Luxury goods are in high demand, and there’s no better example of this than the market in China. In recent times, luxury goods sales have skyrocketed, and Morgan Stanley’s report on this growth in the Chinese market is an interesting look at the power of Chinese consumers. This article examines the data from Morgan Stanley’s report to better understand the remarkable growth in the luxury goods sector in China.
1. Chinese Consumers Fuelling Luxury Growth – Morgan Stanley
Luxury brands are continuing to enjoy broad-based growth across the world, with some brands relying heavily on Chinese consumers to fuel their success. Morgan Stanley recently released a report that examined how Chinese luxury consumers, both at home and abroad, are driving spending on these leading brands.
First, the report highlighted the growth of mainland Chinese luxury consumption, more than doubling in the past five years. With a population of 1.4 billion people, China is now the largest luxury market in the world. Even with the US trade war and slowing economy, Chinese consumption of luxury goods remain strong thanks to the deep pocketed and fashion-forward Chinese elite. To maximize the potential, many brands have been expanding their operations in the country, launching e-commerce sites, flagship stores, and aggressive campaigns during key holidays such as Chinese New Year.
Beyond domestic consumption, the Chinese have become major players in the traveling luxury market. The number of Chinese travelers rose to almost 130 million in 2018, a number expected to increase to 200 million by 2020. These outbound shoppers continuously look for the latest trends, brands, and fashion abroad, leading to strong sales in luxury markets in Europe and the US, where most of expenditure occurs in stores such as Louis Vuitton, Gucci, Prada and Hermes.
2. Exploring the Chinese Luxury Market Boom
The growth in China’s luxury market is unprecedented and the country is responsible for more than 40% of the world’s luxury sales. As a result, it is no wonder that retailers are keen to explore this boom. Here are some tips for taking advantage of the Chinese luxury market boom:
- Understand consumer preferences. Chinese luxury consumers are becoming more discerning in their buying habits, so it is important to know what products and services they value most.
- Tailor marketing campaigns. Leverage Chinese consumer insights to create campaigns that are specifically tailored to the Chinese market. This includes finding effective ways to communicate the brand message and create engaging content on Chinese platforms.
- Innovate with technology. China’s luxury market is constantly adapting to technological advancements such as digital marketing, mobile payments, and artificial intelligence. Retailers should stay on top of these trends and use them to stay ahead of the competition.
- Stay in tune with local sentiments. Many Chinese consumers are influenced by national or local events and sentiments. Therefore, it is important to stay informed and adjust marketing strategies accordingly.
Moreover, retailers should be mindful of other cultural nuances when targeting the Chinese market. Things such as the appropriate use of colors and symbols, the importance of respect for elderly customers, and the use of language are all important aspects of Chinese culture. Paying attention to these details is key to succeeding in the Chinese luxury market.
3. The Ins and Outs of Luxury Goods Consumption in China
Every company seems to be pivoting towards China for luxury goods consumption. But what is it about China that makes it so attractive?
- Firstly, the presence of affluent middle class has skyrocketed in urban areas.
- Secondly, the country’s government policies are encouraging luxury goods consumption.
What makes the affluent middle class most attractive? A combination of factors has led to steady purchasing of luxury items and a growing appetite amongst China’s upper middle class. From improved economic conditions and investment opportunities, to a rising income level and increased disposable income – this has created a new class of luxury goods shoppers. With such a large and robust population of wealthy consumers, luxury companies have established stores and flagship locations in China.
4. Perspectives on the Future of Luxury Goods in China
The growth of luxury goods in China is sure to lay the blueprint for continued success in the future. Here are some of the latest projections for the luxury goods industry in 2021 and beyond:
- Chinese consumers are expected to make up two-thirds of the global luxury goods market by 2025.
- High-end Chinese shoppers are an increasingly valuable customer segment, due to their demand for quality, innovative designs, and noted loyalty.
- Sales of luxury goods in China are expected to reach $47 billion by 2021 as compared to just $10 billion in 2015.
The country’s emergence as a major global shopping center means that luxury goods companies must stay ahead of the curve to remain competitive in this lucrative market. Luxury firms are well-positioned to capitalize on this shift by shifting their focus to local innovation, leveraging digital technologies, and investing in services that cater to Chinese consumers. Additionally, more firms are joining the trend of offering omnichannel customer experiences so that shoppers can experience the same level of convenience in whichever way works best for them. By making these investments and keeping an eye on the shifting shopping landscape of China, luxury goods companies will be able to maximize their opportunities for growth in the coming years. As Chinese consumers continue to explore the world of luxury goods, the growth in this market looks promising. With increasing availability and direct access worldwide, it’s more and more likely that Chinese luxury goods will become synonymous with class and quality across the globe. It’s an exciting time to not only observe but be a part of this growth!
