As we approach the end of 2020, it is crucial to assess the impact of the pandemic on the luxury industry, especially in the Chinese market. To provide a comprehensive analysis, The Boston Consulting Group has partnered with tech giant Tencent to produce the BCG x Tencent Digital Luxury Report. This report sheds light on the changing consumer habits and the rise of online luxury in China.
Contrary to the global luxury sector’s projected decline of 25% to 45% by the end of the year, the luxury market in China is expected to grow by 20% to 30%. This growth can be attributed to the increase in online consumption, which now accounts for 30% of luxury purchases in China compared to 11% in 2019. While the pandemic and travel restrictions have contributed to this trend by boosting offline purchases within the country, the strategic digital positioning of luxury brands has also made luxury products more accessible to Chinese consumers. Platforms like the Luxury Pavilion marketplace and proprietary e-commerce websites, such as the new e-shop by Hermès in Asia, have played a significant role in facilitating this accessibility.
In light of this shift towards online consumption, adopting an omnichannel strategy has become crucial for luxury brands. Crystal Hao, Managing Director & Partner at BCG, emphasizes the importance of leveraging digital tools to understand and meet Chinese consumers’ needs while developing a shopping journey that integrates both service and experience. An example of this approach is Burberry’s immersive social store in Shenzhen, which was accompanied by WeChat mini-programs. WeChat, with its 1.2 billion monthly active users, has become a vital platform for luxury brands to engage with their Chinese consumers.
Additionally, the report highlights the importance of brand content in enhancing the consumer experience. Personalization is key, with 45% of consumers surveyed believing that the use of their personal information is crucial in enhancing their brand experience. Furthermore, 50% of consumers seek information about a brand’s history, indicating the significance of meaningful brand content. These findings are particularly relevant as the under-30 age group now drives 47% of the luxury sector’s spending in China. The return of consumer trust, especially among young buyers, has played a significant role in the growth of the luxury market in China.
Despite uncertainties regarding health in the coming months, the digitization of major events like Golden Week and Singles Day in China’s year-end calendar is expected to further strengthen the Chinese luxury consumer’s supremacy. This trend is exemplified by Dior’s upcoming launch of its first capsule collection for Singles Day.
In conclusion, the BCG x Tencent Digital Luxury Report highlights the rapid growth of the luxury market in China, driven by the increase in online consumption. Luxury brands need to prioritize an omnichannel strategy, leverage digital tools, and create personalized and meaningful brand content to meet the evolving needs of Chinese consumers, especially the influential under-30 age group. The report indicates that Chinese luxury consumers are gaining trust and exerting their influence, setting the stage for a robust future for the luxury industry in China.
Useful Links:
– The Luxury Pavilion marketplace: Luxury Pavilion
– Dior’s capsule collection for Singles Day: Dior Singles Day Collection
