China luxury market, from European heritage brands to local traditional values
People are capable of incredible works of art, from the Terracotta Army in China to the magnificent cathedrals in Europe. This high level of craftsmanship was, in earlier times, the main reason why very few people could live in luxury, as few artisans could deliver such exquisite pieces of work and few people could afford them.
Those luxury islands were exclusive in every Country, from the Palace of Versailles to the sacred ground of the Forbidden City in China, and represented for the elected few the standard way of living. In the past, this exclusivity was something derived from the royal blood or divine right, but in modern times it is based on social values, as the surge of affluent people democratized even the most sacred rituals in showy practices, deprived of their symbolic heritage, replaced by the new individualistic and personal success meanings.
The classical era of China brings a strong resemblance to the lifestyle of Louis XIV court in the 17th century. As much as the western king had his good political reasons to keep its allies and enemies close to court, Confucianism brought few privileged people, for example, intellectuals and bureaucrats, close to the court as well. The main difference was that in Versailles the luxury was used to keep people dependent on the court, while in the Forbidden City it was used to fuel the tradition of gifts exchange: luxury products were necessary as they were traded among the royal courts and they had to be the most refined products of craftsmanship (Rovai, 2016).
Luxury tradition in China started five centuries before Louis XIV and maintained the Country on top of the world, or at the same level as Europe in the later years, till the 18th century. This simple fact makes me think of China as the cradle of luxury, probably not as an industry but certainly as a historical anecdote.
In 1792, for example, Lord Macartney was sent to China to ask for an English embassy in Beijing. He brought some of the best western luxury and technological products of his time, but the Middle Kingdom briefly dismissed both the envoy and the gifts as they were considered low-quality products (Qianlong Letter to George III, 1792).
Luxury and economic superiority of China came to an abrupt halt in the Maoist period, and those very years are influencing what today is happening in China.
What is happening now in China is an entirely different story. In 2018, China contributed up to the 33% of global luxury spending, which translates into almost €400 billion, and by 2025 it is estimated to reach the 46% quota, a bit less than 550 €billion, all of them spent at home (Bain & Company, 2019).
Understanding the basic profiles of the Chinese luxury customers, trying to figure out which emotional benefits are more significant for them, and which personal touches are most memorable, is part of the challenge of hospitality in China. The other part is about design and communicating a message, aligned with the aspirations of the customers.
Chinese people buy luxury products to validate their social status. Consumer behavior is dictated by their desire to be part of a specific social group and to put distance from other undesired social qualifications. Western brands are seen as a sign of being a citizen of the world, and pertaining to an affluent western lifestyle. The ever-growing segment of the middle class is the main responsible of the success of the luxury brands in China as much as its lack of knowledge is responsible for the tactics western producers adopt in the foreign market.
Chinese luxury consumers trust international and most famous luxury brands in order to be reassured of the functional value of what they buy (Zhan & He, 2012). Brand culture and heritage play a significant role in assessing which brands are trustworthy.
This attitude is even more highlighted by Kapferer and Bastien (2009) in their typology of luxury matrix. Far from the excesses of the Russians, the discretion of the French people and the English individualism, Chinese people prefer to be testimonials of heritage stories, inspired by authenticity and a high ratio of price/ performance.
Luxury is that which can be repaired. — Hermès
Across various luxury categories, in the top five brands in China, we can see famous and international names like Chanel, Dior, Hermes, Cartier, Gucci, Louis Vuitton, Prada, Armani, Bulgari and Tiffany (Bain & Company, 2010). They are all heritage brands, but the success of luxury brands is not all due to such pedigree.
In 2017, the wildly popular tv show The Rap of China brought to success the streetwear brand Supreme, in particular after its collaboration with Louis Vuitton. Supreme strong acting as a luxury brand, even without heritage, played well on scarcity and with influencers, to the point to become a genuine Veblen case.
Even if the values offered by luxury products are somewhat universal, the marketing strategy used to propose them in a different country must take into account local peculiarities. Famous key influencers in China, for example, are a mix of western and eastern celebrities, as for any Chiara Ferragni, there is also a Yang Mi. In hospitality, a clear example is Sands and its ‘movie’ campaign, which sees Beckham as a protagonist together with local celebrities.
Internet restrictions in China, such as the impossibility to view Instagram, play a critical role in brand awareness up to a certain point, not as much as necessary as to be present in local Internet communities or with online stores. Tiffany, for example, has a very comprehensive WeChat site and a captivating Engagement Ring Finder app. Michael Kors has also invested in local web presence in the video app Douyin (TikTok elsewhere) and has collaborated with local influencers.
Stress on localization and a growing sense of self-confidence are the natural signs of growth of a more mature market. Knowledge about the brands brings with itself knowledge about the values they support, and finding them in the local culture comes to no surprise to the younger generations. Gen Y and Z are the most tech-savvy, and before any purchase, they diligently do their research. Thanks to the Internet and the new technologies, information and knowledge are at hand, and this simple fact has two consequences: local marketing messages and online purchases are a must.
Solca et al. (2017) stress that China is a highly digitized market where digital payments are 50 times the number of digital payments in the US. In 2016, China e-wallet payments represented 60% of all e-commerce purchases.
Worldwide, by 2025, the online channel will represent 25% of the market, and Gen Y and Z will own 55% of all purchases (Bain & Company, 2019).
One of the best examples of transformation driven by the points described above is the role of brick and mortar shops that now are becoming very different from the usual transaction hubs. As researches and transactions are moved online, shops visits become cultural trips and social experiences to form new tribes of loyal luxury consumers (China Digital Luxury Report, 2019).
The emergence of the younger generations in the luxury market has seen a weird turn driven by the traditional motivations. Apart from the value for money consideration, which still holds true as before, other psychological motivations such as social acceptance in specific status groups and the search for uniqueness, have brought to the realization of a local luxury culture, derived from traditional values.
Lifestyle tendencies that we can be seen around the world, such as minimalism, encompassing lifestyle and naturalness, are the values sought after by the new generations, and the main drivers for local growth of luxury brands in every industry.
One such brand is Shang Xia, funded by Hermes, a Chinese luxury brand that sells homeware and fashion. The name Shang Xia is a testimony of this trend as it means “As above, as below,” the union of opposites, traditional and modern, east and west.
In hospitality, design, cultural events and sustainability are values cultivated both locally and internationally, in particular from Chinese or Asian traditions’ rediscovery, exported to the rest of the world.
These new form of collectivism, based on different sets of values, seems to derive straight from Confucianism and is the leitmotiv of many Asian hospitality brands. Independently by who founded them, brands like Mandarin Oriental, Shangri-La, Como, Banyan Tree, and Peninsula are monuments to their traditional local values wherever they are in the world.
Technology and the ease of retrieving information and communication, education, new generations with less or no memory of the Maoist period, global appeals to world conservation, sustainable lifestyles and a general revolution of social tribes, have brought China to compete in a new form of luxury market, for which it is responsible for a large percentage. More affluent customers, less tendency to show off, the desire to be unique, keen quality evaluation, new value sets from the new generations, and technology disruption help the new customers to make pondered decisions about what to buy and where, whether online or abroad or at a luxury mall.
These evolutions change how Chinese people perceive and buy luxury products and services. From the society point of view, education about the product is as important as the product itself, as the goal shifts to be part of a knowledge society and to seek self-actualization. From the cultural point of view, the big brands have globalized their luxury presence, with clear messages about rarity, high quality, and expensiveness. In China, there are some peculiarities though, and one of them is that luxury is a way to demonstrate wealth. Technology has pushed even some of the most cautious brands to land on social media networks. Luxury is about reputation, and anything capable of damaging reputation, even worse, in a fast-spreading way, was considered more of a danger than an opportunity.
Eventually, though, luxury brands have found out that social media can be used to listen to the customers, and it is thanks to these new conversations that the emerging affluent middle class and the new generations can finally find affordable luxury products.
Social media, technology, and big data are responsible for more accurate positioning of hotel brands in a very crowded industry. Lifestyle hotels and wellness retreats are born on a very scientific basis and with the idea to be considered unique and create a memorable experience.
COMO Hotels, for example, stress that the experiences they offer are not exclusive, actually some of them are, but in general, this assertion is true. From an authentic castle in Italy to the impossible beauty of Turks and Caicos, these experiences are simply marketed as unique.
In China, other luxury brands, like Kors and Kate Spade, have made a secondary brand line which brings luxury to an accessible level. Other brands have chosen to maintain a single line but sell smaller products, like the Tom Ford lipstick.
Even if the Chinese middle-class segment is growing, not everyone considers many luxury products affordable, and the more savant millennials are with them. Again, unique appeal, high quality, and lifestyle emerge as the main characteristics of any luxury product or service.
It has been defined what luxury is, how it came to China, and how to make it appealing in this emerging market. There are also specific luxury industries that add few peculiarties on their own. In hospitality, for example, besides design and marketing positioning, it is also essential to consider that this industry is about people and that the emotional connection with the customers is the most important benefit for them.
It is also worth noting that emotional benefits, such as feeling part of the family, are personal touches that contribute to transforming any moment of interaction in a memorable experience. Chances are that if anybody thinks of a memorable moment, it was a moment of interaction or total lack of it, to preserve privacy.
Different countries have different sets of values, and international hospitality has the added challenge of educating the staff not only in acting accordingly but also in teaching and accepting what they are in the first place, be this in China or anywhere else.
All in all, what I think is that China is following its path to re-emerge as the cradle of luxury of the next Millenium, thanks to its new generations of educated buyers, willing to invest both in foreign values and in traditional ones.
#china #luxury #hospitality #brandstorytelling #luxurygoods #ecommerce
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Author and journalist for many decades, Nick Gandolfi thrives in the complex world of digital and content marketing where he curates the many contents and digital services which float on the web. A storyteller at heart, Nick Gandolfi published comics, kid tales, mystery novels, tech, history, and educational articles (few e-books too). Nick Gandolfi firmly believes that all stories are important because they go to the heart of things and people. This article appeared originally on my Linkedin profile.
References
Rovai, S. (2016). Luxury the Chinese Way. UK: Palgrave Macmillan
University of California. (2014). Qianlong Letter to George III (1792) . Retrieved from http://marcuse.faculty.history.ucsb.edu/classes/2c/texts/1792QianlongLetterGeorgeIII.htm
Zhan, L. & He, Y. (2012). Understanding luxury consumption in China: Consumer perceptions of best-known brands. Retrieved from http://homepage.fudan.edu.cn/heyanqun/files/2013/12/JBR.pdf
Kapferer, J. & Bastien, V. (2009). The Luxury Strategy: Break theRules of Marketing to Build Luxury Brands. Retrieved from: https://www.researchgate.net/publication/281251957_The_Luxury_Strategy_Break_the_Rules_of_Marketing_to_Build_Luxury_Brands
Bain & Company (2010). China luxury market study. Retrieved from: http://www2.bain.com/bainweb/PDFs/cms/Public/China_Luxury_Market_Study_2010.pdf
Solca, L., Grippo, M. & Lucarelli, G. (2017). China online boom: yet to come for ostrich luxury brands. Retrieved from: https://contactlab.com/it/more/reports/digital-competive-map-china/
Walkthechat (2019). China Digital Luxury Report 2019. Retrieved from: https://walkthechat.com/china-digital-luxury-report-2018/
