China Luxury Market Series Part 1: The world’s most exciting market

While the global luxury products market declined by 23%, the furthest extent ever recorded, China’s luxury market grew by 48% in 2020, according to a collaborative report from Tmall and Bain & Co.  Consumers from China are expected to contribute half of all luxury product spending worldwide by 2025. A substantial proportion of luxury consumption now takes place domestically, due to the ongoing disruption to international travel. This shift towards domestic shopping is likely to continue even after travel resumes, because of new consumer behavior trends, an industry-wide pivot to the region, and the long-term development of China’s luxury retail sector by major international brands, Chinese companies and government initiatives.

 

At the outset of this historic business opportunity, the scale of which cannot be overstated, we are issuing a China Luxury Market Series, covering various aspects of business development and cultural context, in order to ensure our clients are able to make the most of this moment.

 

 

  • American brands yesterday, European today, Chinese tomorrow

 

According to the Shanghai-based digital marketing firm Parklu, the top five collections during last year’s fashion month were all from iconic European designers. Meanwhile, American brands did not even rank in the top 20. While some might assume that the reason for this is nationalism and political tensions, industry analysts attribute the poor performance of American brands in China to their lack of heritage, failure to innovate and pursuit of the mass market over finesse and exclusivity.

 

 American brands and businesses have also relied on importing their basic business models to China and relying on Hollywood celebrity endorsements, while consumer trends have moved towards sophisticated, individualized social media strategies, such as direct purchasing links embedded in social media content, leveraging the unique advantages of China’s retail platforms, targeting relevant demographics through specific influencers, and participating in national shopping festivals.

For an overview of marketing products on China’s websites, you may refer to our previously published introductory guide.

 

Meanwhile, even small European brands are seeing increased demand in China, due to their heritage, craftsmanship, specialization and cultural authenticity. In 2021, the key to the contemporary Chinese market for any brand, regardless of national origin, is to emphasize uniqueness and a develop a sense of cultural identity, rather than aggressively seeking attention, catering to generic conventions of luxury and offering discounts.

 

According to Daniel Langer, a professor of luxury marketing strategy at Pepperdine University in Malibu, California,

Luxury is about creating a very beautiful, very positive, very personal memory…there is no difference in the concept of luxury anywhere in the world, however, there is a huge difference in the expression of luxury. The expression of luxury is unique to every culture.”

 

Langer feels that narrative is a key component of luxury, which makes the local marketing strategy essential.

“Luxury always starts with the story. We must have a good story. Storytelling is unbelievably important…I have to have full clarity on who I am as a brand. We are fascinated by people who are passionate about what they are doing.”

 

For these reasons, Langer believes Chinese luxury brands are likely to emerge and take prominence alongside European brands over the coming years. The fashion industry’s increasing orientation towards China, as well as Chinese people’s growing understanding of luxury product development and marketing combined with a home-ground advantage in the Chinese market will give new Chinese brands an edge in the world’s largest market, and therefore internationally as well.

 

 

  • The hottest trends in the hottest market

 

China’s market reflects its vibrant, dynamic culture; trends emerge and move fast, requiring a steady eye and quick, decisive action. Three of the recent major trends are the emergence of younger consumers as a key demographic, collaborations between international and domestic brands, and the emergence of online luxury retail. According to the Tmall/Bain survey, millennials and Generation Z shoppers now drive the luxury market, while also moving retail channels toward digital platforms.

 

Millennials in China are the biggest consumers of luxury products and fashion catalogs, with their purchasing power and lifestyle as upwardly mobile professionals in major cities. Meanwhile, the younger, digital-native Generation Z demographic is hyper-attuned to online trends and social media brand development. Engaging influential younger audiences through social media apps is key to establishing and maintaining relevance in China.

 

International brands in the China market frequently produce collaborative editions of their products and service with local brands. Collaborative editions of products engage audience attention because their novelty and creating an impression of exclusivity since they are produced in small numbers. While the collaborative strategy has been employed in China by major brands such as Vetements and Adidas, the practice can be equally effective for establishing and localizing smaller brands if used strategically. Collaborations need not necessarily be luxury products themselves, as branding can be adapted to curate digital content, social events or any product or experience that helps develop a narrative and effectively engages audiences.

 

 

  • Further insights soon: Luxury Blockchain and the Hainan Factor

 

This is the first in our China Luxury market series. Given the depth and relevance of the topic we will be publishing more focused insights over the coming weeks. Stay on the lookout for our newsletters or visit our website to learn more about China’s exciting luxury market and its fascinating developments, including the development of blockchain authentication for designer labels and the development of the world’s premier luxury shopping destination in Hainan.

 

In the meanwhile, should you have any interest in establishing your business in the China market, we are always available for a free initial consultation.

 

 

 

 

 

About the Author:

 

Mr. Philip Yu

Managing Partner

 

Mr. Yu holds a Bachelor of Commerce (Hon.) from the University of Toronto and L.L.B. (Hon.) from the University of London, and is a member of the American Institute of Certified Public Accountants, Certified Public Accountants of Australia and the Hong Kong Institute of Certified Public Accountants. Philip is experienced in handling cross border taxation issues, corporate restructuring and other cross border business solutions. He undertakes additional posts as Company Secretary, Authorized Representative and Independent Non-Executive Director for several listed companies on the Hong Kong Stock Exchange. He joined our firm in 2001 and currently the Managing Partner of the firm.

 

 

Contact

Hong Kong

10/F., Guangdong Investment Tower,

148 Connaught Road Central,

Hong Kong

 

Tel: +852 2541-6632

Fax: +852 2541-9339

Email: info@fungyucpa.com

Send
Your message has been sent!
Please try again or contact us by email.

Shanghai

Suite 1206, Jing’an China Tower,

1701 Beijing Road West,

Jing’an District, Shanghai, PRC

 

Tel: +86 21 6289 8813
Fax: +86 21 6289 8816
Email: info.sh@fungyucpa.com

Send
Your message has been sent!
Please try again or contact us by email.

Guangzhou

Flat D, 11/F, Yueyun Building,

3 Zhongshan 2nd Road,

Guangzhou, PRC

 

Tel: +86 20 8762 0508

Fax: +86 20 3762 1108

Email: info.gz@fungyucpa.com

Send
Your message has been sent!
Please try again or contact us by email.

Beijing

Room 2005, E-Tower,

No.12 Guanghua Road,

Chaoyang District,

Beijing, PRC 100020

 

Tel: +86 10 6591 8087

Fax: +86 10 8599 9882

Email: info.bj@fungyucpa.com

Send
Your message has been sent!
Please try again or contact us by email.

Paris

20 Rue Cambon
75001 Paris, France

 

Tel: (+33) 1 44 50 40 55

Email: info.fr@fungyucpa.com

Send
Your message has been sent!
Please try again or contact us by email.

Luxembourg

12 rue Jean Engling

L-1466 Luxembourg

 

Tel: (352) 2740 6430

Email: info@harriscorps.lu

Send
Your message has been sent!
Please try again or contact us by email.

This site uses cookies. By continuing to browse the site, you are agreeing to our use of cookies. Find out more.