As MD of Regroup China (part of Regroup Media), we help our Clients develop strategies for establishing and promoting a presence in China on digital channels. Over the last 18 months or so there has been a significant change in market demand for luxury items in China.
We have seen the following trends/ market insights in recent months in this fast-changing market:
Spending on Luxury Items
• Spending on luxury items has dipped in mainland China this year.
• Interestingly overall luxury spending per head hasn’t gone down though, just more and more Chinese nationals are spending overseas, avoiding restrictive mainland tariffs.
• We are definitely seeing this in evidence in the UK, with greater tourist-spend from Chinese nationals, particularly in the capital, but also other popular tourist destinations such as Bath and Cambridge.
Implications for Luxury Brands
• Given the imposing tariffs in mainland China, a lot of Luxury brands are looking to capture their market elsewhere, such as:
a) the lucrative Chinese shopping tourism market in Cities such as London, Paris, New York,
b) establish a presence in the emerging duty free zones such as Hainan on the mainland, where the tariffs don’t exist.
• Interestingly, the mainland tariffs hasn’t hampered a lot of ‘masstige’ brands though such as Michael Kors, Coach, Kate Spade and Longchamp, who are all thriving in mainland China.
• There does seem to have been a negative reaction to the top luxury Western brands in China, where consumers are less interested in ‘bling’ and more focused on quality – see these recent articles in the Guardian/ Forbes:- http://www.theguardian.com/fashion/2014/sep/21/luxury-goods-gucci-prada-china-resistance-to-bling, http://www.forbes.com/sites/kenrapoza/2015/02/05/for-luxury-retailers-chinese-women-take-fashion-recess/
Tapping into the Increasing Shopping Tourism market from China
Key points to consider here when targeting this audience are:-
– the different travel calendars i.e. Golden week – October and singles day (11/11 – the biggest e-commerce day in China)
– the importance of Social Media to reach this market. An estimated 82% of Weibo users purchased a product online and four fifths of users searched the platform for a product or service to buy in the third quarter of 2014. With over 150m monthly users, primarily between the ages of 20-35, Weibo proves itself to be a cost effective marketing tool for European online retailers to attract the Chinese consumer.
Luxury Retailers are upping their e-commerce game
• Luxury retailers have been relatively slow to embrace the Web in China, and in particular mass market shopping platforms such as Tmall. But things are changing; when Burberry launched its Tmall store there was a drop in the fake market for Burberry products, showing the scope for protectionism as well as market growth in these channels.
• There is also a buoyant market in luxury e-boutiques, such as ShangPin and Yoox, which presents opportunities for Western brands.
The Shifting Social Landscape
• Social is key to reaching the luxury market.
• There are two main channels to consider to tap into the high-end/ Fashion space; WeChat & Sina Weibo.
• WeChat has gained a significant amount of ground over Sina Weibo this year.
• In terms of e-commerce in these channels; Alibaba has invested in Weibo while Tencent has teamed up with Alibaba rival JD.com. As a result, only JD.com shops can sell directly through WeChat, while brands that want to promote their Tmall shops on the mobile messaging platform can only link out to them.
• Brands are only starting to develop their response to these complicated market trends, but 2015 will be the year that more labels develop clearer strategies to keep their brand DNA intact while embracing these channels.
Quality Versus Quantity
• When Weibo dominated the Social market in China, efforts were more based towards viral sharing – paying KOLs (top bloggers) for mentions, to up the volumes of shares. With the emergence of WeChat the focus is very much on quality of messaging, rather than quantity, WeChat’s function as a 1:1 sharing network limits the number of posts an official account is allowed to make. The brands that will succeed here, will be the ones who get their customers to share quality information with 10 of their closest friends rather than 100 random followers.
• The rise of WeChat and e-commerce in China’s luxury market means that brands will have more details on their consumers’ demands and shopping habits than ever before. Expect a growing number of brands to use digital tools to improve CRM, track in-store customer engagement, and pinpoint VIP customers in order to improve their Chinese clients’ experience as well as brand loyalty.
Challenging times ahead for the Luxury market in China. lets watch this space.
For more information on Regroup China please click here:- www.regroup-china.com