The explosive growth of China’s luxury fashion sector is being driven by a major influx of new shoppers: 50% of customers entered the market just in the past 12 months, and this group is expected to drive 80% of its growth, according to a survey by Oliver Wyman. That growth potential is massive; sales increased 40% to $41.6 billion in 2021.
These new shoppers are young, with 40% below age 25, and they have very different preferences compared to older luxury shoppers. Retailers will need to understand their demands if they want to succeed in China’s luxury space and tap into its growth potential, including:
- Luxury purchases are all about self-gifting: China’sGen Z luxury shoppers are willing to spend on themselves and for themselves, whether it’s to celebrate a triumph or recuperate from a setback, and retailers should position products to fit this need;
- Social media is an absolute must: Social media is even more important to Chinese retail than it is for shoppers in the West, so retailers need to get on the right platforms, set up livestreaming and keep an eye out for new social opportunities; and
- Associates are critical parts of the experience: While Chinese luxury sales moved mostly online during the pandemic, live associates remain integral to the experience, because shoppers are now becoming digital clients even if they aren’t in-store customers.
Self-Gifting Makes Trendy Items More Appealing Than Pricey Goods
While a desire to “dress to impress” may be a driver for many luxury shoppers worldwide, that isn’t the case for China’s youngest consumers. Gen Z is buying luxury items that match their own interests and life events, which has a significant impact on the types of items that are selling.
“It’s much less about impressing others compared to when you think back to what was driving luxury consumption a generation or two ago in China,” said Hunter Williams, Partner in the Retail and Consumer Goods and Pricing, Sales and Marketing Practices at Oliver Wyman in an interview with Retail TouchPoints. “This generation is much more about self-gifting. That can either be celebratory — so [for example] a pay raise or a promotion — but also a kind of retail therapy, consoling yourself after a breakup or other misfortune. And what does it mean to be able to target that type of occasion? It means having something at the right price point that fits with the need.”
It also means offering trendy designs and seasonal items is important, according to Williams. While a Chinese Gen Z luxury shopper’s parents might have been interested in expensive jackets or evening gowns, younger shoppers might prefer a signature T-shirt at a significantly lower (if still premium) price point. Luxury brands that can keep up with shifting trends can position themselves for success with this fast-growing demographic.
All Social Media is Important, from Livestreaming to Direct Messaging
Luxury and social media have gone hand-in-hand in China for years, and that relationship has only grown stronger since COVID-19 drove more sales online. “That’s the channel for influence,” said Williams. “You see a lot on the pure social media like Douyin, which is the [Chinese] Tik Tok equivalent. You also see a lot on the social shopping platforms where you’re learning from your peers about what is hot and what you would want to purchase.”
Live shopping also is much more mainstream in China than it in Western markets. China is years ahead on this front, and studying the habits of established Chinese retailers can provide universal lessons for all livestreaming programs.
However, retailers shouldn’t limit themselves to just the cutting edge of social media technology. Well-established messaging apps also are an important part of luxury retail in China, and recent developments on these platforms are creating new opportunities.
“WeChat is interesting because it’s a communication platform for friends and family, but it’s also become a platform for associates to reach clients,” said Williams. “Increasingly, WeChat mini programs — embedded storefronts inside WeChat — are becoming an important channel and taking share away from traditional official sites and Tmall. That’s been an emerging channel, and WeChat is really becoming an ecosystem in its own right.”
Associates ‘Have Broken Out of the Four Walls of the Store’
WeChat is just one of the ways the store associate remains relevant in China even as ecommerce increasingly dominates. Oliver Wyman’s survey found that 60% of Chinese luxury shoppers talk to a sales assistant at least once every two weeks, through channels including WeChat text, voice messages or phone calls.
“With COVID and the rise of online shopping it would be very easy to say that the role of the in-store sales associate should be fading away,” said Williams. “Actually, what we’re finding is the opposite. The role of the store associate has gotten extremely strong, but it’s broken out of the four walls of the store. Sales associates are reaching out to their clients by WeChat messaging and phone, establishing real relationships. They are being a real driver of sales and repeat purchases and getting people really passionate about these brands.”
This means that Chinese shoppers are very well-informed before they visit brick-and-mortar locations: 70% say they have already decided on what they’ll be purchasing (with help from their sales assistant) before going to the store. Williams noted that Chinese shoppers aren’t actually making purchasing decisions any faster than in the past — the customer journey just starts elsewhere.
With this in mind, retailers need to facilitate online research, combining a strong online presence to seed inspiration with knowledgeable associates who can build relationships with customers. This is particularly important for Western retailers looking to launch cross-border operations in China.
“You can’t count on the affluent Chinese consumer to come to you,” said Williams. “You need to find a way to go to them. It’s harder than it was in the past. The competition has a head start. Local Chinese brands are stronger and have done a lot of catching up, and there are some more risks to consider now versus in the past, but it’s absolutely an impossible-to-ignore market.”
For additional advice on selling cross-border, including more tips from Williams, check out Retail TouchPoints’ Cross-Border Commerce Special Report.