Iconic Chinese cities like Beijing and Shanghai have become focal points for luxury brands hoping to reach Chinese consumers. But as the market continues to mature, China’s lesser-known cities are becoming fashion epicenters in their own right and are now meriting closer attention. China is home to over 600 cities that are classified as tier-3 or below, and the people living in these cities account for 70 percent of the country’s total population and 59 percent of its GDP. The residents of these lower-tier cities (otherwise known as China’s less-developed urban centers) are less burdened by the high living costs that plague residents of first tier-cities like Shanghai, Beijing, and Guangzhou, and most of them haven’t been overexposed to luxury and fashion the way citizens in tier-1 cities have. This limited access motivates High Net Worth Individuals (HNWIs) living in lower-tier cities to travel to the nearest shopping capital for luxury goods. As China’s middle class continues to grow and its spending power strengthens, a whole new subset of the Chinese community has emerged that’s eager to spend on luxury and gain knowledge about brands. But, in a country as large as China, consumer behaviors differ drastically from city to city and region to region. By combining our China expertise with first-hand conversations from local retailers and consumers, the new Jing Daily City Guide unlocks the consumption trends of the most buzzed-about second- and third-tier cities in China. We’ll evaluate each city’s current luxury presence as well as shed light on the intricacies of its retail market — from consumer spending habits to high-end retail spots. For our inaugural city guide, we dive into Nanjing, the capital of Jiangsu province and the second-largest city in the East China region after Shanghai. A three-hour bullet train away from Shanghai, Nanjing is situated in the Yangtze River Delta region and has established itself as a prominent business center for regional headquarters like JD.com and Starbucks. Notably, Nanjing is home to the retail center Deji, which was recently ranked the second-best performing luxury mall in China in 2018. How exactly did a shopping mall in a second-tier city outperform malls in first-tier cities? Who’s shopping in Nanjing? Below, we evaluate the presence of luxury and fashion in Nanjing while also highlighting opportunities for new contenders: Nanjing’s key statistics GDP 1.28 trillion RMB (183 billion USD) Ranks 11th in China’s urban GDP rankings Population Nearly 8.5 million (2019) 30th largest population among China’s cities Nanjing is the second-largest commercial center in the East China region after Shanghai Yearly tourists 134 million (2018) Wealthy population Nanjing ranked No.16 in the nation in producing rich people (Hurun Wealth Report 2018) Nanjing’s province, Jiangsu, placed No. 2 in GDP in 2018, according to data provided by the National Bureau of Statistics of China Average disposable income 52,000 RMB yearly or 7,000 USD (2018) Average disposable income has increased steadily since 2013 Ranks 7th among the nation Luxury Presence The majority of top luxury brands have only one store in Nanjing, located at Deji Plaza (notable exceptions include Rolex, which has three locations) Who is the Nanjing luxury shopper? High Net Worth Individuals Nanjing is a top shopping destination for High Net Worth Individuals from both Nanjing and neighboring cities, particularly lower-tier cities in Jiangsu and Anhui Province. Rapid economic development over the past several decades has resulted in a “new money” class in many lower-tier cities, and as the first generation to accumulate a fortune, this group of people is eager to purchase a large number of luxury goods to impress others. Due to limited access to luxury brands, most in this class still need time to be educated about luxury and cultivate their tastes. Their interest in certain luxury brands or products usually follows that of other members in their local wealthy community, and big-name brands like Louis Vuitton, Hermès, and Gucci — which they consider “badges of success” or symbols of affluence — tend to be their top choices. Rising middle class Well-educated, post-70s-, 80s-, and 90s-born people with high incomes make up the rising middle class that’s shaping current consumption trends in China. As the administrative capital of Jiangsu Province, Nanjing draws many government departments, institutions, and leading companies’ headquarters to the city. Therefore, many middle-class Nanjing consumers work in government offices, the financial industry, and the technology sector. This group of consumers is quite diverse in terms of brand preferences, but they have shown a growing willingness to treat themselves and pay for high-end experiences. Compared with top cities like Beijing or Shanghai, the rising middle class in Nanjing feels less pressure to outfit themselves with luxury for social needs. Students College students — and even younger kids — keep fueling the local luxury consumption in Nanjing. As they’re often the only children in their families, Gen Zers tend to grow up in an affluent and open environment. They’re also better informed about fashion and beauty trends than older generations. For normal college students with limited living expenses, Taobao is the main shopping destination. Aside from colleges and universities, some exclusive private high schools in Nanjing feature elite educations. Students at these schools are fascinated with high-end streetwear, luxury sneakers, and handbags and are generously supported by their parents. Nanjing has many high-quality universities and research institutes (including Nanjing University) and ranks third in the number of universities on the list of 100 National Key Universities. Nanjing’s ratio of college students to the total population ranks No.1 among large cities nationwide, and the city provides talent to the entire Yangtze River Delta Region. Retail snapshot Deji Plaza Opened in 2006, Deji Plaza is Nanjing’s ultimate luxury shopping destination and features big-name luxury stores, premium fashion labels, and niche designer brands. Affluent consumers from Nanjing and the surrounding area — including northern Jiangsu Province and Anhui Province — shop in Nanjing, as there’s a lack of domestic, high-end shopping destinations anywhere nearby. But, at the same time, the high density of Central Business Districts near Deji Plaza offers it some advantages. Like other Tier-2 cities, emerging districts like the Hexi area have been on the city map for a long time, but downtown Nanjing’s Xinjiekou area is still the most vibrant CBD in the city. Known as “the No.1 Business Circle in China,” Xinjiukou has six shopping malls within a half-mile radius of its center — an entirely walkable distance for consumers. This cluster of shopping malls presented a challenge to Deji in its early years, since they’ve been around for a long time and have earned the trust of local consumers. To distinguish itself from these existing malls, Deji focuses on presenting luxury brands and experiences primarily to high-end consumers. The first phase of Deji’s project was similar to traditional luxury shopping malls in that it featured premium luxury brands like Louis Vitton, Dior, Gucci, and others. But the mall’s modern interior design, diverse entertainment facilities, and world-renowned dining options have attracted young consumers and torn loyal consumers away from neighboring malls. While Deji showed a climbing trend, it still ranked after some other high-end shopping malls in Tier-2 cities such as Hangzhou’s Tower Shopping Mall. But it was the second phase of Deji’s project development that generated its extraordinary business performance. Six years after its grand opening, Deji Plaza intended to expand to enrich and upshift its profile. With its large sales volume, Nanjing’s enormous potential for luxury consumption was now being recognized by luxury brands. The plaza reserved key two-floor flagship stores for brands like Chanel, Cartier, Tiffany, and others, and while those luxury brands already had presences in the nearby Suzhou and Wuxi malls, their flagship stores in Nanjing were now superior and better-positioned because of their more diverse inventories and limited editions. Deji is also favored by established luxury beauty brands like La Mer and La Prairie as well as niche perfume labels like Atelier Cologne and Diptyque. Located in the plaza’s underground level, the beauty department features a similar boutique feel to the luxury houses upstairs. And instead of being displayed at counters like in a typical shopping mall, beauty brands in Deji own separate storefronts and highlight their personal beauty advising services and special VIP advantages. Golden Eagle International Shopping Center Nanjing Golden Eagle International Shopping Center is one of the major commercial complexes owned by the Nanjing-headquartered retail giant Golden Eagle Retail Group. The department store chain has positioned itself as a fashion and luxury goods provider. It regularly releases internal fashion magazines called GE MODE to clients, and examples of luxury brands it works with are Givenchy, Lancome, Dior, Valentino, Hugo Boss, Balenciaga, Guerlain, Clarins, Folli Follie, Furla, and more. Ai Shang Tian Di Shopping Center Having opened in 2012, Ai Shang Tian Di is a shopping center aimed at a young generation of consumers who want a fashionable and creative lifestyle. With this target, Ai Shang Tian Di decided to host the Apple Nanjing flagship store and various restaurants that are popular among young Chinese, such as Elementfresh, Wagas, and others. Aside from showcasing fast-fashion brands like Hollister and GAP, the mall is also a favored destination for local streetwear lovers. China’s influential streetwear platform YOHO opened its first offline boutique, YOHO!STORE, at Ai Shang Tian Di. With its curated brand selections (including Western and domestic streetwear labels) and interactive store merchandising, YOHO!STORE drives a good deal of traffic to the mall. What Nanjing residents say about luxury shopping Deji Plaza’s dedication to maximizing shopping experiences drives consumer stickiness to its brand. To understand why the mall is appealing to consumers, Jing Daily interviewed two locals and asked them about their go-to shopping destinations in the city. “Deji Plaza is my top choice due to its modern and vibrant vibe. I enjoy randomly hanging around the plaza, even though I don’t have a specific shopping plan. There are so many fun things that consumers can engage with, such as art exhibitions at Deji Art Museum, pop-up stores, and campaigns. Also, while Deji updates the layout of storefronts and brands frequently, the organized interior structure of the plaza is very consumer-friendly.” — Miss Zhang, an art industry worker in her mid-20s “I would say Golden Eagle International Shopping Center and Deji Plaza. Golden Eagle is among the earliest batch of shopping malls in Nanjing, and I have shopped there for many years, so I am quite familiar with it and can easily find what I am looking for. But at Deji, which is always crowded with young faces, I can identify and catch up with the latest trends. At the same time, its brand profile and in-store facilities are inclusive, so different generations can find places that excite them in the plaza.” —Ms. Wu, a college professor in her mid-50s What retailers say about Nanjing Nanjing is proving to be a unique luxury consumption hotspot, but what are some pros and cons that brands should be aware of? Jing Daily interviewed three experts who have retail planning experience in Nanjing to get a better idea: “Even though Nanjing is a close distance from Shanghai, it captures the nearby wealthy [shoppers] in Jiang Su (especially north of Jiang Su) and An Hui (Maanshan city). There is no other nearby city that has such wide coverage.” —Amanda Wang, Former Montblanc Asian Commercial Director “Brands should do it with confidence. Nanjing is a strong retail town, which is now at the level of a tier-one city. But they also need to look at the whole picture [because] Nanjing is just a drop in the ocean. There are many cities where brands can achieve successful results.” —Miquel Cardona, Managing Partner at Oriental Retail Ventures “Popular trade zones in Nanjing are very obvious locations for brands to launch stores at. However, they should proceed with caution. For example, in Nanjing, Hexi is a young emerging trade zone. Its maturity doesn’t compare to Xin Jiekou, and two out of five projects in Hexi will turn out to be a good option. Second, localization is increasingly important in China, and brands need to build a China-specific strategy down to the city level. For example, brands can invite local Nanjing KOLs and partner with up-and-coming Nanjing brands. Third, local consumers are well-traveled, and they would go to New York or Paris for a better deal. Brands ought to offer a good reason for them to purchase at home, releasing tailor-made products and marketing strategies to stay on top of local consumers’ minds.” —Matt Shapiro, Associate Director of Retail Tenant Representation in China at Savills Key takeaways for brands As Nanjing residents’ disposable capital and local tourist consumption both grow, the city’s current shopping areas, the business center Xinjiekou and luxury destination Deji Plaza, cannot meet rising demand. Hexi District is seen as the next promising CBD, but its land retail and residential property prices have skyrocketed over the past five years. Crowded by upscale apartments and office buildings, Hexi would be the ultimate opportunity for retailers targeting the new middle class and HNWIs. Deji Group and the International Finance Centre (IFC) have validated the potential of Hexi by expanding into the area. Echoing the successful business model of Deji Plaza, a new project — the Deji World Trade Center — aims at building a new landmark in Nanjing, while the city will be the IFC project’s third settlement after finding roots in Hong Kong and Shanghai. Owned by the prestigious Sun Hung Kai Properties, Nanjing IFC mall will house top-notch international brands and hot newcomers, creating a brand new one-stop shopping destination. Currently, luxury houses such as Louis Vuitton, Chanel, and Dior only have one location in the city (at Deji Plaza), but expansions into the Nanjing IFC are foreseeable. As the upscale commercial center projects are due for completion in three to five years, the luxury shopping landscape of the city is sure to be upgraded and diversified quite soon. Reported by Ruonan Zheng, Wenzhuo Wu, and Zheyu Chen.