The Chinese market is the fastest-growing luxury market in the world, and one of the most important. It’s not just about high-end brands like Gucci and Chanel anymore; more and more people are starting to buy from mid-range brands such as Tory Burch. In a recent study by McKinsey, they found that China will be responsible for nearly half of all global luxury growth over the next five years. This provides an opportunity for luxury groups looking to expand their business in this rapidly growing country. There is a huge demand for high-end goods and services, but it’s also a very competitive market. It’s essential to be aware of what your competitors are doing in order to remain successful. In this post, we will explore how you can best present your brand to Chinese consumers.
Luxury in the Chinese market
The base of Chinese consumers is made up of fairly young individuals, between 20 and 35 years old: they tend to save less, spend more on leisure than their parents, do their shopping online more and more, and prioritize more the quality. Some parts of the country have experienced increases in spending, particularly coastal areas such as Shanghai, while others have experienced declining growth or even negative growth. The middle class represents around 240 million people, it is 19% of the total population, according to the Chinese Academy of Social Sciences.
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Nowadays, 80% of Chinese buyers are under 45 years of age. They are highly fascinated by western brands and have high internet consumption. Therefore, the most suitable way to reach this buyer group is through the internet. Chinese people are more and more willing to purchase online because of the convenience of e-commerce platforms.
Tmall and JD, the two leaders of e-commerce in China have launched last year their dedicated platform for luxury brands, respectively called “the luxury pavilion” and “ Toplife ”. Tmall and JD aim to guide their super-wealthy customers to these platforms. JD.com and Alibaba are going toe to toe on the battlefield of high-end fashion, providing different advantages for their partners.
Chinese Luxury Consumer Behavior
China is currently going through a consumer revolution; it is a constantly developing country that offers growing purchasing power to its people. As the standard of living improves, more and more people are focusing on high-quality products, luxury goods manufacturers and service providers are experiencing significant growth in China. As a result, the price a consumer is willing to pay for a product has increased in recent years. Consumers today are looking for the highest quality products and services, and often turn to the big brands.
China is the largest market for luxury brands, accounting for approximately 47% of global sales of luxury consumer products. Marketing is starting to play a key role in attracting Chinese consumers, as well as advertising and search techniques. As a general rule, the Chinese inquire a lot before the purchase, the main source of information being word of mouth. Chinese consumers are curious about what is on offer, especially with regard to foreign products.
There is a development of independence and individuality in consumer behavior in China. The country has almost 1 billion active users of social networks, and 400 million consumers in 2021 who buy on e-commerce sites. Dematerialized and online payments are set to grow very quickly.
Luxury forecast in the Chinese market
China is the world’s leading luxury consumer, contributing in particular to 35% of the global luxury market as of 2020, and almost one in two (46%) luxury products in 2015 were purchased by a Chinese citizen. Purchases of luxury goods in China represented 34 billion euros in 2016. It’s estimated that this figure will be 80 billion in 2021.
The growth of the luxury industry in China is slowing down a little in recent years, with a 6% growth in 2017, the same in 2018. This figure should go towards 4% by 2025. If the Chinese tended to spend their money on luxury goods when traveling abroad, their habits are changing. According to a study by Bain & Co, Chinese customers will make 50% of their purchases in China and not abroad. This trend will force luxury brands to adapt particularly to customers who do not travel, and to the specifics of the Chinese “local” market.
The evolution of the relationship between luxury and e-commerce
The reluctance of Chinese people to buy luxury goods online is also decreasing. In 2015, a sample of Chinese respondents said that the maximum amount he could spend on a luxury product on the internet is 4200rmb (equal to 545 euros) on average, an increase of 121% compared to the same study in 2014. Luxury Houses have long hesitated to take the digital transformation niche because of the major challenges it engenders, such as:
- The culture shock: While Luxury is based on exceptional product durability, technology leads to obsolescence. In addition, the Maisons have always based their communication on their heritage and heritage. For the first time, technology has led these Maisons to look more towards innovations.
- The technological and organizational challenge: To catch up with the Chinese digital tidal wave.
- The reinforcement of their digital ecosystem: For example, in 2015 LVMH appointed a former digital director of Apple Music as the group’s Digital Director.
The permanent evolution of the use of e-Commerce is now pushing brands to go through different distribution channels so as not to get lost in the middle of the competition which is increasing day by day. E-commerce doesn’t actually mean you’ll be working online. However, it only takes a few seconds for an Online site to retain a customer or interest a potential customer.
To do this, you need to understand Chinese internet habits and increase the attractiveness of your brand with product presentation, strict selection, page design, call to action, easy navigation, and online experience. Today, luxury brands cannot do without e-Commerce because even if it still only represents around 10% of total sales, it is thanks to it that brands gain visibility and can deploy their marketing strategies. by adapting more and more to their target.
The major Chinese e-Commerce platform for Luxury Brands in China
Tmall and the Luxury Pavilion
The period from 2019 to 2021 has been difficult for luxury goods. Luxury brands have had to embrace technology and reinvent themselves. For example through various platforms such as WeChat, Little Red Box, Weibo, Douyin and Tmall, etc. Today, 200 luxury brands are available on Tmall Luxury Pavilion. To differentiate themselves from the competition, luxury brands have adopted creativity and novelty. For this Tmall Luxury Pavillion is one of the favorite platforms of the top brands of the game.
Indeed, thanks to the Luxury Pavillion, brands can:
- Engage with Chinese consumers with qualitative experience: An invitation system is set up. Tmall selects Chinese buyers who have a real interest in the brand and who have a high income.
- Tmall combines Online and Offline: Tmall Luxury Pavilion has worked on the convergence of the offline and online experience by offering a Brand Experience Center. Pop-up activations are exclusive to luxury brand sites.
- You can keep control of your brand: The main advantage of the platform is the experience. You will have the freedom to pick the price, the merchandising strategy, and the communication strategy.
- A real boost to your exclusive product sales: Limited editions and exclusive products are always a success in China, you can have the same brand impact with Tmall Luxury Pavilion. The e-commerce platform provides several services from virtual flagships to live-streaming.
- Live streaming: Tmall Luxury Pavilion is a key strategy to combine live streaming trends and sales engagement. The ability to purchase is facilitated by the e-commerce platform.
Secoo the luxury & lifestyle e-Commerce platform
Secoo is one of the largest Chinese multi-brand luxury B2C platforms. If your business is in the luxury sector, Secoo is the platform to turn to. In China, Secoo has managed to differentiate itself from Luxury Pavilion and Toplife, which have absorbed a large share of the online luxury goods retail market.
Today the platform operates for very big brands like Miu Miu, Hermes, Rolex, Longines, and Bulgari. Additionally, to meet the growing desire of Chinese consumers for an upscale lifestyle, the platform featured cars from brands such as Bentleys and Porsches as well as personal yachts and jets. Secoo enjoys an excellent image by offering authentic and credible luxury items. Secoo provides a high-quality service, such as same-day delivery, delivered by couriers in suits and white gloves.
WeChat x Luxury brands, together to innovate
In the beginning, Wechat was an app for communication but it has developed a lot of features, waiting to be explored by brands. We have to notice here that WeChat has now over 1 billion monthly active users. According to its surprising capacities and its important user database, WeChat has taken more and more attention from luxury brands.
Wechat Mini-program widely used by Luxury brand
The famous WeChat mini-programs are additional devices to the classic WeChat social network. Yet in just a few years, these programs have won over Chinese consumers, who are over 300 million using them in 2021. These programs do not require any special installation and combine both traditional social tools and shopping functionalities.
Most of these programs are often games, services, or information for example. These mini-programs are highly appreciated, especially by luxury brands, because they help to strengthen the loyalty of their customers and to increase their notoriety even more.
There are case studies about luxury brands WeChat marketing below :
- Through Wechat, the well-known French luxury brand Longchamp offered the possibility to customize its flagship bag. Consumers could choose the size, the color, the style to make their personalized model.
- Users who have subscribed to Burberry’s WeChat official account can participate in the event launched by the brand and gain their own customized card. Burberry cooperated with WeChat and proposed to customers to order ornaments at any time with their Chinese or English names on them.
- For the Chinese valentine’s day, Dior has posted on its official WeChat account, “Lady Dior small, the Chinese valentine’s Day limited version, will be sale in online Shop”. It was only sold on WeChat, in limited time and limited number. This action became the best innovation in the luxury industry.
- Yves-Saint-Laurent, one of the most appreciated luxury brands in China promoted a number game on WeChat and Weibo to predict players’ lucky numbers. The exploration of lucky in the last season of 2016 was predicted by the talented spirit of several, Evelyne Lehnhoff. People can get their own lucky number after they gave their birth month and days. There were many women engaged in this game. They participated actively, left messages, and shared with their friend among their social network.
- On 08, September of 2016, the fall/winter fashion show of TOM FORD 2016 started in Seagram Building. At the same time, TOM FORD opened the live show on WeChat as well.
It is a very new experience to consumers as WeChat was transformed into an “e-commerce platform”. They had the possibility to buy any clothes, shoes, and stuff they saw on the live show immediately through the WeChat shop.
WeChat CRM, Luxury brands ally
WeChat’s social customer relationship management software generates detailed user data of your target audience with a focus on the WeChat platform. Thanks to this you can best understand your audience on WeChat on a personalized level. This software aims to enrich customer profiles through social media behavior and customer data. This leads to richer segmentation of your marketing efforts and better communication with your subscribers.
Read: Wechat marketing Guide
The CRM tool helps brands get a complete view of their audience, produce highly targeted marketing tactics, and provide support with streamlined customer service. It’s the optimal way to merge data that enables personalized marketing and provides a wealth of customer information for brands of all kinds. By fully understanding WeChat CRM, your brand can experience higher conversion rates and be able to always stay one step ahead of the competition.
O2O strategy for luxury brands in China
Luxury brands need to communicate more often with their online customers. In big cities, Chinese people are almost all online. To reach your target consumer and your potential consumer, offline marketing activities must integrate online marketing strategies. Brands need to publish informative content, interactive online activities by earning rewards or point systems, develop inquisitiveness, and providing shop and sale options on their social media accounts.
This is the reason why you can use the O2O strategy. This strategy which can also be called OtoO is the initial of Online to Offline. It refers to changes in the behavior of consumers who are now preparing their visit to points of sale (Offline) with the help of an analysis phase of the website on the Internet (Online). The expression O2O thus reminds us that nearly 90% of the retail trade is done directly in physical points of sale but that this activity is also impacted by the “Online”.
For merchants the benefits of the O2O strategy are:
- Drive sales traffic
- Dedicated eShop with exclusive branding
- Analysis of consumers’ spending behavior
- Effective advertising and promotions
- Channel with targeted marketing
For customers the benefits of the O2O strategy are:
- One time log in enjoy wifi whole day
- Prompted with nearby promotion
- Rebate system (gifts & redemptions)
RED Little Red Book, the RDV of high-end and luxury lovers in China
The Little RED book is the new Popular App at this moment and a great way to work on your awareness and Engagement. The Little Red Box is a Chinese e-Commerce application that is becoming more and more trendy with brands, and more particularly luxury brands.
Indeed, the application is aimed at beauty and fashion brands and offers upscale products. The community that uses this platform is very active and consists mainly of women who share a lot with each other through this network.
This platform can become a huge advantage in the Chinese market for the luxury brands that use it. RED is an excellent word of mouth tool and gives credibility to the image thanks to the many KOLs that work on it and thanks to the “Shopping Notes” pages which are the opinions of customers on the products tested.
The use of KOLs to strengthen your image in the e-Commerce Chinese market
Users of the majority of Chinese social media platforms are increasingly turning to KOLs. Brands see these people as a marketing opportunity since the communities that follow them tend to be very loyal to them. Audiences seek authenticity in the content shared on social media and turn to KOLs they trust and can relate to. These Key Opinion Leaders generally have some expertise in a niche sector and who succeed in meeting the needs and expectations of users who seek more quality than quantity in the sharing of content.
Currently, the trends that are most appreciated by KOLS concern the fields of beauty, cosmetics, or fashion. For luxury brands that are already known internationally, it is easy to create a collaboration with a KOL: through a live-streaming, with product reviews, invitations to events or content including the KOL becomes the direct face of the brand’s official advertisements.
For younger brands with less brand awareness, it’s best to work on your brand’s visibility and credibility first. If you have a small budget, you should use micro-KOLS or KOC which have fewer subscribers, which are cheaper but can be just as effective.
Key Opinion Customers speak to their community in a more personal way and make brand or product recommendations to help people they know personally. KOCs have more control over content creation as brands are required to maintain co-creative marketing with them. They are often much more selective with the products and brands they want to recommend. Having some brand awareness helps get the best deals with bigger KOLs and will help you increase sales later on.
The importance of the offline experiences in Chinese marketing
The changing mindset and aspirations of Chinese consumers have opened up barriers in the luxury industry. Chinese customers have higher demand, increasing disposable income and therefore changing needs. Customers are looking for an experience, a moment of life.
In their integration strategy, we note the integration of a customer awareness strategy. Luxury brands are developing human-centered services to retain and attract consumers. For example, Cartier has developed personalized services such as for marriage.
With the development of e-Commerce, half of the Chinese luxury consumers now hope to live a digital experience directly at the point of sale. More than 50% of Millennials are even ready to share their personal data to obtain ultra-personalized service in-store. They would like to live concrete experiences, for example:
- Connected and intelligent cabins,
- Virtual or augmented reality
- Or even interactive and intelligent screens.
Burberry, for example, has used technology to improve its customer experience to the maximum. After showing its parade for next winter live on a giant screen in Piccadilly Circus, the English brand celebrated with pomp the opening of its store in Beijing on April 13. A big show was planned with light shows, 3D videos, and above all an impressive hologram parade.
Luxury & Art Exhibition: a winning combo in China
As explained previously, in the world of luxury it is essential to stand out from the competition, notably through the customer experience around the purchase of the final product. We have seen that although the vast majority of Chinese now consume through e-Commerce, the offline part should not be neglected and this is also possible thanks to art. Indeed, art is constantly evolving and allows luxury brands to transform their products into true masterpieces. Today, China has become the must-see venue for innovations from famous brands like Gucci.
Read more about Luxury & Art in China
The famous luxury brand Gucci, which is the fourth luxury brand sold worldwide, pursues its wish to elevate fashion to the same rank as art. This ambition makes the iconic brand much more than a simple competitor, but an emblem of culture. For this, the brand has collaborated with many artists and seduced in China with its “art walls” exhibited in large cities on buildings for example. Gucci also offered immersive multimedia experiences allowing consumers to be fully integrated into its world at numerous exhibitions ranging from Florence to Shanghai.
“I thought it was interesting to accompany people in these first six years of adventure, inviting them to cross the imaginary, the narrative, the unexpected, the glitter. So I created a playground of emotions that are the same as in the campaigns because they are the most explicit journey into my imagery”.Alessandro Michele, Gucci’s Creative Director
Need a Digital Partner in China to promote your Luxury Brand?
The digitalization of China has brought a lot of new tools, creating new opportunities. Do you want to explore the Chinese luxury market?
GMA can help you with it. Our agency is specialized in digital marketing and we have knowledge about Chinese consumer’s habits.
We follow the latest trends and make our services up-to-date to effectively promote your Brand Do not hesitate to contact us for more information, see our case studies and Speak to our Luxury Expert.