Luxury: Is The Two Or Three Tier City A Paradise Or A Hell?

Just in Luxury brand As we enter China's two or three tier cities, people worry about luxury brands. Is the luxury brand able to maintain its high-end brand image after the expansion?

According to the World Luxury Association's 2010-2011 year survey report on luxury goods consumption in China, the top three of China's luxury consumption ability are Hangzhou, Wenzhou and Qingdao. In 2010, luxury brands came out of the "northward Canton" and began to enter the inland two or three line cities.

More than 100 top international brands are accelerating luxury goods in all parts of China. market The total number of franchised stores has reached 1000. Apart from big cities such as Beijing, Shanghai and Guangzhou, the branches of central and western cities have mushroomed. The French luxury brand LV has opened 27 stores in 22 cities in China, including Changsha, Xi'an, Qingdao, Xiamen, Wuxi, Wenzhou and other two or three cities, while Ningbo and Hangzhou have gathered almost all of the international luxury goods. Roger Farah, President of the US top luxury brand Ralph Lauren, recently said at a luxury forum that consumer demand in many two or three line cities is being released, and new markets must be opened up in addition to increasing investment in the first tier cities.

Then, what factors make luxury brands go deep into China's two or three tier city market? Will such strategic layout have a negative impact on its high-end brand image?

Future wealth heights

Luxury brands are pushing forward to the two or three line market. First of all, they see the huge purchasing power of the market. China's rapid urbanization and the growth of wealth outside big cities have bred a large number of luxury consumers in two or three line cities. Bain research shows that in 2008~2009, more than 60% of China's luxury consumption growth came from two or three cities, such as Zhuhai, Shaoxing and Wuxi. The sales performance of luxury goods in Zhengzhou, Chengdu and other places also shows the strong consumption power of the two or three line cities. Business opportunity 。

According to a survey by McKinsey, Beijing, Shanghai, Shenzhen, Guangzhou and other cities now concentrate about 30% of the Chinese rich, but by 2015, 75% of the rich will live in two or three line cities and some non coastal cities. Goldman Sachs predicts that China will increase its consumption of luxury goods from 40 million to 160 million in the next 5 years, mainly in two or three line cities. As the main battleground of luxury consumption, the two or three line cities have broad prospects for development. This is also the main driving force for many luxury brands to rush to China's two or three line cities.

Compared with the high cost of living in big cities, the two or three line urban residents spend less, and the employees in the oil, electricity and telecommunications industries earn the first tier city level. They also constitute the main force of luxury consumption. As the main body of the new luxury consumers, the consumption amount of the two or three line cities is almost equal to that of the consumers of the same income in the first tier cities. According to the World Luxury Association's 2010-2011 year survey report on China's luxury goods consumption cities, the top three cities of China's luxury consumption ability are Hangzhou, Wenzhou and Qingdao.

Grey income may provide another explanation for purchasing power. Recently, Wang Xiaolu, deputy director of the National Economic Research Institute of the China foundation for reform, released the "grey income and national income distribution". In 2008, the total disposable income of the whole country was 23 trillion and 200 billion yuan. The data of the National Bureau of statistics is 14 trillion yuan. In 2008, the average per capita income of cities and towns in China was 32154 yuan, not 15781 yuan announced by Statistics Bureau. Of course, this report has been refuted by the National Bureau of statistics, but it also reflects the purchasing power of the two or three line cities in fact, which is actually underestimated: This is the place that will really support the rapid growth of big brand sales in the future.

Two or three line City luxury consumer what kind of?

Luxury consumers in the two or three tier cities have the following characteristics: heavy material and conspicuous consumption, tug of consumption, heavy experience and business type consumption.

As the main body of new consumers, consumers' awareness of brand and consumption intention in two or three tier cities are also close to consumers in the first tier cities such as Beijing and Shanghai. However, compared with the consumers in the first tier cities, they also have different consumption characteristics. In view of these different consumption characteristics, luxury brands can launch marketing correspondingly.

Luxury consumers in the two or three tier cities have the following characteristics: heavy material and conspicuous consumption, tug of consumption, heavy experience and business type consumption.

In the two or three tier cities, luxury consumption is not rational enough. It belongs to the stage of material and conspicuous consumption. It pays more attention to brand awareness and the frequency and quantity of luxury goods. A survey shows that in the consumer group with a monthly income of 50 thousand ~10 yuan and 100 thousand yuan or more, the consumption of luxury goods on the two or three tier cities is almost equal to that of the first tier cities. 54.6% of the consumers in second tier cities believe that the price level will not affect their purchase of luxury brands. In the advanced clothing accessories, the second tier cities will spend less than 20 thousand yuan per year.

74.9%, the number of people who spend 20 thousand ~10 yuan per year is 23.5%, and those who spend 100 thousand ~20 yuan each year are basically the same as those in the first tier cities.

Secondly, "circle" consumption, the crowd psychology is the motivation of many second line rich people to consume luxury goods. Because luxury consumption has not risen rapidly in recent years in China, two or three line consumers are not familiar with all kinds of related information, which can only lead to fast learning by imitation. For example, bosses in Yixing especially like to buy with partners. Therefore, luxury brands can create a circle through brand clubs, SNS communities, etc., and seize the opinion leaders and organize activities to attract consumers who have preferences for their brands.

Relative to the product itself, the two or three line luxury consumers also reflect the same heavy experience characteristics of consumers in the first tier cities. Because of the relatively limited access to luxury goods, consumers in second tier cities are more concerned with salesmen's professional advice than in the first tier cities. The 2010 China luxury goods report shows that 43% of the respondents in second tier cities hope to know the history and value of luxury brands through salesmen and improve their understanding of products. Therefore, luxury brands should actively improve the quality of salesmen and keep the service level up to the needs of consumers. Or set up a luxury online shopping platform, professional shopping consultants can communicate with consumers online.

In addition, the Goldman Sachs bank survey found that luxury goods are widely used in business gifts. This phenomenon accounts for 28% of the respondents in the first tier cities, up to 36% in the second tier cities, more than 3 times that in Hongkong and Taiwan. Among them, the data in Southern China and West China's second tier cities are more than 38%, ranking first in the country. Among the luxury items that are suitable for gifts, one of the most popular clothing accessories and small leather goods is the most popular. 37% of the respondents believe that the price of products such as high-end wallets, scarves, neckties, glasses and so on is appropriate and respectable. Therefore, luxury brands can start with products and attach importance to developing small products that may be more popular among big brands.

Making good use of the Internet is another feature of luxury consumers in the two or three tier cities. According to the US West Fashion survey, customers in Beijing, Shanghai and Guangzhou account for only about 30% of the consumers who buy the goods on their website, while the remaining 50% come from the second tier coastal cities, and the proportion of inland cities such as Chongqing and Chengdu is also increasing. Therefore, at present, luxury brands such as Armani have begun selling seasonal products through official online stores.

How to solve the dilatation problem?

Although the market potential of the two or three tier cities is huge, there is still a huge gap between the supporting market and the first-line market. Therefore, luxury goods manufacturers need to respond to local conditions and cope with them flexibly.

First of all, the retail space of the two or three tier cities is very limited, and it is necessary to have rich local experience to find and store the appropriate stores. Most luxury brands have limited familiarity with the two or three line city retail property market. In the case of greater difficulty, we may as well look at the practice of Zegna (ErmenegildoZegna). For entering a new city, Zegna's agents often help find suitable store locations, and are more familiar with local regulations, business and tax policies.

Second, local shopping malls lack experience in cooperating with luxury brands, while luxury brand management concepts and operational standards may be quite different from local stores. Some large shopping centers can not meet the requirements of luxury brands even after being renovated. The expected market performance of new shopping malls is difficult to determine in the short term, and the risk of venturing into large shopping centers is great. In France, Evelyn adopted the strategy of adjusting measures to local conditions: in the design of storefronts, they shipped furniture, lamps and lanterns from France in eighteenth Century, and in the decoration style they would be more close to Chinese characteristics. For this reason, CEO DoMINIqueFremaux said, "Chinese people are more curious about our products, stronger in demand and more open in thinking. To do so is to highlight the purpose of an artistic life.

Finally, recruiting and retaining the right store staff in the two or three tier cities is another problem for luxury brands. It often takes months to train a professional store, but excellent salespeople are still very easy to lose. As Zegna Group Chairman Paul Zegna (Paolo Zegna) said, a suitable luxury store salesperson should have both the "global expert opinion" on luxury goods and the "local expertise". The former includes how to make a comprehensive and appropriate combination of products, how to display products better, and how to develop marketing strategies that can enhance core values. The latter mainly refers to understanding local laws and tax policies, familiarity with the development of local retail market, and effectively identifying, developing customers and communicating with them.

Now, luxury enterprises have met with a good opportunity. A large number of post-80s students who have been educated in the first tier cities have fled the first tier cities and returned to the two or three line cities where their hometown is located. Many of them can be trained quickly through training, and there are a large number of excellent salesmen in them, and luxury enterprises should vigorously excavate them. {page_break}

Polarization of luxury goods market

Luxury goods in the world regard China as a "big customer" and expand in China's two or three tier cities. According to the World Luxury Association blue book report published by the World Luxury Association, at present, the global market can find luxury brands near 2/3. It is estimated that by 2013, the remaining 1/3 blank may also be filled. But people are worried that luxury brands will also face the challenge of maintaining high-end brand image when they are expanding in China.

Ouyang Kun, China's chief executive of the World Luxury Association, believes that the polarization of China's luxury market is inevitable. In the next 1~3 years, front-line luxury brands will face the challenge of China's high-end market to shuffle cards. On the one hand, with the continuous influx of new consumers, the level and positioning of luxury goods will become more and more blurred. In order to show their identity, some high-end consumers have to give up the luxury brands that most people like and choose more advanced products. "It's like if most subordinates use LV and GUCCI, the boss will buy Hermes." On the other hand, the high level consumers in Beijing and Shanghai have become increasingly mature, and will gradually tend to buy luxury goods of "self individuality" and leave the public orientation.

This will embarrass the mainstream luxury goods such as LV and GUCCI that have entered China earlier. LV stores in Beijing and Shanghai, where high-end consumers are concentrated, store sales decline 5% to 10% a year. Although its internal adjustment is tightening, it hopes to retain top consumers, but the result is disappointing. Although many professionals believe that the future of mainstream luxury goods such as LV and GUCCI is in the two or three line market, can they maintain the brand image that has long been high?