The Chinese luxury market is the battleground for brands. Who won, who lost, what it takes to excel when competitiveness is getting stronger. Finally, what is the role of very young consumers. Three analysts explain perspectives and, above all, pitfalls of the People’s Republic. Mario Ortelli, managing partner at Ortelli & Co., Amrita Banta, CEO and co-founder of Agility Research, and James Roy, director of the Shanghai office of the same company talk about it with BoF.
The luxury market in China
“The gap between luxury winners and everyone else is bound to widen. But, from now on, it will be more and more difficult to increase sales”. Who has won in China so far? “The best brands with an established leather goods business, a strong digital presence and a good network of stores. Brand perception and digital presence are the two factors that divide winners from losers. Brands are usually excellent at both. Hermès is an exception with its relatively discreet digital presence”.
“China’s spending on luxury has not yet reached the levels of when it was possible to travel abroad,” explains Banta. The resumption of travel shopping will not take place until 2023. With travel restrictions, “luxury gifts have become an important category”, continues Banta. Millennials are currently the largest consumer in the Chinese market.
Brands also invest heavily to attract Gen Z, that is, those born after 1995 (which are about 80 million in China). How can this be done? “They really like being added to WeChat by store sales assistants. They don’t find it as an imposition and they want more personal connections with brands, and this is a key opportunity” adds James Roy. This is confirmed by the fact that, according to the data in the Tmall-Bain report, the sale of products born from collaborations or in limited editions has risen from 300 to 400% between January and October 2020.