How China’s Digital Customers are Driving the Luxury Industry Worldwide

How China’s Digital Customers are Driving the Luxury Industry Worldwide

Already constituting around a third of global sales of luxury goods, Chinese consumers are predicted to account for 40% of demand by 2024. That’s an astonishing rise and one which cements the importance of Chinese consumers to the luxury industry as a whole.

We know Chinese spending on luxury items grew 20% last year. Boston Consulting Group predicts that China’s presently driving 70% of growth in luxury; Bain & Company says growth in mainland China will be at least 20% this year. This growth trajectory transforms China into something of a battleground for luxury brands trying to survive in a competitive world market.

Although the luxury industry is seeing strong growth in emerging markets, the world population of luxury buyers remains relatively small.

More frustratingly, they’re well distributed across regions. Digital shopping is an opportunity to access those shoppers wherever they might be. But reaching into new markets and building an online brand are both risky steps for an industry that’s essentially conservative in nature. This is a time of both opportunity and risk for luxury brands looking to Asia.

China’s growing demand for luxury, particularly through online channels, is a disruptive phenomenon for the industry. Not only are there new markets to try to engage with but there are also new and unfamiliar customers emerging.

China’s keen luxury shoppers tend to be young and much more likely to be buying on a portable device (such as a laptop or tablet) than consumers in other markets.

A woman buying jewellery with her credit card on a laptop.

Growth in luxury spending in China was led by womenswear, jewellery and cosmetics last year, according to management consulting firm Bain & Company.

These consumers tend to be pretty well informed about luxury brands, including even niche brands in the industry, and they tend to be highly socialised. China’s digital consumers will discuss their tastes and preferences online and they’re highly influenced by both peers and key opinion leaders, particularly celebrity ones.

Finding the best way to engage with these customers is an ongoing challenge for luxury brands. They have to make themselves relevant to customers with a different set of needs and expectations.

They have to engage with them across language and cultural barriers. And they may need to do it in markets where there are unfamiliar competitors and a very different retail landscape both on- and offline.

Brands respond to Chinese influence

For brands trying to succeed in China, it’s important to fully understand these trends. It’s vital to be connected to the activity in this market so as to truly understand the local consumer. This means having strong ties to local influencers, collaborations that help develop the brand in a way that’s sympathetic to local preferences and gain a better understanding of how to reach local consumers.

RELATED: Why Are Western Fashion Brands Getting It so Wrong in China?

It’s misguided to assume China’s consumers are homogeneous in their tastes. But one impact of China’s growing and weighty share of demand for luxury goods means that Chinese taste – or at least how luxury design teams interpret that – will become more influential.

We’re likely to see more collaborations with Chinese brands and Chinese designers and perhaps also a retail calendar that takes into account China’s seasonal trends.

What this means is that the growing importance of Chinese customers to luxury brands magnifies their consumer voice. It’s likely to impact on many decisions made by brands in the luxury industry, including who they hire and work with, and the creative direction of the brand.

What’s the effect?

Such a dependency on a single market – no matter how vast – makes the luxury industry vulnerable. If China’s economy contracts or there’s a sudden shock to consumer tastes and habits, a large chunk of the luxury industry’s sales will be in jeopardy.

There is no shortage of doom-mongers when it comes to analysing the future stability of China from either an economic or political perspective. Any market can be affected by sudden contractions brought about by war, natural disasters or political crisis – and China is no exception.

Even if you disregard the risk of a sudden downturn impacting on luxury sales, there’s another factor which makes this dependence on China a potential hazard for luxury brands.

It’s one of the defining characteristics of China’s wider market – its rapid pace of change. Consumer tastes here are evolving at an accelerated rate, social factors are changing rapidly and this is impacting on consumer behaviour.

Woman holding bags of shopping

A contributing factor to China’s rise in luxury shopping is the country’s government implementing incentives to buy luxury products at home rather than abroad.

This phenomenon has been the downfall of many western brands trying to make a go of it in this market. The fact is, China’s consumer tastes are extremely hard to pin down from one moment to the next. Ten years ago, Chinese luxury shoppers were likely to be making their first luxury purchase.

They were also likely to be the first person in their family to be making a luxury purchase and maybe in their social network. These days, shoppers are much more sophisticated and experienced. This means they are more discerning about the brands they favour and what they buy from them.

China’s a tough market for any brand for a whole variety of reasons. What’s clear is that Chinese luxury shoppers are going to be important to the future of many luxury brands and this market will be the theatre of conflict between luxury names trying to assert themselves on the world stage.

Written by Demetrius Williams
Demetrius Williams
Demetrius Williams is a Digital Marketing Specialist at TranslateMedia and has previous eCommerce experience working with a number of luxury brands in the fashion and beauty industry. He enjoys photography, binge-watching Netflix and can often be found roaming around London with a camera in his hand.

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