Is aspirational luxury back in China?

Aspirational labels like Coach and MCM have over the past decade achieved considerable growth in China, propelled by a rising middle class. Today, these brands are targeting a younger consumer base: Gen Z and first-time luxury buyers. But will the strategy work? MCM, Coach, Longchamp, Tory Burch, and Bao Bao by Issey Miyake consistently appear in the top spots on Xiaohongshu when users search for college student handbag recommendations. Priced between 1,000 RMB and 5,000 RMB ($140 and $700), these bags appeal to young consumers eager to experience luxury during their university years, or as they transition to their first jobs. However, this demographic, which is emerging as a growth driver for aspirational brands, remains sensitive to cost, typically choosing entry-level luxury options. “Bags have long been the first luxury item Chinese consumers, especially younger demographics, consider purchasing,” says Vicky Li, managing director at China MarTech agency Retex. “Unlike seasonal items, bags are versatile, used year-round, and effortlessly paired with different outfits, lowering the daily cost per use. Classic styles, in particular, retain value well. Buying luxury handbags, even accessible ones, often satisfies a need for social recognition and status, which requires little explanation.” Self-expression over exclusivity Coach’s approach to this emerging consumer base was highlighted during its Q2 2024 earnings call, when CEO Todd Kahn remarked, “Chinese consumers are now more deliberate and thoughtful in their purchases, which bodes well for Coach.” This shift in consumer behavior has benefited the brand. Its parent company, Tapestry, reported 19% YoY sales growth in Greater China, signaling the growing popularity of Coach among Gen Z shoppers. Similarly, French luxury brand Longchamp achieved 84% sales growth in mainland China in FY 2023. Last year, it tapped into the rising “handmade DIY” trend, reaching target audiences on Xiaohongshu with a new bag customization feature. This strategy not only refreshed the brand’s youthful image, but also drove a 20% increase in users aged under 27 years. The concept of “affordable luxury,” which gained traction in China around 2010, redefined luxury consumption for a burgeoning middle class, offering access to premium products at approachable prices. Yet, as high-end brands expanded their entry-level options, aspirational consumers who once drove affordable luxury now find themselves drawn to full-fledged luxury labels. This shift has prompted accessible luxury brands to refine their strategies. Now, economic uncertainty has Gen Z shoppers favoring a new type of luxury – one that emphasizes self-expression over brand exclusivity. “Young consumers are more cautious and savvy, emphasizing cost-effectiveness and practical value. Redefining ‘new luxuries’ that allow Gen Z to maintain a premium lifestyle affordably is essential,” says Kelly Shen, General Manager of Brand Communication at brand agency Gusto Collective Shanghai. Embracing logoless, modern aesthetics In recent years, Coach has embraced a fresh and modern aesthetic, combining youthful energy with a sleek, contemporary design. With prices that are accessible to young professionals and Gen Z, the brand has become a favorite in the affordable luxury segment. One of its newly launched products, the Brooklyn shoulder bag featuring a minimalist design, has garnered widespread praise from fashion enthusiasts on Xiaohongshu, quickly becoming a standout in the online style community. MCM, too, has recalibrated its brand image to appeal to younger buyers. Under the guidance of creative directors Tina Lutz Morris and Katie Chung, the brand has refreshed its iconic logo designs, eschewing full logos while embracing a cultural narrative that speaks to young consumers. Its new collections, such as the Fall/Winter 2024 line, exemplify this transformation, incorporating signature motifs with a modern twist. “We tailor our products and strategies to each platform, which helps MCM consistently rank among the top brands. We’ve also developed exclusive products specifically for the market, designed with the styles and colors that resonate with our customers,” says Sabine Brunner, Global Commercial and Brand Officer at MCM Global. Branching out As competition heats up in China’s luxury market, brands like Coach and MCM are increasingly looking to expand beyond first-tier cities into third- and fourth-tier markets. These smaller cities, while often overlooked by global luxury brands, offer significant growth potential as the appetite for premium goods rises. “Emerging lower-tier cities deserve brands’ attention. These cities are now becoming highly attractive – the populations tend to be younger, economically mobile, socially aspirational and increasingly sophisticated. It’s also important to take local tastes into consideration,” says Shen. Coach has been at the forefront of this expansion, not only opening brick-and-mortar stores in these cities, but also doubling down on its e-commerce presence. It has launched flagship stores on major online platforms like Tmall and JD.com, while also integrating with livestreaming platforms such as Douyin and Kuaishou to engage with consumers in real time. MCM, too, has capitalized on its strong digital presence to fuel growth. “Compared to the industry, we are actually growing this year, thanks to our strong online presence and highly targeted products for each platform,” Brunner tells Jing Daily. “Chinese consumers have a high acceptance of digital assets and consumption, making digital channels the most effective way to reach young audiences. E-commerce platforms, targeted ads, social media marketing, mini-program stores, and multi-channel approaches drive purchasing behavior,” says Li. Aspirational luxury’s new era For many consumers in smaller Chinese cities, brands like MCM, Coach, and Longchamp represent coveted entry points into the world of luxury. In regions where international luxury brands are scarce, local offerings typically range between 1,000 RMB ($140) and 5,000 RMB ($702), making the midpoint of RMB 3,000 ($421) for these affordable luxury brands an attractive option. Shen says that young consumers’ purchasing decisions are often influenced by peer discussions and community feedback on social media platforms. Hence, “exclusive merchandise, such as capsule collections that are available only at pop-ups creates urgency and encourages purchases, appealing to the desire for exclusivity,” she adds. MCM is keenly monitoring what its young customers want. “We do collaborations that are linked to Chinese culture, telling stories that not everybody is aware of. We partner with local bookshops for example in Shanghai, or we created a fun ride through an MCM passport in Shanghai where we would invite customers to discover several places for flowers, Mybarre dancing, and bike tours. With every stamp, you could then return to MCM and receive a surprise. It is all about traveling, physically but also digitally, the digital nomad lifestyle,” says Brunner. For houses like Coach, MCM, and Longchamp, the path to success in China’s evolving market lies in striking a balance between emotional connection, digital engagement, and strategic expansion into untapped regions. Those that strike the right ratio will be best positioned to capture the hearts and wallets of China’s next generation of luxury consumers.

Is aspirational luxury back in China?

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Published October 25, 2024

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Is aspirational luxury back in China?