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The Evolving Luxury Landscape in China: Embracing Digital Transformation
By Alizila Staff October 25, 2018
Tr Spotlight:
As Chinese consumers continue to drive the global luxury market's growth through their online shopping habits, there lies a significant opportunity for brands that are willing and able to undertake digital transformation.
Significance of China Market:
Chinese buyers account for an astounding 32 of global luxury sales compared to US consumers who rank second at 22, as per Bn consultancy. Notably, the share of Chinese sping significantly exceeds that of other countries: a remarkable growth rate of 11 versus only 3 in 2016, according to a Bn report. By 2025, China is predicted to contribute an impressive 44 of global luxury sales, as estimated by McKinsey.
Chinese consumers are increasingly favoring domestic over overseas purchases, fueling the rapid growth of up to 20 in the Chinese luxury market last year. This shift was sparked by international brands including Louis Vuitton, Gucci, Hermes and Burberry cutting prices after China's government slashed import duties on consumer goods.
Understanding the Luxury Consumer:
Wealthy households contribute disproportionately to global luxury sping, accounting for an estimated 88 of Chinese luxury purchases in 2016 based on McKinsey’s survey. By 2025, these wealthy households with income over RMB 300,000 are forecasted to constitute an even larger share at 91 of global luxury sales and will contribute up to 4 trillion yuan $678 billion, according to McKinsey.
The Future of Luxury Online:
E-commerce platforms like Tmall offer brands unprecedented access to potential customers in locations where they might not have offline stores. In the first day of Versace’s launch on Alibaba's Luxury Pavilion, it reached over 283 cities across China with online sales, including many third- and fourth-tier cities without physical Versace stores.
The Role of Digital Presence:
Brands must engage with Chinese consumers through digital channels since nearly 80 of luxury purchases are digitally influenced. For instance, Tiffany leveraged augmented reality for a unique launch experience on Tmall's Luxury Pavilion. Items that were part of the pre-sale period sold out quickly.
Key Takeaways:
Luxury brands need to adapt their digital strategies to cater to young and tech-savvy Chinese consumers who increasingly rely on online platforms for fashion inspiration and social interaction.
Digital capabilities - such as AR, VR experiences or interactive live-streaming sessions with influencers – are essential tools that can replicate the exclusive offline shopping experience in an online setting.
As China's luxury market continues to grow digitally, it is imperative for brands not only to expand their presence online but also innovate by leveraging technology like AR, and social media platfor Chinese consumers effectively.
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