The luxury industry in China moves fast. Aside from normal challenges like fickle customer tastes, 2018 saw new tax laws, growing consumer debt, and an unprecedented trade war in China, all of which had Western brands scrambling to make adjustments. But despite the doom and gloom, some marketing ideas and brand collaborations led to positive gains this year, and breakthrough technology is likely to help certain companies continue to dominate the luxury market in 2019 and beyond.
Here, Jing Daily offers our year-end look at the 8 (traditionally a lucky number in China) top trends of the year.
China’s tax-dodging daigou business is undergoing seismic changes: In anticipation of the launch of the country’s first-ever e-commerce law on January 1, 2019, the Chinese government has rolled out a series of measures to stamp out the influence of daigou (a term for overseas shopping agents) in the cross-border trading arena. The development has prompted many Chinese daigou to reconsider their business strategies going forward. For global brands, the crackdown will test their profit-making ability in the short term but could help build healthier business relationships with China over the long term.
The crackdown on daigou shoppers will force the business to adapt to a new environment and laws. Photo: Shutterstock
Rising trade disputes hit luxury business: China’s economic growth has been under downward pressure since the onset of the United States-China trade war from July of this year. That has seriously dampened Chinese consumers’ global shopping sentiment and purchasing power for high-priced luxury goods. The depreciation of the Chinese currency even further lessened Chinese tourists’ shopping activities abroad, and many luxury brands, particularly U.S. ones, have gradually felt the chill during this fourth quarter, including Calvin Klein and Tiffany.
China’s Gen-Z consumers are taking over the luxury market: In 2018, not much focus was on the millennial generation. brands were instead buzzing about China’s Gen-Z — a remarkably different generation from the previous one, but alas, many luxury brands are struggling to connect with them. Some common mistakes included confusing Gen Zers with millennials, ignoring their mania for limited-edition luxury items, and picking the wrong celebrity endorsements.
These digitally-connected youths in China are driving luxury sales. Photo: Shutterstock
Leading luxury brands are lowering retail prices to spur domestic consumption: A slew of high-profile luxury brands like Louis Vuitton, Gucci, Burberry, and Marni lowered their retail prices in China in the second half of 2018 in response to the government’s call to encourage domestic consumption. The reduction rate ranged from three to eight percent.
Millennial and Gen-Z consumers’ debts balloon: Many are underestimating China’s consumer debt issue. A recent survey from HSBC shows that the debt-to-income ratio of China’s post-’90s generation (typically refers to individuals born between 1990 and 1995) has reached a staggering 1,850 percent. The most important message to luxury brands is that many consumers fund their luxury consumption with debt, a highly unsustainable purchasing habit.
Western and Chinese tech and e-commerce companies form alliances: The landscape of luxury e-commerce in China is taking shape in 2018. After Farfetch teamed up with JD.com and Tencent, another leading luxury e-commerce platform Net-A-Porter formed a joint venture with Alibaba Group earlier this year.
It wasn’t just Chinese brands forming partnerships with other Chinese brands this year. Many foreign brands joined forced with the likes of JD.com, Vipshop, and Tencent. Photo: VCG
Heritage culture is to Chinese youth what hip-hop is to Americans: Regardless of origin, what intrigues Chinese youth is brands that are able to truly utilize heritage culture (“中国风”) in their product designs and marketing. That can be seen in the extreme popularity of Palace Museum lipsticks and a trending TV show about the life at the 18th-Century Qing Dynasty.
Beauty brands stay competitive through new tech: In order to create memorable in-store experiences for Chinese consumers, a great number of beauty brands including SK-II, Sephora, and Givenchy invested a lot in in-store high-tech devices during 2018. Things like augmented-reality mirrors and AI-powered make-up walls have become a must for beauty brands to open competiive stores in China.