Ask The Experts: What’s In Store For China’s Luxury Industry In 2015?

A solid gold Buddha at Chow Tai Fook in Beijing. (Jing Daily) With changing consumer tastes, rising incomes, and rapidly developing technology, China’s luxury market is transforming at lightning-fast speed. We’ve already brought you some of our own predictions of what’s likely to happen in the industry for 2015, and decided to check in with top experts on everything from travel to digital to hear their thoughts on what’s in store for the year. We asked each expert to answer the question, “What is the top trend you're watching in China’s luxury market for 2015?” with regard to their particular field. Check out what they have to say below: Retail Charlie Gu Account Manager, China Luxury Advisors @ChinaLuxAdvisor The year 2015 will be one where we see how “light luxury” brands such as Coach, Michael Kors, and Kate Spade survive and revive in an increasingly competitive market segment. Concerns of overexpansion and brand fatigue led to a bad year for Coach in 2014, with the company recently tasking Mulberry and Loewe veteran Stuart Vevers to reinvent its brand image. Another interesting development will happen in the luxury watch segment. In addition to the broad impact felt by Swiss watchmakers due to China’s anti-corruption campaign, the imminent launch of Apple’s first smartwatch will require these brands to come up with new strategies to retain their market share in China. Noriko Villanti Makino Guest Experience, Value Retail As Chinese consumers become increasingly sophisticated, they are developing their own unique and noteworthy expressions of style. The old but prevalent style culture of mimicking runway looks is quickly vanishing with Chinese leading the way as global fashion icons and style taste-makers. They are admiringly fusing the beloved Western trends of high-low and mix-and-match with uniquely Chinese fashion trends. The shopping experience created in our luxury outlet village featuring premium product offering, unparalleled service and a unique brand mix is a natural choice for this type of sophisticated shopper. Luca Solca Managing Director, Sector Head Global Luxury Goods, Exane BNP Paribas Luxury spend by Chinese consumers will continue to grow, but consumption will likely polarize. Accessible luxury and premium products and brands should grow strongly, supported by more and more Chinese consumers making into the middle class. High-end consumption, on the other hand, is likely to stay on the back foot. Asset price deflation—especially in real estate—is causing income inequality to ebb, prompting consumers to be more “reasonable.” Government policy aimed at spreading wealth more broadly will compound this—as well as a new “pro austerity” and “anti-bling” mood. Trading down and cherry-picking of only the most iconic products in each brand (we call this the “locust field” effect) should be the order of the day. James Roy Associate Principal, China Market Research Group The focus in 2015 will once again not be on the big brands, the Louis Vuittons, the Guccis, the Chanels. Look for Chinese luxury buyers’ attention to continue to shift to niche newcomers, like Kate Spade, Michael Kors, and Tory Burch. Chinese consumers, once content to save up months’ worth of their salaries for a single big-ticket purchase, are splitting their spending money more between luxury brands and their new obsession, travel. Shopping still figures into tourism (reaching Chinese consumers outside of China is just as important as reaching them in-country), but experiences matter too. Luxury hotels need to take notice. Digital Rebecca Lui Director of Marketing and PR, Alipay U.S. @alipayus China’s luxury market is exciting for many reasons, but the first is that it has become the largest e-commerce market in the world, and is adopting e-commerce faster than anyone else globally. We predict a growing number of brands and retailers will start selling directly to China through e-commerce platforms, even without a physical store presence. Our own recent experience showed us how powerful this can be. Alipay teamed up with U.S. retailers for Black Friday, including Macy’s, Bloomingdales, Saks, and Neiman’s, in a move to make products more readily available to Alipay members. Some of our merchants saw a phenomenal increase in sales. So as American brands become savvy about the Chinese market, and as the Chinese continue to travel more and gain exposure to other brands, we’ll see this market continue to grow. The potential is enormous. Alexis Bonhomme General Manager Business & Development, Curiosity China @CuriosityChina For 2015, luxury brands' digital marketing activities will focus on mobile. Expect luxury to adopt higher interaction between social media and CRM activities. On mobile devices, this means less mass communication but more dedicated messaging, where the right message will be send to a targeted audience. This can be accomplished by performing database segmentation with tailor-made push messages. In addition, brands will increasingly connect the offline experience with day-to-day communication, bringing more services and added value to the final customer. This will help brands focus on increasing repeat purchases as opposed to finding new customers. Much of this mobile activity will take place on WeChat, which is being used as a 360-degree communication tool: WeChat is now combining daily communication between close groups of users with mobile payment, e-commerce functions, and soon, banking functions. The announcement of WeBank, 1st online private bank in China is likely to make WeChat the main communication tool in the country. Pablo Mauron General Manager China, Digital Luxury Group @pablomauron The digital landscape will remain more dynamic than anywhere else, and trends and opportunities will continue to evolve at a tremendous pace. However, the race to exposure is behind us and the key challenge for 2015 will be to demonstrate the concrete ROI of digital marketing in China. Political, sociological and economic parameters put luxury brands in a situation where the China P&L must demonstrate profitability, no matter if it’s through online or offline, owned or 3rd party properties. Digital investments are being rationalized and all the activities will be benchmarked accordingly. The idea of performance is going to be deeply integrated in every digital marketing activity which is a very logical evolution. Lifestyle & Travel Dan Washburn Author, The Forbidden Game: Golf and the Chinese Dream and Chief Content Officer, Asia Society @DanWashburn After a grim 2014, it’s hard to believe things could get worse for China’s golf industry, but in today’s political climate anything is possible. China banned new golf courses in 2004, but over the ensuing decade no country in the world built more of them than China — not even close. Last year, however, amid Xi Jinping’s corruption crackdown, the government began taking the moratorium more seriously, and the construction boom went bust. Rumors swirled that authorities had plans to close down as many as 100 illegal courses in 2015. Meanwhile, the number of golfers in China continues to rise. Something’s got to give. It’s just hard to believe that it will be Beijing. Delphine Lignières Founder & CEO, China Rendez-Vous @ChinaRendezVous The concept of luxury has positively evolved and consists more of creating unforgettable experiences and sharing strong values than just enjoying a product of a high value. Customers are becoming more attached to heritage, tradition, and self-fulfillment than just a public display of their wealth status. China Rendez-Vous integrates those trends in associating luxury brands with targeted lifestyle experiences related to communities led by passion: boating, polo, aviation, classic cars, art, wine, music, and more. Steven Schwankert Founder, SinoScuba and Editor, The Beijinger @greatwriteshark Outbound travel is where it's at. When SinoScuba started 12 years ago, the number of direct flights from Beijing and the ability of Chinese citizens to get visas were both hindrances. Now, with 100 million travelers per year going abroad, there is no more sought-after visitor than the one from China. They certainly won't all be divers, but even if one-tenth of a percent took the plunge... Erwan Rambourg A uthor, The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun In 2014, many wealthy Chinese stayed home or spent less abroad when travelling for different reasons: foreign exchange (FX)—Europe looked expensive up until recently; fear of travel—airline accidents in South East Asia, HK disruptions; political tension—in Thailand for instance—and more. When they stay at home, wealthy Chinese spend less on luxury items. My strong conviction for 2015 is that wealthy Chinese outbound travel will resume as FX has become favorable and we lap the tough trends of last year. All administrations are making it easier for their countries to welcome Chinese. Pierre Gervois CEO & Publisher, China Elite Focus @chinaelitefocus With the new 10-year, multiple-entry visa for the United States now available for Chinese travelers, Western European destinations should realize that they will face severe competition from across the Atlantic Ocean in attracting affluent Chinese tourists and investors. The United States will become in a few years the number destination for Chinese outbound travelers, not only for sightseeing and luxury shopping, but also for real estate investment.

Ask The Experts: What’s In Store For China’s Luxury Industry In 2015?

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Published January 14, 2015

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Ask The Experts: What’s In Store For China’s Luxury Industry In 2015?