Retail Hive Wrap Up – China’s Luxury Consumers

3 minute read

By the Hot Pot China Client Team

Hot Pot attended Retail Hive’s Digital Luxury Forum in early February 2020. The Retail Hive is a network of handpicked members based on their ability to contribute at a strategic level. By bringing together Heads of eCommerce and Digital, Omnichannel Directors, CMOs and other business leaders, the Hive creates the ideal environment for idea generation.

Jonathan Smith, Hot Pot’s Founder and CEO, led two roundtable discussions focused on China’s luxury opportunity. As Chinese consumers represent 50% of global luxury sales, it is unsurprising that there was high demand to join this roundtable.

Here is a top-line summary of Jonathan’s guidance he shared during the roundtable discussions:

The China Luxury Opportunity

  • China has the largest single market representing nearly 50% of global luxury in 2019
  • 75% of all new luxury growth will come from China
  • Three quarters of Chinese luxury consumers were born after 1980, meaning 18-40 is the core target audience
  • Digital natives: 600m people made mobile transactions in China 2019, with 60 billion total transactions
  • Overseas — 70% of Chinese luxury consumers will be spending on luxury overseas
  • 130 million overseas trips still represent less than 10% of the Chinese population — it is still the tip of the iceberg

Channel Selection is Crucial

  • Luxury offerings from the main marketplaces Tmall and JD.com are unproven but are picking up pace
  • Tmall Luxury pavilion currently has 140+ brands active but is yet to prove itself as a main channel to the core luxury consumer
  • The days are gone where online experience suffered on Chinese platforms. It is possible to build a web/ecommerce presence in line with global luxury aesthetics
  • Online numbers are compelling, but offline still represent 65% of retail value in China
  • Offline pop ups and brand experiences are critical parts of the marketing mix in China but increasingly are being treated as media touchpoint with attribution, rather than being measured on pure sales per sqm
  • For example, Gentle Monster’s flagship in Shanghai is 90% art installation, 10% retail space

Smart Brands are Launching in China with O2O Propositions

  • For example, at Zara’s Shanghai flagship store, each product is equipped with a QR code tag that enables the customer to order their size to be delivered directly to a waiting changing room
  • Customers can then purchase items directly with WeChat Pay and either leave the store with their purchases in hand or have them shipped to their home within 24 hours
  • Consumers no longer face long queues and can enjoy a hands-free shopping experience
  • WeChat has blurred the lines between offline and online with payment, content, interactive experiences, built into a single all-powerful app
  • Luxury brands are increasingly launching capsule collections and influencer-led collaborations through WeChat eCommerce to offer a frictionless experience

Brand is Hugely Important

  • Own your own channels for social and any activation
  • Ensure your brand is being represented accurately in China but that the right notes are being hit to drive long term growth — certain partners may “sell out” the brand for quick sales but this does long-term damage to the brand’s reputation
  • Think about how your core message needs to be inflected for a Chinese audience while staying true to your DNA
  • Western models can be helpful in selling the international credentials of a brand, but when it comes to practical product shots, Chinese and Asian models are essential to driving conversion as consumers can see items on a comparable body type

Know your Consumer

  • Are you targeting a “pan-China” approach? If so, then much of the media spend may be wasted
  • China is vast with regional variations and it pays to focus
  • How strong is the competition in Tier 1 cities (Beijing, Shanghai, Guangzhou) versus Tier 2 and beyond
  • Hefei city has 8 million people – how effective could your media spend be there? Focus and localise

Test and Learn

  • Always have a longer term (2-3Y) vision and route to ROI
  • In parallel, be ready to test and learn – conduct regular reviews of digital, eCommerce channels and messaging to ensure ongoing relevance
  • Use targeted initiatives to gather data – learn and act on that data on an ongoing basis

At Hot Pot China we partner with forward-thinking brands on their China activity. We guide our clients in maximising ROI from their short, medium and long-term marketing activity in China, as well as executing the same in-market.

Contact Hot Pot China here to discuss how our team of China specialists can help realise greater value in your brand, digital and eCommerce initiatives.