Luxury Fashion, Digital Innovation and the Chinese Consumer
The Chinese luxury consumer market is growing at a rapid pace, and it’s only getting started. The speed of acceleration and influence is unprecedented: consulting firm McKinsey predicts that Chinese luxury buyers are expected to spend $150 billion on luxury items by 2025, amounting to almost 40% of the global luxury market.
What does this mean for the world of retail, and how do Western companies continue to stay relevant in the face of such formidable change? In an exciting panel discussion organised by FarFetch in collaboration with FashHack, we took a closer look at the Chinese luxury industry, digital innovation in the market, as well as strategies for targeting the Chinese consumer.
‘China used to be a copycat nation. Today, they are a land of innovation.’
Alexis Bonhomme, VP off Greater China, Commercial at FarFetch opens the panel. ‘Growth and development have been fast, but that doesn’t mean there aren’t challenges ahead.’ Alexis goes on to highlight that trends and innovations are indeed very often driven out of China, and that foreign companies must re-tool their R&D strategies if they are to keep pace with newly innovative Chinese enterprises.
David Boyle, Customer Insights Director at Harrods, agrees. ‘Technology is literally everywhere in China; stores are equipped with AI-powered ‘magic mirrors’ to enhance clothing recommendations, there is zero regard for privacy and data security…,’ the audience chuckle. ‘All these technologies amp up the level of personalisation.’
Manufacturing is also ahead of the curve. Victoria Maigrot, Consumer Discretionary Specialist at Berenberg, says that China is simply more efficient at selling products, and, due to fierce competition, produces products of a higher quality. Western companies ought to watch and learn. Tom Nixon, Client Service Director & Co-Founder of QUMIN, adds that while luxury companies in the West traditionally look to heritage as a tool of differentiation, Chinese people are increasingly interested in brands that are relevant.
Kiara Alves Walters, Senior Strategy Analyst at FarFetch and the moderator of the panel discussion, goes on to ask the panel whether they feel that mobile is how consumers largely access luxury goods. The answer is an overarching ‘yes’.
‘In-store experience is still important, but leveraging social media is crucial,’
says Victoria. After all, engaging with consumers on mobile is where the customer journey begins. David agrees that mobile is vital, but also points out that, if customers have vague needs, the in-store experience can still be very useful. The emotions behind the in-store experience are unparalleled, Alexis agrees, but highlights that we need to be aware that the youngest online customers are predominantly Chinese. Queenie Yang, Editor of Asia at Vogue International, adds that, due to China’s vastness and its overwhelming pace, 68% of consumers use e-commerce because of convenience.
Bringing along the Chinese consumer onto the luxury retail journey isn’t easy. Victoria points out that emotional handholding is needed to help consumers make online purchases — and uses fashtech startup Hero as an example of a company successfully integrating that method. Video chat and connecting online shoppers with live associates in-store are some examples of the way that companies can convert customers. Tom notes that the savvy Chinese consumer can see through obvious tactics like influencer endorsements, but high-end videos hold a lot of power, as do WeChat travel groups and target advertising.
It is also easy to get things very wrong, and companies hoping to succeed in China need to be aware of common pitfalls. The expert panellists unanimously agree that Western brands need to respect Chinese pride and culture. Avoiding European-centric strategies and crafting a precise, localised China strategy is paramount. Equally, it is vital that companies do not underestimate their Chinese competitors and their creativity. It is futile to waste time trying to ‘understand’ China — simply trust and listen to the experts you hire, as well as your team in China.
The discussion rounds off with predictions on what the China market will look like in 5 years’ time. It is clear that Chinese luxury consumers, who have increasingly become the core of the market over the past 15 years, have drastically influenced the retail industry. Growth will continue to come from the millennial consumer, and companies will need to understand how to stay at the forefront of their changing taste. We can also anticipate growth in domestic market spending. Queenie emphasizes that the Chinese government is incentivising well-educated people to relocate to lower-tier cities in China, which luxury brands ought to look into and exploit.
Innovation, then, is imperative for luxury brands if they hope to stay relevant to Chinese consumers and their evolving tastes. ‘There is so much change all the time, it can be hard to keep track,’ says David. ‘But if you focus on the core and master the basics — and aren’t too distracted by the constant changes — you’ll be on the right track.’