one in 10 have broken sites or do not fully load on a smartphone device.

More than half of prestige brands offer either an iPhone or iPad application in both South Korean and Japanese iTunes Stores, while only eight brands maintain an Android app in South Korea and a third in Japan.

The report points out that Japan is ahead in monetising social activities and driving users from social to commerce. With 6.2 million monthly visitors, @Cosme is Japan’s largest and most influential beauty community site with 10.5 million user reviews of more than 200,000 products from some 23,000 brands. Sixty per cent of prestige beauty brands maintain a branded space on @Cosme.

However, when it comes to m-commerce, which accounts for 25 per cent of all online revenues, less than half of prestige brand sites are mobile optimised, and only 21 brands provide m-commerce.