With a large pool of luxury players currently diving into China’s market, the country has become one of the most competitive business environments in the entire industry. The intensified competition requires brands to stay abreast of quickly-evolving Chinese shopping behaviors if they want to win the market’s daily battles — and, ideally, the long-term war.
Following its inaugural collaborative luxury report with Boston Consulting Group (BCG) last year, Tencent Marketing Solutions released its latest edition on June 18, titled “Tencent x BCG 2019 China True-Luxury Playbook” at the 66th annual Cannes Lions Festival of Creativity on the French Riviera.
The report notes China’s luxury market reached $123 billion (110 billion euros) in 2018, growing by six percent from the prior year. It also predicts that the country will contribute 41 percent of global luxury consumption by 2025 — a big jump up from 33 percent in 2018. This monumental growth will be super-powered by the next generations of customers in China: Millennials and Gen Zers. “Luxury consumers [in China] are very young,” says Nicolas de Bellefonds, partner and managing director at BCG France. “48 percent of them are aged under 30 but contribute to 42 percent of luxury sales.” These young customers are currently buying big on ready-to-wear apparel, accessories, and shoes, but have yet to develop the same level of sophistication as their predecessors on handbags, watches, and jewelry purchases.
Below, Jing Daily sums up five surprising findings from the report to help brands understand the nuances of luxury shoppers in China:
1. WeChat remains the most-used social media app during discovery and research, followed by Weibo and Little Red Book
The report says Tencent’s social media platform WeChat remains the uncontested No.1 platform for consumers to discover and research luxury brands and goods. 52 percent of surveyed respondents said the WeChat ecosystem triggered their interests in a luxury product, followed by Weibo (28 percent), Little Red Book (19 percent), short videos (seven percent), and then others. Kiki Fan, General Manager of Sales and Operations of Key Accounts, Tencent Marketing Solutions, said the company offers a holistic ecosystem that assists luxury brands in acquiring customers, monetizing social traffic, and managing the customer relationship.
2. Word-of-mouth (WOM) marketing is gaining significance
Secondly, the importance of online WOM marketing — including friends’ moment ads/chats, communication with sales assistants and customer service — saw a significant rise from 2018 to 2019, the report notes. BCG’s de Bellefonds pointed out that this change was particularly worth noting for brands, as “in the past, it was more on influencers/key opinion leaders [to serve as the key touchpoint for consumer discovery], but now more and more consumers are trusting each other.”
3. “Research online, purchase offline (ROPO)” demand surges
“Research online, purchase offline” retail behaviors rule the Chinese market, the report finds. As it has already been a salient characteristic of Chinese shoppers as noted in the 2018 Tencent x BCG report, the demand this year rose from last year by over 20 percent to 82 percent, which is roughly 30 percent higher than the global average. Meanwhile, even overseas luxury consumption by Chinese nationals is highly influenced by domestic online touch points before purchase, the report says. This finding once again indicates the necessity for luxury brands to not only develop digital pathways but to also forms seamless online-to-offline strategies when targeting Chinese customers.
4. An ever-fragmented Chinese influencer landscape that’s remarkably different from the West
The report further notes a hypercharged influencer market in China that Western luxury brands may be unfamiliar with — but one that is essential to comprehend. Normally, Western influencers can be categorized into three types: celebrities (A-list), mainstream fashion bloggers, and niche influencers. However, the variety of influencers in China is much more nuanced. There are product influencers, “sharenting” (shared parenting), fitness lovers, home décor lovers, food bloggers, artsy backpackers, etc., who also hold a large amount of power in influencing consumers’ shopping decisions and behaviors.
5. The top-50 Chinese cities generate over two-thirds of luxury consumption
China’s leading 50 cities hold 65 percent of luxury consumers and contribute over 70 percent of luxury sales, according to the report. Beijing, Shanghai, Guangzhou, and Shenzhen, which are defined as the top-tier cities by the report, spend an average of $14,557 (13,000 euros) on luxury goods-per-consumer, followed by 11 Tier-1 cities at around $13,437, 32 Tier-2 cities at about $12,317, and the rest of the Tier-3 cities at $10,076.
Overall, developing digital sufficiency has become an indispensable part of luxury brands’ strategies in China. The report finds over 50 percent of surveyed respondents expect improvements in digital shopping experiences offered by brands at their offline stores. The ability for brands to enhance their digital intelligence will be crucial towards gaining traction in today’s crowded and cutthroat Chinese market.