China is a country in constant change. The rate of change related to anything China has been phenomenal, presenting both challenges and opportunities for luxury companies who want to part of this promising market.
Despite a much-reported growth ‘slowdown’ and political upheavals, China’s growth will continue. We expect Chinese luxury consumers’ desire for less conspicuous consumption and unique experiential pursuits to gain further momentum this year. Other trends to watch in 2014 include:
E-Commerce/M-Commerce Becoming the Norm
Consumers (especially younger consumers) have quickly become comfortable buying online. These consumers are more knowledgeable about brands and products, and more trusting of certain e-commerce sites. Buying over the Internet and with their mobile phones have become common. With new technologies making online shopping easier and more enjoyable, as well as integrating online and offline channels, online and mobile shopping could see explosive growth.
Lower Tiered Cities Become Major Battlefield
Luxury brands have moved into lower tier cities and these new markets are getting crowded. New marketing strategies are needed to target consumers in these lower tiered markets. Brands that are trying to get in the market will also be confronted with new challenges such as higher cost of entry.
Research & Purchase Model Is Here to Stay
As Internet use continue to climb in China, Chinese consumers are doing more research before they purchase. Given their love for ‘showrooming’ and the rise of m-commerce, it is not uncommon to see Chinese consumers browsing products in store and not buying. Instead, they are now using their mobile devices to investigate products they have seen in a store and find them cheaper elsewhere. For those who have the opportunity to travel overseas, they will check out products in China and then buy overseas to save money; and potentially buy something not available in China.
Growth of “Lifestyle” Brands
As Chinese consumers become increasingly sophisticated, they are looking to express their identity and status through fashion. They are also “seeking more unique and personalized shopping experiences, and also brands that can represent themselves on an emotional level.” The concept of lifestyle brands is still in its infancy in China, but they are becoming more popular. These brands attempt to embody the values and aspirations of a group. Consumers like the unique store experiences offered by lifestyle brands. Furthermore, lifestyle brands are generally priced as more affordable luxury.
Shift from Rapid Store Expansion to Improve Store Productivity
In the past, luxury brands have adopted aggressive expansion strategy to gain visibility. However, brands are finding that this strategy is not sustainable because it is not profitable. Brands are now focusing on the return on their investment (ROI) and one of the best way to achieve this is to improve the productivity of existing stores. According to a recent report from Li & Fung, retailers are upgrading “by investing more in R&D, launching more long term marketing campaigns for brand building, introducing new store brands and retail concepts, launching differentiated merchandise assortments, and accelerating format revamps and innovations.”
Second Hand Luxury Boom
Second-hand stores and shopping have been gaining popularity due to a slowing economy and changing consumer attitudes. A new breed of shoppers – fashionably chic yet budget-conscious – are no longer concerned that a luxury handbag is “gently used” if it can be bought at a fraction of the price. With the government cracking down on corruption and displays of wealth by officials, expect the (re)selling of luxury “gifts” to continue, further increasing the supply of affordable secondhand goods.
China to Become Greener
Given China’s current environmental predicaments, Chinese consumers will embrace the latest and greatest health safety innovations in 2014. Brands who believe that “health is wealth” would likely thrive in a more health conscious China.
image credit: slices of light