Navigating Luxury in China: a Look at Shoppers’ Evolving Expectations
China’s luxury customers have emerged from the pandemic with a new set of retail expectations. And now, nearly four years after the first set of lockdowns, international retailers are rethinking their domestic and international strategies to keep pace.
These new expectations, in part fueled by the country's uncertain economic outlook, mean Chinese shoppers are traveling less, are being more scrupulous with their spending, and are seeking a higher level of service when making luxury purchases. Yet, despite the challenges of an increasingly complex macroeconomic environment, luxury retailers have opportunities to establish deeper, more localized strategies that accelerate long-term regional growth.
During our latest FARFETCH Platform Solutions (FPS) industry roundtable, hosted in partnership with Jing Daily, our community of luxury leaders met in Paris to discuss the trends, expectations, and solutions powering innovation in the Chinese market.
Here are three things to consider when building a retail growth strategy in the new Chinese luxury environment:
Cultural Relevance is Essential to Growth
Understanding your Chinese luxury customer is essential to providing experiences that capture their attention and convert their interest. After all, when brands look at China as a big-picture market, rather than localizing their approach to smaller locales, they leave important customer touchpoints unengaged.
Chinese cities of all sizes are culturally varied. Chengdu, for example, is known for its laid-back lifestyle, where shoppers are engaged in niche communities and aesthetics like skateboarding and hip-hop. Conversely, Suzhou, a small city located just 40 minutes west of Shanghai, is known for its high-net-worth individuals, historical architecture, and natural landmarks. The city’s residents and millions of annual visitors look to experiences and brands that speak directly to their affluent niche.
As an international brand or retailer, understanding these differences can help unlock the market and enable you to tailor campaigns, products, and services to their unique preferences. This is especially true in Tier-3 and Tier-4 Chinese cities like Yangzhou and Mohe. While often ignored by international retailers, these cities are centers for luxury growth and innovation.
In addition to regional niches, luxury brands and retailers should be developing campaigns, products, and events relevant to China’s unique calendar of holidays and festivals. These include the Mid-Autumn or Moon Festival, an annual day of gifting in China, and Singles Day, China’s equivalent of Black Friday. Last year, Singles Day reached an impressive $84.5 billion in gross merchandise value, more than six times as big as Amazon’s Prime Day.
Luxury brands that seek to develop long-term relationships with Chinese customers need to prioritize cultural knowledge both on and offline. Whether it’s tailoring campaigns to regional subcultures or launching activations for key cultural moments, luxury retailers should invest in gaining cultural expertise and give validity to their understanding of, and respect for, Chinese culture.
Shoppers are Spending More at Home
Where Chinese customers shop is changing. While only 41% of Chinese shoppers bought luxury goods domestically in 2019, the number has surged to a remarkable 62% this year.
During lockdown, Chinese customers’ inability to travel meant they were spending more money at home. Even as borders eventually reopened, new visa requirements and reduced tax incentives across European fashion capitals have made shopping overseas less enticing.
Domestically, the Chinese Luxury market has matured to meet this new demand and local retailers have differentiated themselves by offering elevated in-store experiences. Aligned with the Chinese customers’ rising interest in experiential retail, experiential boutique experiences are becoming increasingly commonplace. In the first half of 2023, these stores accounted for 35% of the newly opened retail spaces in Beijing.
Within China, international luxury brands and retailers have had to adjust their in-store retail strategies to accommodate these new standards. In some cases, this means moving away from the high-end commercial shopping complexes and malls luxury customers once relied on and instead developing new high-touch boutiques.
Even beyond China's borders, Chinese customers are anticipating these same best-in-class in-store experiences overseas. As mainland retailers continue to deliver world-leading boutique experiences, the Chinese luxury customer has become more selective with where they spend their money. Faced with increased retail competition from Chinese boutiques at home, global luxury brands must offer unique in-store experiences both domestically and overseas to win over their Chinese customers.
Consumer Values are Changing
As Chinese customers' expenditure decreases by between 20-30%, shoppers are moving away from status-driven luxury purchases and toward brands that reflect their social values.
Luxury customers’ changing priorities are apparent in their growing preference for environmentally friendly brands. Corporate responsibility is now the second most important factor in changing luxury customers’ purchasing habits and sustainability has moved from being a “nice to have” to an “important” factor in their purchase decision-making process. 40% of Chinese customers even said they would stop shopping a brand that does not align with their personal beliefs or values, and persuade others to do the same.
The recent rise of quiet luxury in China is in large part a symptom of this shift in values. While shoppers are certainly spending less, they haven’t stopped shopping for luxury goods altogether. Instead, customers are looking for brands that offer timeless and reliable investment pieces with lower cost-per-wear.
As luxury shoppers become more conservative with their spending, new opportunities are arising for brands to refine their ethos, product offerings, and marketing campaigns to address customers' demands. By developing a deep understanding of changing customer trends within China, brands and retailers can become more strategic with their targeting and develop a brand well-suited for long-term growth in the Chinese market.
Our conversation at the latest FPS roundtable made one thing abundantly clear – even amid a challenging macroeconomic climate, the opportunity for luxury success in China means it is an essential market for brands and retailers to invest and localize in. Like customers around the world, Chinese luxury customers evolved during the pandemic. Now it's time for brands and retailers to catch up.
To learn how FARFETCH Platform Solutions can help, contact us here.
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