Luxury Redefined: Trends Moving The Chinese Luxury Market.

In January 2023, KPMG China and DLG jointly released a report titled Luxury Redefined: Building trust with Chinese consumers through authenticity and integrity. The paper aims to highlight current trends in the Chinese luxury market.

In the joint webinar organized for the release of the report, Pablo Mauron , Partner and Managing Director China at DLG (Digital Luxury Group) , and Willi Sun, Head of Advisory, Consumer & Retail at KPMG China , delved into key market topics and how brands should be prepared.

Dive into the Q&A below, composed of the many interrogations attendees had during the webinar, to know more about the Chinese luxury landscape and get an overview of the market's current trends.

You’ve talked about Tmall being the biggest window for many luxury brands in China. What are consumers looking for on other digital platforms, like WeChat, TikTok, etc. How should brands develop different EC strategies across?

From a communications POV, developing content that takes into consideration the stage of the user journey consumers are at, on that platform – i.e. content that is more information-driven and catered to the interest stage of the consumer journey on WeChat vs more awareness driven on TikTok (Douyin); while Xiaohongshu, as a platform dominated by user-generated content, plays a critical role with third-party voices on the Interest and Advocacy stage.

From an EC merchandising POV, understanding the way consumers use these platforms to shop, and the type of consumers that are typically shopping on these platforms:

• Tmall is a window to the brand universe, with many of the consumers in luxury brand stores being first-time consumers of the brand, products, and content on Tmall store need to address that; lower-priced products tend to sell better on Tmall as it is the first point of entry to the brand universe for consumers.
• WeChat shoppers tend to already be familiar with or are returning customers of the brand. Therefore brands can consider putting a larger assortment of products up on their WeChat store for browsing purposes; acting as a product research space or brand directory for consumers (note that over 80% of consumers still research online and purchase offline).
• TikTok (Douyin) is usually used for live-streaming sales, and products on the store should be "livestream-sales" friendly.

How will Western countries benefit from China’s reopening? When will it return back to the pre-pandemic levels, based on your observations?

It’s difficult to predict when things will be back to pre-pandemic levels, but the growing consumer confidence in China is a positive sign.

The return of Chinese travelers will bring about a redistribution of consumer spending across markets, but the extent of this remains to be seen. However, we are not expecting a dramatic change, as Chinese consumers have also gotten used to purchasing luxury domestically over the past three years, this evolution of consumer shopping habits is not going to change overnight just simply because leisure travel is now possible.

It will of course also be quite dependent on brands’ pricing strategies across markets; brands with clear price harmonization strategies in place are less likely to see huge variances. Brands that do not, however, might see an uptick in sales in European markets; and the daigou economy might start flourishing again as well.

How can brands understand/define their consumers even before purchases, in order to communicate and target them precisely?

This is where SCRM and an integrated CDP (Consumer Data Platform) come into play, especially on WeChat.

An integrated CDP enables brands to capture and tag their consumers across channels based on behavioral and transactional data, allowing them to better identify their preferences and demand, as well as their current stage in the consumer journey.

With membership programs, brands are able to track consumers from an earlier stage in the consumer journey – prospects instead of customers – and nurture that interest over time, moving consumers along the journey within the ecosystem.

Brands can tag and segment these consumers with SCRM solutions available on the market, which will also allow them to customize content and messages to different consumer groups at different stages of the consumer journey.

Do you still see this population looking for good bargains and being price driven or this behaviour is changing? In relation to this question, will Hainan and other free tax zones be the location to go to?

While not necessarily focused on a good bargain, consumers across all markets are naturally price sensitive to a certain degree.

This is, of course, especially so for certain product categories, especially when there is a huge price gap present between products sold in offshore duty-free zones like Hainan vs in the city (i.e beauty).

One should note that Chinese consumers are also maturing, and in consumer categories like fashion, watches & jewelry, it is not so much about price but also about the availability of specific products (SKUs), which makes price sensitivity less apparent in this case.

You talked about a segment of luxury consumers that focuses more and more on local products, do you think it will have a real impact on international luxury brands in the future?

This speaks to a larger trend of increasing appreciation for local crafts, flavors, and culture.

Meaning that international brands will need to be more mindful in their messaging and even product development, as introducing elements of local craftsmanship or local icons and motifs will be important in attracting this segment of consumers.

For inquiries, please reach out to our team on digitalluxurygroup.com