The Chinese market has become an indomitable force in the global luxury industry. Indeed, the past two decades have seen European luxury brands become increasingly reliant on consumers from the Far East. According to a recent report by Bain Consultancy and Italian luxury brand group Altagamma, Chinese consumers are currently responsible for a third of all global luxury sales (approximately AED 25.7 billion per year in sales according to consultancy firm McKinsey), which Bain Consultancy predicts will grow to 50% of all global luxury sales by 2025, while McKinsey gives the slightly more modest prediction that Chinese consumers will be responsible for 40% of all global luxury sales by the same year. Although all luxury brands have locally led strategy at their core for their various international outposts, China arguably demands special attention. Not least because of its potential role as kingmaker in the future of the luxury sector but due to the idiosyncratic nature of the Chinese market. Censorship in the country has meant that globalisation, which has played into the hands of messaging for many brands and celebrities has developed differently in China. A good example of this is the difficulty with which many global stars have struggled to make headway in China. Kim Kardashian, for example, who has 139.2 million followers on Instagram, has barely made an indent on the Chinese leading social media site Little Red Book, where she has around 171,000 followers compared to local star Angelababy who has more than 14.4 million followers on the platform. Melissa Twigg recently highlighted in the China Morning Post, that part of the issue is ignorance to the nuances of the Chinese market, pointing out that many TV exports such as Keeping Up With The Kardashians are not known in China, while many of the celebrities who do post on Chinese social media sites do so in English. According to Twigg, Karlie Kloss who is also on Little Red Book “barely made a dent” with her Estee Lauder campaign on social media in the country.
Holding court in China
A key strategy for some leading European fashion houses has been to localise collections through merging local influences in one-off regional shows. In March last year, Dior showed its Haute Couture Spring/Summer 2018 collection in Shanghai with 12 pieces created especially for the show. The new pieces were inspired by traditional Chinese fans and included striking red designs (symbolising happiness and good fortune in traditional Chinese culture). Indeed, it’s a strategy that seems to be working for the label - RTG Consulting named the brand the “most relevant” for Generation Z consumers in the country. In a further sign of the strategy’s success, the label has repeated the formula in other markets with successful shows in Dubai and Marrakech in 2019. However, luxury brands are not immune from getting it wrong. In fact, fashion commentator Elaine Chow, argued that the show could have been perceived differently: “In touchier times, not only would the brand have been lampooned for its lazy, pandering use of the colour red, but two of the dress designs – put front and centre as part of the collection – might have sparked controversy for being strikingly similar to Japanese imperialist imagery,” she commented in Chinese luxury consumer publication Jing Daily. Indeed, D&G famously faced backlash earlier this year following a campaign in the country, which depicted a Chinese model attempting to eat various Italian foods with chopsticks.
Youth power In China
18-to-30-year-olds account for the overwhelming majority of luxury consumers, making up more than 60% of the market, and as a result, digital penetration has been integral to successful luxury campaigns in the country. “Since 2015, the top 40 luxury brands in China have nearly doubled the portion of their marketing budget devoted to digital, spending between 40% and 70% of that on WeChat. These leading brands use WeChat to identify and target consumers for online and offline sales. For example, Estée Lauder consumers can use WeChat to book facial treatments, and Coach allows consumers to access coupons and manage their membership cards on the ubiquitous social media platform,” explains a recent industry Bain Consultancy report.
Reports this year of stalling growth in China cause understandable worry amongst the luxury market. Ongoing trade disputes with the US have created uncertainty in the Chinese luxury trade, further rattled by announcements by Apple and Richemont of slower growth in the country. However, industry insiders remain optimistic: “Chinese consumers are slightly less bullish than last July, but they are still very optimistic about the future,” said Erwan Rambourg, an industry analyst at HSBC who specialises in the region. Indeed, despite change, many consumers say they will continue to prioritise luxury products. “I will delay spending on a car or house, but am spending more on goods,” 25-year-old marketing employee Xue Yueyue said earlier this year. Moreover, according to a recent study by research firm CSG and public relations agency Ruder Finn, 46% of shoppers said they planned to spend more on luxury goods this year. The study looked at 1,385 luxury consumers and nearly half of all respondents said that they were planning to spend more on luxury goods throughout 2019 than in 2018. Chinese consumers are arguably the future of the luxury market. With a population of more than 1.4 billion and a growing bourgeoisie class it is not difficult to see why. Despite market turbulence, China remains the undoubtable kingmaker for the future of the luxury industry.