• Andrew Collins

The Ins and Outs of Chinese Luxury Consumer Growth

Despite a sluggish global economy, growth in China has been rampant in many industries for the past few years. One area where growth has softened is in the Chinese market for luxury goods. Yet major luxury brands are operating as if runaway growth in China is still the norm. Many retailers have continued to roll out stores across the country hoping to increase sales to Chinese consumers, but would their efforts be better spent abroad?

Industry experts in the luxury market have reached a consensus that forecasts a growth rate of between only two and four percent in 2014, down from twenty percent in 2012. Regardless of these slowing numbers, brands continue to expand their on-the-ground presence in China. For instance Burberry, which has experienced great success already, has launched over 70 stores, with eight in Shanghai alone.

Some other brands have tried to emulate the success of Burberry. For instance A&F has plans to launch 100 stores in China over the next decade, starting with their flagship store in the Jing’an district of Shanghai. Even Apple is preparing another retail push in China.

However having hundreds of stores in China may not be the most strategic way of reaching Chinese consumers. With luxury market growth slowing, and with luxury goods being incredibly expensive in China, it may be time for brands to focus less on how many stores they have in China, and more on whether their digital presence is flourishing. After all, there is one industry in China seemingly untouched by slowing growth – outbound tourism.

Outbound tourism is posting year-on-year growth of 18 per cent. Two hundred million Chinese tourists are expected to travel overseas in 2020, so it may be more beneficial for brands to focus less on customers in mainland centres and instead target Chinese consumers where they most readily spend their disposable income, abroad.

Brands would still benefit from having some on-the-ground presence in China’s tier 1 and 2 cities, but perhaps they should more avidly pursue social media strategies that will not only enhance the potency of their local presence, but advertise their accessibility for Chinese consumers when they’re travelling away.

Of course the end game is to get the consumers in stores wherever they are, but brands should definitely consider integrating social media campaigns more readily into attracting their customers abroad, lest they end up with more Chinese outlets than customers.

*Image via The Business of Fashion

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