Chinese Luxury Market Forecast for 2020
The year 2020 is upon us and has brought with itself a host of opportunities and challenges. Some of the markets and regions are more susceptible to feeling the changes brought by technological and digital revolutions due to the quick rate of adoption and receptive market dynamics. China is among those nations that have seen a huge revolution in the field of technology and digitization and owns a large share in the global market.
Although other segments in China are also embracing the changes the year 2020 is bringing, the luxury market is among the ones that are most likely to take on the challenges the future has to offer.
If you own a luxury brand and want to make a debut in China, you will have to step in after doing your proper research work, and maybe get assistance from a reliable Chinese translation services to help you along.
Here is the luxury market forecast of China for the year 2020:
1. Brands, the Millennials and Culture Sensitivity
The millennial generation is always receptive and more open to changes than other generations, especially in a rapidly-changing market such as China. To say that Chinese consumer has spent well on luxury goods in the past as well would be an understatement. In 2018, Chinese spending represented 33% of the global luxury market compared to only 22% and 18% by American and European consumers, respectively.
This amounts to approximately $115 billion spendingsby Chinese on luxury items and this spending is forecasted to grow to 40% of the world’s spending by 2025. This is why luxury brands in China are more culturally sensitive to changes in the Chinese spending patterns, taking special care to be more relevant when it comes to Chinese consumer’s purchase preferences.
Although the Generation Y in China (born in the 1980s) was the first generation to embrace luxury goods and is the driving force of China’s luxury appetite, the millennial generation (born after 1990s) is the new face of luxury items adoption, as they opinionate that spending on luxury items makes them feel “different”.
This young consumer’s consumption of media and the luxury lifestyle portrayed by this media drives consumption, along with a desire to be seen and “snapped” in the latest luxury wear. Other factors such as social influence and knowledge of brands are also the driving factors that propel this generation to adopt luxury goods, thanks to the advancing social media platforms and creative marketing campaigns practiced by luxury brands.
2. Social Media Engagement and Online Channels
As 2020 brings on a wave of new technology and advancement in digitization, luxury brands across the world are harnessing the power of social media to drive their sales and growth, especially in a lucrative market like China. One of the extremely useful tactics employed by brands is the shift from offline to online retail channels. The E-commerce platforms have reported a significant sales figure in the past and will continue to do so in the future as well.
At the end of 2019, online retail sales increased to $1.5 trillion, representing a quarter of China’s total retail volume. This number is likely to increase with each passing year, owing to the boom in the E-commerce sector and the rise in omnichannel shopping. This type of shopping gives the consumer the choice of both online and offline purchases, enticing them to compare and purchase luxury brands easily than in the past.
The advancement of social media and platforms have opened avenues for companies worldwide to advertise their brands in the Chinese market. Thanks to WeChat, the biggest social media platform in China, the Chinese customer can reap the benefits of multiple functionalities offered by the platform to make purchases. Additionally, social media has allowed the younger generation to compare brands after consultation and recommendations from peers and friends, especially in the case of luxury brands—the awareness about the latest brands in town reaches fast owing to word-of-mouth and digital channels.
3. Rental Fashion, 5G Technology and Digitization
Although young consumers are more careful about their luxury purchases, it was reported in the McKinsey Report on China that many of them are not attached to the brands as compared to Generation Y. This is because these youngsters are willing to compare brands and opt for those luxury items that make them “feel and look good”. This is the reason rental fashion and resale luxury market is likely to grow in the future as well.
One technology that is greatly shaping the Chinese digital landscape is 5G technology. The high internet speed allows for a speedy browsing experience of online stores and luxury items, powered by E-commerce stores and platforms. As the tendency towards online purchases of luxury items grows, so will the need to set up online stores, which is why if an international luxury brand wants to make a mark in the Chinese market, it will have to use the power of 5G services and WeChat platform to drive its sales, along with hiring the services of a professional Chinese translation services to translate its website content in Chinese.
Internet retailing and digitization of brands is the next trend to look out for in 2020, and some of the luxury brands are already riding the waves of technology to market and advertise their luxury brands, powering AI technology to add virtual try-on services in their stores. This artificial intelligence and Internet of Things (IoT) both increase the likelihood of consumers making purchases online. In addition, brands are using B2C channels to establish a comprehensive presence across the Chinese market, such as Alibaba’s Tmall and luxury verticals like Secoo, and London-based Net-A-Porter.
Chinese Luxury Market—A Look Ahead
The Chinese market is a receptive market, and when it comes to comparing it to European and American markets, the opportunities that it presents for the luxury brands are lucrative and welcoming. According to the McKinsey Report, forecasted growth of online luxury sales by three times the current market size is predicted, to account for an eighth of China’s 1.2 trillion RMB luxury market by 2025.
China’s young luxury consumers are more inclined towards aspiration and image attached to luxury brands, which is why brands should adopt an ‘updated’ approach, centered on a cycle of refreshed product launches and innovative media campaigns. The keywords for luxury brands in the future are “newness” and “exclusivity”—propelled and fostered through the launch of limited editions, brand endorsements, and collaborations with social media influencers.
Reaching the young consumers also requires a careful approach towards E-commerce channels and online stores, powered by 5G internet technology and digital promotions. As the future approaches, luxury brands can look forward to capturing the young Chinese consumer’s attention by going digitally-savvy and by seamlessly integrating business units across regions, as well as online.