Online drives Chinese luxury sales rebound
Physical stores miss out on action as nation leads shift in where to purchase high-end stuff
After several years of slumber, China’s luxury market is finally returning to growth. You would not know that, though, from peering into its — mostly empty — high-end stores.
Western luxury brands have banked for years on rapid growth in China to drive global profits. The country’s breakneck economic expansion created legions of wealthy consumers keen to flaunt their newfound status.
Many travelled overseas, buying high-end handbags and exotic watches in London, Milan, Paris and elsewhere.
But when luxury retailers invested heavily to bolster their marketing and expand their store networks within China, the bet never quite paid off.
A slowdown in the Chinese economy, as well as an anti-corruption campaign led by the country’s president, Xi Jinping, left customers less willing to splash large amounts of money.
That is now changing. Sales of luxury goods in mainland China are forecast to grow by between 20-22 per cent this year, according to a report by the consulting firm Bain & Co.
The authors of the study, one of the most closely watched overviews of the global high-end retail market, predicted that such expansion would drive up growth across the global luxury market by as much as 8 per cent.
On the streets of Beijing, Shanghai and other Chinese cities, however, luxury shoppers are hard to find.
And that is because the country is increasingly leading a shift in how such shopping is carried out.
The sight of would-be buyers in any of those luxury shops, however, is extremely rare. Salespeople have little to do except mill around and stare through the front windows.
Instead, customers in China buy their luxury goods from elsewhere — and increasingly
The Chinese are accelerating the shift of the luxury industry to a more millennial state of mind...” Claudia D’Arpizio | Bain partner and lead author of the study
online. Whereas groups like LVMH Moët Hennessy Louis Vuitton and Kering have traditionally invested heavily in a flawless in-store experience, catering to consumers who want to be pampered and doted upon.
Chinese shoppers are typically younger and heavily influenced by social media.
Revising pricing strategies
More and more, they like to spend their money in a digital shopping culture that is distinct from that of Europe and North America, and they are well-versed in price differences across the world.
As a result, luxury brands have revised their pricing strategies in China and have worked to cater to local customers. They communicate with customers via WeChat, a ubiquitous messaging and social media app that is increasingly used as a shopping portal, they partner with regional celebrities and “influencers”, and they offer additional services like white-gloved delivery staff to replicate the old-fashioned shopping experience.
“Buyers of luxury in China are young, increasingly fashion-savvy and well aware of the price-value equation,” said Claudia D’Arpizio, a Bain partner and lead author of the study. According to D’Arpizio, the strong performance of the mainland China market suggests that luxury brands’ new strategies are bearing fruit.
“The Chinese are accelerating the shift of the luxury industry to a more millennial state of mind,” she added, “and are responsible for much of the sales growth we have seen so far this year.”