China is seen as an "Eldorado" by many luxury brands, and is
expected to become the world's largest luxury market in a very near
future. As a consequence, many luxury brands have been heavily
relying, over the last decade, on Asia and China to grow. But
recently, Burberry has announced its growth in Asia, for the coming
years, would come from Japan. The growth rate on the Chinese luxury
market is still expected to be around 2%, but figures are down from
7-15% in the previous years.
The Chinese market has entered a period of transition, and
leading luxury companies will need to be creative to adapt to these
changes. Current areas for growth are the affordable luxury market
- with brands such as Coach - and smaller cities (tier 2/3). The
Chinese market is also becoming global - 60% of the sales on the
Chinese market actually occur outside of Mainland China.
These changes also signal that the market is becoming more
mature, and that consumer preferences are changing. Luxury brands
therefore need to understand the risks of a 'one size fits all'
strategy in collectivist cultures. As research conducted with my
colleague Dr Kastanakis suggest, consumers from collectivist
cultures have very different types of motivations when consuming
(see Kastanakis & Voyer, 2014). Chinese values of collectivism
mean that belonging to groups is more important than being seen as
different. Chinese consumers therefore want to look like the
'typical' luxury consumer, rather than stand out with a different
limited edition. The type of products preferred by Chinese
customers is also changing. Chinese consumers used to prefer loud
products with highly visible labels (e.g. LV bags; Burberry check)
but are now becoming more educated and turn to quieter brands (i.e.
with less visible logos). This means that brands with highly
conspicuous logos and symbols, such as Burberry or Louis Vuitton,
need to reinvent themselves once again to continue to appeal to the
Another major change affecting the Chinese market is the
emergence of local players. Brands such as Shanghai Tang, which
belongs to the luxury conglomerate Richemont; Powerland, a Chinese
handbag maker competing with Prada; or Shang Xia, linked to the
French luxury brand Hermes, have appeared on the Chinese luxury
landscape. They arrive at a time when Chinese nationalism is
rising, and when wealthy customers are looking for alternatives to
the main Western luxury brands. These newcomers however face some
difficulties when trying to go global, given the negative
connotation of the 'Made in China' image for luxury goods. Shanghai
Tang creatively replaced its 'Made in China' label by a 'Made
by Chinese' one.
Altogether, these changes make the Chinese luxury market more
interesting than ever. For luxury companies, it is the beginning of
a new era on the Chinese market - one that will need creative
inputs to stay at the top!
For more on this topic, you can watch my interview on the topic