Yes, China’s luxury market offers great opportunities to new coming luxury brands
The Chinese luxury goods market is forecast to see strong growth over 2019-2024. The expansion of the market will be driven by growing demand from Millennial and Gen Z consumers and by the growing focus of luxury brands in tailoring their innovation, marketing, and product distribution strategies to these consumer groups.
In recent years, China is becoming more and more central to the global strategies of luxury brands. Many players have and are investing in this large market.
But not a few brands in this sector have or are finding it difficult to reach the hearts of these consumers due to poorly localized marketing strategies and a lack of branding.
To be successful in the Chinese luxury market, companies must adapt their product development, marketing, and distribution strategies to the specific needs of local consumers.
How to do this? Following a careful analysis of the opportunities for new coming luxury brands in China, we will analyze how these companies should manage their business in China.
Millennials & Gen-Z: the largest consumers of luxury goods in China
Chinese consumers are now the engine of global growth in the consumption of luxury goods. They spend a lot on luxury goods and services, from luxury fashion, jewelry, and cosmetics to fine art and luxury travel.
Who are the biggest consumers of luxury goods in China?
China currently has the youngest, most digitally tech-savvy, and most demanding luxury market in the world.
In fact, the millennials, generation born between 1981 and 1996, have become the main drivers of the growth of luxury goods in the Chinese market. Furthermore, Gen Z consumers, born between 1996 and 2015, are also becoming an increasingly important force. Given these numbers, successful luxury brands in China are adapting their product offerings, brand images, and distribution strategies to the preferences and sensibilities of younger consumers.
What are these consumers looking for?
Brand is the main consideration: The brand value associated with luxury goods brings more trust and a sense of belonging to the young people interviewed.
Younger consumers will appreciate the in-depth design, materials, manufacturing process and other factors as they pursue the brands. Therefore, the brand is still the key to expansion in the Chinese market and the creation of brand value is the solution to access the younger generation in China.
Chinese luxury consumers tend not to be loyal: How to win them over?
It’s hard to find Chinese consumers who buy products from the same brands all their lives, love to change and try new things. Therefore, both local and foreign brands need to find more relevant ways to establish a lasting image and relationship with their Chinese consumers.
First of all, companies need to think outside the box of the brand. They are more willing to venture beyond themselves for new luxury experiences and tend to churn out more quickly than older, more loyal consumers.
Young Chinese consumers love to feel part of the brand, they want to participate and I want to be involved. The customer experience must always be innovative and fun. A recent case is the opening of the virtual Burberry store in Shenzhen which offers a unique and interactive experience to Chinese consumers.
Trends in China’s luxury sector after Covid-19
Traditionally, a significant amount of Chinese luxury purchases were made outside of China, while traveling abroad. However, many Chinese consumers have started shopping domestically in recent months, through offline stores, online stores, and e-commerce platforms.
Furthermore, before Covid-19, many luxury brands remained skeptical about the need to digitally transform. Now, however, most of them have been digitized in order to reach these consumers who are increasingly digital, not only because of the pandemic.
The opportunities for brands seem many, but the most important thing in China is the brand as Chinese people tend not to buy products from brands they don’t know, especially in the luxury segment.
So how can brands market their luxury products in China? Let’s see how to do it together.
How can new luxury brands market their products in China?
As mentioned earlier, branding is needed to reach Chinese consumers. Telling the story of your brand, expressing the value of the brand, are all aspects necessary to create interest from Chinese consumers. If not done in the right world, consumers won’t pay attention to your brand and rest assured they won’t buy your products.
For example, given that Chinese consumers trust KOLs (Key Opinion Leaders) more than brands, adopting a KOL marketing strategy can be very useful in attracting consumers’ attention and following the KOL’s advice on products. and on the brand.
Social shopping in China is an important aspect and companies should leverage Chinese social features to win over young consumers. When it comes to China, luxury brands need to think about combining their strategy, positioning and history across all digital and physical brand experiences and through the most relevant products. Too many companies still ignore local preferences, customs and buying traditions, but all of this is critical in China.
How Chinese luxury consumers get information about new luxury brands?
The main sources from which the young Chinese generation of luxury goods get information on brands and products are:
- online channels of official brands,
- offline stores,
- word of mouth
Most Chinese consumers acquire information on luxury consumption both online and offline and spend an average of 3-5 hours searching, consulting, reviewing, and sharing luxury-related information per week.
These data reveal that digitization is the key for luxury brands to reach young Chinese consumers. These consumers are influenced to some extent by digital channels during the buying process.
Therefore, companies in the luxury sector must have an active approach guided by novelties such as new products, collaborative launches, and creative digital campaigns.
Online channels of official luxury brands in China
Wechat and other social media have become the main battleground of luxury branding and marketing.
Many luxury brands have now turned to the online experience. Chanel, Burberry, Cartier, Bvlgari, Dior, Gucci, and dozens of other brands are examples.
Digital marketing has become a way to expand the brands’ customer base. Wechat, Weibo, Xiaohongshu, Douyin, Kuaishou, Bilibili are excellent channels for promoting luxury brands in China.
In China KOLs are the most trusted people for purchasing luxury goods
Through collaboration with KOLs (Key Opinion Leaders), Chinese consumers are much more likely to appreciate the nuances of products and are attracted to brand-product combinations.
KOLs are a great way to get young consumers to try a new brand as they are usually idols or “to follow” people.
Moreover, luxury companies can gain the digital attention they need by influencing the so-called KOC (Key Opinion Consumers), normal consumers who try your product and recommend it to others, creating an incredible word of mouth. They are even more credible than KOLs, as they are consumers like everyone else who offer their thoughts and judgment on a product spontaneously without economic feedback.
To sum up, Chinese consumers are heavily influenced by opinion leaders who speak out and display their purchases on social media. They want personalized digital experiences, from their online interactions to apps that use games to increase engagement.
The importance of offline stores customer experience
Although the Chinese are very influenced by digital channels during the shopping process, however, in terms of market statistics, 92% of consumers still choose to shop offline.
But a simple offline store is no longer enough for demanding Chinese consumers. Experience and interactivity within the store is in great demand. Young Chinese consumers prefer unique and innovative experiences in branded stores when it comes to making a purchase decision.
Therefore, brands need to reinvent in-store experiences, satisfy the desire of young consumers to feel different and appreciated.
The power of word of mouth in China’s luxury sector
Since the power of community and word of mouth for advising and suggesting Chinese consumers on what products to buy, Baidu Zhihu is definitely a great tool for creating this effect.
Not only being present on Baidu Zhihu will allow you to answer questions about your field but also to educate your target audience about your brands/products in an undercover way. It is an excellent tool to increase your conversion rate and to generate brand awareness.
The platform has an array of features that can be used to create and manage a community around a topic related to your brand. Use these tools to engage with your audience and exchange information with them but also to build your author authority.
Here are some of these tools:
- Zhihu column
- Zhihu bookstore
- Zhihu Roundtable
- Zhihu live
- Zhihu tip service.
We will make use of all these tools to help you improve your reputation in China. To know more about Zhihu: https://agency.marketingtochina.com/zhihu-marketing/
China E-commerce: a place to buy luxury goods and find information
As in-store retail continues to dominate sales of luxury goods, it has become increasingly difficult for brands to ignore the dynamism and growing influence of e-commerce in the Chinese luxury market. In fact, young Chinese consumers tend to appear online in all categories of personal luxury. It is no coincidence that the main brands have and are collaborating more and more with e-commerce platforms such as Tmall, JD, and Xiaohongshu.
E-commerce, in addition to being a sales channel, is now also a favorite source of information, where Chinese people can gather product information, consult buyer reviews, and share their experience.
Gentlemen Marketing Agency is a Digital Marketing Agency that is expert in helping foreign companies to establish or strengthen their position in China. We are a growing team of 75 marketers with a passion for China and digital marketing.
We can help your luxury brands enter the Chinese market, contact us to discuss it further!
Read more about China’s Luxury Market:
- CHINA LUXURY CARS MARKET TRENDS IN 2020
- POST CRISIS LUXURY BRAND STRATEGIES IN CHINA
- WHY IS LOCALIZATION SO IMPORTANT FOR LUXURY BRAND IN CHINA?