Experience, experience, experience for luxury brands targeting China

China is in the midst of slowing economic growth - its GDP growth went up by 7.4% compared to 7.7% in 2013, the lowest rate of growth since 1990.

In the context of anti-graft policies and an influx of new emerging luxury brands, mainland Chinese customers are increasingly looking for exclusivity, quality and value for money without the logos often seen as staples of the luxury consumer.  There is also a greater diversity of preferred brands on the market versus a handful of dominating high-end brands.

According to Bain & Company’s 2014 China Luxury Market Study, published yesterday, 70% of the 1,400 mainland Chinese consumers surveyed said they like to try out different brands and styles.

Almost 45% of respondents planned to buy more products from emerging luxury brands in the next three years.

“This creates a new window of opportunity for emerging brands.  At the same time, it is imperative that more established brands don’t grow complacent as China’s luxury market continues to evolve or they risk falling out of favor with consumers," Bruno Lannes, a Bain partner and author of the study.

“Brands’ future positioning and popularity within the luxury market hinges on their willingness to revamp concepts to serve the needs of the increasingly sophisticated and well informed Chinese consumers while managing the growing diversity of sales channels such as daigou.” said Lannes.

Daigou refers to overseas personal shoppers who buy luxury goods for and ship them back to customers in the mainland.

The daigou market grew to an estimated market value of RMB 55-75 billion last year.  The biggest share of this market is taken up by cosmetics, followed by leather goods, watches and jewelry.

Luxury has become experiential

Experience will become a key differentiator for brands.  This is illustrated by another competitor for the wallets of luxury Chinese consumers: luxury travel and experiences such as spas and cruises.

80% of the study's respondents said they would travel more and 55% said they have spent money on a luxury hotel or resort in the past.

Lannes shares three tips for luxury brands hoping to remain competitive in the Chinese luxury market.

1. Enhance exclusivity and the VIP experience

Ramp up VIP programmes and customise store formats and product categories to maintain an image of exclusivity. Meanwhile, set aside aggressive store growth for the sake of being present and instead target the right locations to reach the right pool of consumers.

2. Rethink your approach

As Chinese consumers become more sophisticated and educated, being fashionable and investing in design and exclusivity is key.  Develop a regional strategy that provides consistent and good experiences across borders.

3. Roll out omnichannel touch points

Extend your distribution channel to e-commerce platforms and roll out digital campaigns on social media, specifically platforms popular with mainland Chinese consumers such as WeChat and Weibo.