China is the first market for Luxury in the world. However, consumption behavior is shifting in the Middle Empire and make brands change their strategies in the country.

The Chinese Rich People are changing their style

1.    The Chinese Luxury Market

The purchasing of luxury products in China represented 36 million dollars in 2016. We estimate this number to reach 79 million in 2020, and an average annual growth around 20%.

The Chinese also acquire more and more high-end products abroad and eight luxury products out of ten bought by a Chinese citizen were purchased from a foreign country in 2015, for an amount of 36 million dollars.

Those two figures make of China the first buyer of luxury goods in the world, contributing for 30% of the global market, and the Chinese bought almost one luxury product out of two (46%) in 2015.

However, the market is experiencing a slight slowdown, particularly due to the willingness of President Xi Jinping to eradicate corruption within the Chinese ruling class. Since 2012, a powerful campaign had a strong influence in the decline in consumption of certain categories of ostentatious luxury goods. For example, it was possible to find incriminating pictures posted on the Internet (bureaucrats wearing expensive watches, etc.).

As a result, China’s luxury market is becoming less bling and less conspicuous.

 

2.    A shift in the Consumption of Luxury Goods by the Chinese

Luxury purchases used to be all about showing logos and brands in China. Even though this behavior is still present in some lower-Tier cities, Chinese consumers are now motivated by the intrinsic value of luxury goods, as well as their rarity and exclusivity and not as signs of wealth and high social status. Logos are less and less sought after, especially in large cities.

To fulfil that demand, Chinese malls are increasing their supply of niche brands.

Chinese luxury tourists are also beginning to focus on experiences—hotels, food, etc.—over pure consumption. We can then say that the main goal of luxury brands for the Chinese market is to provide a qualitative lifestyle combining high-end experiences and niche products.

 

3.    Luxury Brands’ Digital Challenges

As more sober tastes generally imply lower margins for luxury manufacturers, brands need to attract more Chinese customers. In China, digital is the key, that’s why brands need to be massively present on Chinese social media and on e-commerce platforms. Indeed, most luxury firms have inefficient digital strategies while over two thirds of Chinese use the Internet to research luxury brands.

Very few of them have adapted their website to the Chinese customers. Many don’t use servers in Mainland China, their website can then be slow. Many don’t offer a website translated in Mandarin or showing prices in RMB… Finally, nearly half of all China’s e-commerce sales were made with mobile devices in 2016, and this figure could 71% in 2019. However, few luxury firms’ websites are optimized for smartphones.

Social media are booming in China and WeChat is the most important social network for luxury brands as it helps connect customers in a very intimate way, and thus create a strong proximity. The app was only used for messaging before, but is now an entire ecosystem, including a payment method, e-shops, etc.

 

Although Weibo and WeChat remain the most used social media by luxury brands in China, other platforms can be used to create good marketing campaigns. Like Michael Kors with the photo-sharing app “In” in 2016. Jaguar using the live-streaming app Periscope in 2015… New technologies like Augmented Reality (AR) and Virtual Reality (VR) will be able to enhance the personalization of service from luxury brands. This is even more effective when brands use Key Opinion Leaders, KOLs, in their campaigns.

Product reviews are also extremely important to Chinese consumers, more than half of them look for reviews on the Internet before buying a product). These opinions can be found on forums, which customers consult not only to buy a product in China but also to plan a trip abroad to find the best brands to bring back for them and for their family. The list of products to bring back can be very long, it is then important for the brands to manage their reputation on the Internet, and especially on the forums.

 

To conclude, adaptation is the key in China. Luxury tastes in China are shifting from conspicuous purchases to more sober goods. Luxury brands then need to focus on those niche and qualitative goods, but they also need to opt for an efficient digital strategy to increase brand awareness and gain new customers in China.

It is time for niche Luxury Brand to enter to China.

 

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