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Photograph by Emily Hlavac Green

Chinese consumers represent 35% of luxury purchases throughout the world. The emergence of a wealthy middle class boosted the growth of the Luxury industry in China. Even though expansion slowed in 2014, the figures and growth prospects remain more than encouraging. But is the golden age of luxury in China drawing to an end?

No More Bling-Bling

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Brands must realise that Chinese consumers are evolving and increasingly becoming more sophisticated. This means that new challenges and new expectations are being presented. Novelty rather than tradition, discretion rather than visible Logos. Chinese Luxury consumers are moving on to smaller, less mainstream and more niche brands. A logo-less Hermès bag being preferred, over a visibly branded Louis Vuitton; contrary to previous Chinese consumer habits!

A Redirected Demand

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Affluent Chinese individuals are wealthy enough to travel and do their luxury shopping overseas. Taxes applied by the Chinese Government on luxury and fashion goods are often considered as extreme, pushing the elite to shop abroad whilst the less wealthy purchase more counterfeit based items through the black market. The Chinese Government identified this spending power escape and subsequently cut taxes on imported products. For the moment only fashion and other sectors are concerned by this particular tax deduction. The Government aims for Chinese consumers to buy on their own soil and with the government’s acknowledgment of the potential of the luxury market, it would not be surprising to see more regulations in this industry sector.

A New Offer

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The future face of the Chinese luxury industry is likely to be shaped by home-grown designers, with new talents emerging within China’s fashion industry and gaining more and more recognition among Chinese luxury consumers. Going local is therefore the developing trend in China. Some luxury brands have seized this opportunity by acquiring Chinese firms to match the Chinese market. For example the French group Kering partnered up with Qeelin a Chinese jewellery brand, which features the French know-how and the Chinese culture symbolisms. They have also incorporated a similar business model with Hermès and Shang Xia, the Chinese Luxury Lifestyle brand, which represent Chinese culture in a contemporary way. This allows foreign brands to match China’s specific cultural characteristics.

The Digital Challenge

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In China Online customer experience is as important as Offline customer experience, if not more. High-End and Luxury brands must realise how essential having a well-built Digital Strategy is in China. Producing a website in Chinese, hosted on a Chinese server, being present on local social networks is imperative! The problem is that many brands tend to hold more importance on the In-store experience and think that going online will hinder their prestige. Refusing to organise a presence on successful E-Commerce platforms such as Tmall, due to fears of their image being misrepresented to the mass market. The digital landscape is vast in China, allowing you to find some upscale E-tailers such as Shangpin or Yoox that helps Chinese consumers to find the newest and hottest designers. These types of e-commerce platforms perfectly answer to the new need of finding unique labels and for designers to promote themselves on the Chinese Fashion Market.

The Mobile Age

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Some luxury brands have made full use of Chinese digital tools, such as Mont Blanc who launched a game entitled Big Boss through WeChat (The leading social messaging App in China) during a limited time to promote the brand in China; Burberry invited their followers to special events by using the ‘Shake’ function on WeChat. Standalone App’s are also very effective ways to operate a digital presence, 50% of sales made by the E-tailer Shangpin are made via their mobile App. Mobile shopping is expected to rise in China, therefore luxury brands tapping into the Chinese market should consider mobile payment systems such as Alipay widely used in mainland China. M-Shopping is the new E-Commerce trend in China which brands should embrace.

The luxury sector might have slowed in China but it is still representing a huge market compared to the rest of the world. After breaking into the market using global methods, brands should now readjust their strategy in order to answer to the new needs and expectations of the Chinese consumer.

Written By: Marjanne Mabialah (Journalist & Junior Digital Marketer)

Editor: Florence Bailey