Trends in the luxury market in China

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China will become the largest market for luxury  in 2015.  So what about China as the new Eldorado for luxury brands ? Myth or a reality ?

We all heard about how good consumers  Chinese are and that the middle class will double in the coming years which promises a high purchasing power and an opportunity for luxury brands.

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china-consumer

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I will offer a synthesis of the state of the luxury market  in China: what motivates consumers to buy luxury goods and how the luxury market tends to evolve.

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What are the percpective for luxury brands investing in China?

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The market for fashion and luxury: a double-digit growth.

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A double digit growth

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Nevertheless chinese consumers spent less this year. This is due to the economic growth which is going to soften.

But the major luxury brands such as Prada, LVMH  or Burberry still benefit from their investment  in China.

 

The luxury market and the asian concept of « Face »

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I will illsustrate the concept of « Face » with an exemple. In China if you see a group of friends and everyone has the latest model of Cartier’s watch except one this latter will lose face and will  soon acquire one to recover it. The aim is to show social status.

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Baofahu

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Some segments of the luxury market in China

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Wine

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red wine in china

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Just a small story to begin with. I was recently at  a French wine tasting event in the south of China, near Kunming. The Chinese were all gathered around Italian and French wines. On Italian wine, we could read “Doscana” instead of “Toscana”, but it was not the funniest. The red wines were served much too cold. However, Chinese love this kind of private events to discover new products. I invite you to visit our section on the wine for more information.

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Beautiful cars

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Merce-Benz

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European cars have an image that inspires quality and safety. Often it is the parents who buy the first car of their children, the safety of German brands has its influence.

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Handbags

Handbag Louis Vuitton

 

Offered by lovers or generous husbands. Handbag is a symbol of luxury but without  ostentation (I invite you to read the brands of handbags that dominate China )

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Ready to wear

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French and Italian ready to wear are well recognized  for the long tradition carried by them. But in China distinction also means ostentation when it comes to the ready to wear. Having a Chanel dress means you have money. If a chinese buy a Louis Vuitton bag most of the time he will prefer to take it with a great logo in order to be sure everyone will notice it.

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Watches

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We have the example of the Swiss watchmaker Breguet , which is a great success in China with two new store openings in 2011 in Beijing and Shanghai. Chinese often associate one kind of product with one country. Regarding Watches chinese will believe that you have to buy a swiss model if you want the best quality.

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E-commerce is booming in China

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E-Commerce and M-Commerce in China

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Do you know what is the best media in order to influence consumers ? No it’s not TV or the press. It’s  the INTERNET!  Most of the people in China don’t believe informations provided by CCTV anymore. So congratulations to the brands that  invested in the internet as main communication channel. Chinese consumers love to surf and do their shopping on the internet due to lack .  Indeed for many chinese it is logistically easier to buy stuff in the internet  than moving downtown in shopping malls.

 

Some brands that have had the foresight to invest in the internet: Coach, Burberry or Shanghai Tang. I also have in mind the exemple of Zara  as I received a beautiful bag with the inscription of their website, urging consumers to see specific offer online.

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mode-chine-zara-1

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But online communication must be completed in China by a strong 020 (Online to Offline) marketing strategy.

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Development of new cities in China are an opportunity

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While brands have invested the main chinese cities  such as Shanghai, Beijing or Hong Kong … new cities begin to appear and to be opened to new investments, especially in central or southern China. Cities such as Chengdu, Kunming or Chongqing have increasingly rich populations.

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A segmentation of the rich people of China

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Different kind of rich consumers

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The consumer for ostentation

Anyone who wants to show his wealth in order to gain face. For these consumers expanditures for luxury goods is also a way to gain “guanxi” (network).

This kind of consumer is good for luxury brands as Mister Ostentatious doen’t pay attention to his  expense.

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Mister generous

He will rather buy luxury goods for gifts than for himself. If he  buy a nice car ti twill be to get his wife to work and children to school. To put it in a nutshell he will spend money for the welfare of his family without necessarily spending too much on luxury goods

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The visionary consumer

People often consider that chinese are not very good when it comes to creativity and the ability to take initiatives. For cultural and historical reasons Chinese are accustomed to be guided. This tends to change. The new generation of chinese is made of more people interested in long term perspectives. This kind of consumer will rather save money than spending their income in luxury goods. They will focus on long-term needs. But luxury brands can catch their attention with a communication on the quality of their product.

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Mass luxury will be challenged by  more Marketing 3.0 oriented strategies

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In China you can see too many ladies with the latest bag by Burberry or Louis Vuitton on their arms. So many consumers are beginning to desire something else, something different. They are more likely to search for designers and truly unique luxury goods.

Of course  the French image is still very good but things are slowly  evolving. One can find some clue of such a change with the emergence of Chinese luxury brand like Shanghai Tang. More and more Chinese consumers take pleasure in exhibiting original creations.

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Political limit to the growth of the luxury market : anti corruption actions taken by the government

 

In 2012 the chinese government ask officials to stop investing public money in luxury goods and have ostentatious  behaviors under penalty. Officials  were asked to come to work  with sober outfits. Maybe this will stop a large number of consumers with the fear of losing their jobs.

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Watch-Uncle

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However I think chinese officials  will find other ways to consume luxury goods more discreetly.

Another example can show that the government can be a brake for some luxury goods for diplomatical reasons. Following the dispute between China and Japan  sales of Toyota and Honda, have fallen.

 

 

Conclusion: Ultimately the opportunities for the luxury brands in China overcome the threats. Even if the luxury market can not follow the path of an exponential and without limit growth many share of market are to be taken. And for that purpose there is nothing better for luxury brand than an innovative webmarketing strategy.

 

 

 

 

 

Marketing to China