Young Chinese consumers are the main consumers of luxury goods

26/07/2018

 

In addition to focusing on the young people market, luxury brands are accelerating the expansion of e-commerce platforms, especially in the increasingly important Chinese market

 

French luxury brand Louis Vuitton China official online store officially launched delivery services for Chinese cities, which means that Chinese consumers will also be able to enjoy the brand ‘s quality services, currently only available in 12 cities including Beijing, Shanghai, Chongqing, and Guangzhou.

In order to compete with Gucci, Louis Vuitton is entering the Chinese market faster and faster. Currently, consumers can purchase all the products of the brand at the official online store of Louis Vuitton China.

Launch online shopping services in Chinese cities is a good marketing strategy and business efficiency improvement for Louis Vuitton. Louis Vuitton closed nearly 20% of its stores in China from 2016 to 2017, mainly in second and third-tier cities, and closed eight offline stores in Guangzhou, Harbin, Urumqi, Shanghai, Taiyuan, Tianjin, Suzhou, and Nanning.

 

The improvement of the living standards of Chinese consumers has promoted the luxury consumption potential of consumer groups in second and third-tier cities

 

Online shops have helped luxury brands better serve consumers. However, Louis Vuitton is still cautious of the Chinese market. It did not choose to cooperate with JD.com or Alibaba’s  Tmall but launched online shopping and delivery services on its official website.

However, Louis Vuitton is not the only luxury brand that has opened online stores in the Chinese market and offered delivery service. For example, Gucci and Prada can ship products to all Chinese cities. It is worth noting that Louis Vuitton lowered the price of products sold in China in June to support China ’s tax cuts, afterward several luxury brands such as Gucci, Hermès, and Burberry, etc. followed.

According to a report released by Bain & Company in June 2018, China’s luxury goods sales will increase from 20% to 22% in 2018, which is twice the growth rate of the rest of the world, and the expansion of China’s business will maximize the global luxury goods market growth by 8%. The e-commerce business has a small proportion in the global luxury goods market, accounting for only 7% of the overall sales of the luxury goods industry, but is expected to reach 12% by 2020, and still has great market potential.

 

Louis Vuitton’s price cuts in China and the launch of the official e-commerce delivery service are aimed at accelerating the luxury consumer market in China

 

However, Chinese consumers are not satisfied with the purchase of luxury goods in China, mainly on in-store experience and customer service. Improving delivery speed and experience will be factors to consider for Louis Vuitton.

In a report, Deutsche Bank’s Fashion & Luxury Summit, hosted by Italian consulting firm Pambianco, pointed out that Millennials are the main customer base for luxury goods, accounting for 27% of luxury consumers, up to 2020,it will rise to 33%. This proportion will rise to 40% in the next 5 to 7 years. In China, this group is about 200 million people.

 

Although consumers in first and second-tier cities can immediately go to a local offline store to buy new products, for the millennial or even generation Z, the convenient e-commerce platform shopping experience is even more attractive than offline store shopping and it saves time

 

For current consumers, shopping behavior occurs almost anytime and anywhere. For example, millennials consumers will want to buy a new Gucci handbag when they see it on Instagram or WeChat, rather than waiting until they have the opportunity to go abroad.

In the current Chinese market, young consumers have strong purchasing power, and their loyalty to brands is getting lower and lower, which intensifies competition among brands. Now, luxury brands spend almost 80% of their energy on young consumers.

With the increase of sensible young consumer groups, the way luxury brands use high prices for marketing may become increasingly unsuitable for the Chinese market. Coupled with the increasingly fierce competition between brands and the expectation of tariff cuts, the trend of price cuts will more obvious.

Whether Louis Vuitton will break the current competitive landscape of luxury e-commerce in China is hard to say, but one thing is certain: if luxury brands ignore the digitalization and violate the needs of consumers, they may face the risk of being eliminated by the industry. For the Louis Vuitton parent company LVMH, which has a market value of more than 170 billion euros, cannot be taken lightly.

If it does not improve the development of the e-commerce industry, the company may lose its growth momentum. This is the digital anxiety of LVMH boss Bernard Arnault. In front of Bernard Arnault stands Gucci, which is threatening the status of Loius Vuitton, defeated Hermes in younger design and digitization.

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