• by Mark Walsh  @markfwal, December 18, 2012

Beauty and fashion brands are leading the way when it comes to doing digital business in China, according to the latest report from digital think tank L2.

Brands such as Estee Lauder, Lancome, Burberry, Sephora and Kiehl’s made up two-thirds of the top 20 luxury retailers ranked by L2 based on their China-specific offerings across the the Web, social media, and mobile as well as in digital marketing.

For each platform, the 100 brands ranked are assigned "IQ scores" from over 140 to under 70 that equate to ratings of "genius," "gifted," "average," "challenged" or "feeble." The digital IQ index developed by L2 scores companies against more than 800 qualitative and quantitative individual data points.

Beauty brands had the highest average digital IQ, with Estee Lauder at No. 1 overall. The cosmetics giant earned the top spot by creating Chinese-language iPhone and iPad apps, running paid advertising on local search engines, and having a user-friendly site that includes user reviews and ratings, live chat and online makeup trials. 

One of the biggest surprises in this year’s ranking, according to L2, was Hong Kong-based jewelry brand Chow Tai Fook faulting to No. 3 by ramping up its e-commerce capability across channels and launching smartphone and tablet apps.

While fashion and jewelry brands featured prominently in the top 20, the majority ended up in the “Feeble” category, including Prada, Harry Winston, Baccarat and Ralph Lauren, which came in at No. 100. L2 found that digital investment by brands overall is lacking, despite the large opportunity represented by the Chinese market.

As an example, it pointed out Chinese sites have average load times of 24.1 seconds, four times longer than their global counterparts. More than half of the sites still aren't certified by the Chinese government, possibly resulting in pages being removed from search results. Furthermore, only four brands have launched direct e-commerce sites since last year.  

“For the first time in a decade, China is a question mark for the prestige industry,” said L2 founder and NYU marketing professor Scott Galloway. “We continue to believe China offers more upside -- specifically digital upside -- than any other luxury market.”

His outlook is buoyed partly from spending by Chinese tourist spending in the third quarter, which was up 58% from a year ago. Despite the hurdles, the L2 report city a McKinsey study projecting China’s luxury e-commerce market will grow 33% to $3.2 billion this year from $2.4 billion in 2011.

One area where brands have made strides is in social media in China. Sina Weibo remains the social platform of choice for luxury brands, with nine out of 10 setting up storefronts there.

Progress on the mobile front has been slower. Only 23% of brands maintain a mobile-optimized version of their China site and only a third are e-commerce enabled. Though Android dominates the mobile landscape in China, only 35% of brands have an Android app, with 22% available in Chinese. And only one app offers e-commerce.