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China Luxury Report 2019 Summary

China’s luxury goods market is humming along nicely, with a second straight year of 20% growth in 2018. Think of it as a powerful machine running on four engines operating in perfect alignment. Brand Catalyser complies the best data from digital luxury analysis into one report packed with insights. We combined data from McKinsey, Bain, BCG and Tencent to give you a snapshot of the Chinese Digital Luxury market as of 2019.

Market Size & Insights

The domestic luxury market posted 20% growth in 2018, driven by millennials and women. Chinese consumers made 27% of their luxury purchases in China in 2018, up from 23% in 2015, and we anticipate that this share will increase to 50% by 2025. But this doesn’t mean that Chinese consumers are buying less abroad. Luxury spending by Chinese shoppers now represents 33% of the global market. (source: Bain ‘What’s Powering China’s Market for Luxury Goods?’)

1. More Chinese-driven purchases happening in China.

Chinese customers will account for 45%+ of the market, and half of their luxury purchases will happen in their home country.
Strategy: Dynamic pricing and advanced merchandising strategy to overcome international differences and capitalise on consumption back in local borders.

2. E-commerce, online, digital permeating every single purchase.

Online Channel will represent 25% of the market value. 100% of luxury purchases will be influenced by online interaction. In 2025 online will influence every single luxury purchase and digital will enable more than 50% of them.
Strategy: Optimisation of shopping experience overcoming digital barriers and fully integrating physical and digital channels.

3. Footprint consolidation reshaping the store of the future.

Digital penetration will lead to physical disruption: network consolidation within the luxury industry, as already happened in other segments. Stores will inevitably change: from point of sales to point of touch to provide a 360-degree change in the approach to customers.
Strategy: Big data and advanced analytics to drive retail excellence – tracking consumers in a purely omnichannel setting; Augmented reality to provide them with a tailored experience.

4. A youthful market-disrupting growth path.

New generations will deliver approximate 130% of the market growth with Gen Z showing original traits vs. Gen Y, to be properly addressed.
Strategy: CRM and CXM to be taken to the next level: big data, effective tech and emotional advertising to customise customer experience by taste, touch-point preferences and emotional specificities.

5. Cultures and sub-cultures taking over consumption trends.

Cultures/sub-cultures and new consumption patterns will arise. Categories will blend: brands must be dynamic and responsive to adapt.
Strategy: ‘Smart and Agile’ processes responsive in capturing emerging cultures and sub-cultures and timely adapting value propositions accordingly.

6. One market serving markets of one.

Growth model will overcome current boundaries, shaping new competitive maps. Brands will become excellence and idea platforms, enlarging their relevance.
Strategy: Extreme personalisation technologies together with online customisation and fitting to deliver unique products, a result of a co-creation with consumers.

Who Are Luxury Buyers?

  • Chinese luxury buyers are relatively young: 36% of them are between 18 and 24 years old.
  • They are also very educated, with 71% of them holding at least a college degree.
  • Chinese luxury buyers are also overwhelmingly female: 71% of them are women.

Conclusion

The Chinese luxury market is currently undergoing major shifts, from the migration of customers from offline to online (especially in smaller cities) to the increasing percentage of consumers buying directly from mainland China. Although the market can seem complicated, it is essential to crafting a long-term marketing and distribution strategy in the fast-moving Chinese luxury market. Brand Catalyser is here to support and work with you to embrace this market, let’s chat!

nihao@brandcatalyser.com