What Is The Trajectory Of High-End Business Development In China?

A few days ago, the 2018 China luxury market research released by Bain, a global management consulting firm, showed that Chinese consumers bought 85 billion euros (about 647 billion 300 million yuan) luxury goods globally, accounting for 33% of the global market, ranking first in the world. Among them, the overall sales volume of China's luxury goods market was 170 billion yuan, which continued the record breaking growth in 2017, and the growth rate reached 20% in second consecutive years.

The report also shows that in 2018, the proportion of luxury goods consumed by Chinese consumers in the mainland rose from 23% in 2015 to 27%. It is expected to reach 50% by 2025. This shows that China's luxury consumption is gradually returning, and more and more Chinese consumers choose to buy luxury goods in the mainland market.

The Chinese market has become a battleground for every luxury group. The younger generation represented by the millennial generation has also become the target of all luxury brands. China's luxury market is expected to maintain a strong momentum in the future.

So what is the development of luxury brands in China? Which city luxury market has great potential? Which shopping centers are high-end consumption "vane"? What are the core characteristics of luxury consumers? Next, we will use big data to reveal the secret!

Core highlights of the report:

East China is most popular with luxury brands. Guangzhou can't compete with Chengdu and Chongqing.

Let's play the younger GUCCI, expand the most powerful.

Which mall do most luxury brands prefer in cities?

After 80 and 90, support China's luxury consumption.

In the future, the development potential of "light luxury" will exceed the traditional "heavy extravagance".

01

Which regions / cities do luxury brands prefer?

According to the big data center of the winning business, as of December 2018, 30 representatives of luxury brands (sample selection details at the end of the article) opened 656 shopping center stores in 18 key cities across the country.

From the regional point of view, the most prominent East China shopping area is most popular with luxury brands, with more than 250 stores (the number of stores has been counted according to the number of shopping centers), followed by North China, and the number of stores is nearly 140.

Shanghai and Beijing are the most favored cities, leading the country with about 100 luxury brand stores. In East China, apart from Shanghai, Hangzhou and Nanjing, they are all the leading brands, and they are among the number of luxury brand stores. TOP10 is outstanding in southwest and northwest regions, and the number of 52, 45 and 42 in Chengdu, Chongqing and Xi'an exceeds the two largest cities in Southern China area. Guangzhou has failed to enter TOP10, and because of geographical advantages, local consumers are more inclined to buy luxury goods in Hong Kong and Macao.

From the luxury brand richness (luxury brand richness = the city has 30 luxury brands /30), Beijing, Shanghai, Chengdu, Hangzhou and Nanjing also maintain the leading position, which is the first choice for the international luxury brands to enter the Chinese mainland market, and the luxury brand richness is over 90%.

Among them, the luxury brand richness of Beijing and Shanghai reached 100%. It is worth noting that besides the TOD 'S, the other 29 brands have been stationed in Chengdu, reflecting the promising prospect of Chengdu's luxury consumer market.

Chengdu is known as China's new fashion capital and luxury consumption third city. The high-end consumption power has shown the level of the first tier cities or even some local surmounting. Take LV as an example, its annual sales performance of Chengdu direct shop has been ranked the top three in the country, second only to Beijing and Shanghai. Chengdu consumers are willing to enjoy, dare to try and advance their consumption consciousness, showing a keen interest in luxury goods. They also have fashionable lifestyles and advanced consumption concepts.

In recent years, with the promotion of the government and the market, Chongqing, a neighboring Chengdu, has gradually formed its luxury consumption culture through international fashion week, luxury show and other activities. In 2018, Chongqing welcomed several high quality shopping centers to enter the market, providing diversified choices for luxury brands to enter Chongqing. For example, the introduction of Chongqing's first Vacheron Constantin and Chongqing global shopping center in the Mixc, Chongqing, has introduced Chongqing's first VERSACE, leading the Chongqing high-end retail market to a new stage.

As a big western city, Chengdu and Chongqing are potential markets for luxury goods growth. The urban population is increasing and the power of the middle class is growing. In addition, the geographical location is relatively superior -- the distance between many developed cities is too close, and luxury brands will decline in the neighboring cities after entering the first tier cities.

On the whole, 265 of the 656 stores, accounting for 40%, and 391 in second tier cities, accounting for 60%. This shows that the development of luxury brands in the Chinese market has become increasingly mature, the city concentration has been reduced, the competitive environment is good, and consumers' demand for buying the second tier cities has become the main position for luxury brands to expand the market.

In terms of business circles, the attraction of emerging business circles and regional business circles to luxury brands is relatively insufficient. Over 8 stores and luxury brands enter the traditional business circle. Their development period is relatively early, and the development and operation of shopping centers are relatively mature. The city level business circle is located in the core area of the city, which is a gathering place for high-end shopping centers, and luxury brand stores account for far more than the regional business circle.

From experience judgment to data decision, big data will help to improve the efficiency and quality of the industry, enhance the innovation success rate of the sites and brand ends, and create greater value for the spanformation and upgrading of commercial real estate.

02

Which brand development is the most powerful?

What are the location characteristics of brands?

Among China's luxury goods, GUCCI, VERSACE, BURBERRY, MontBlanc, Ferragamo and other brands are the most powerful, with more than 30 stores, reflecting the importance of these brands to the Chinese market.

From the top 10 brands, let's take a look at the urban distribution characteristics of typical brands: Beijing and Shanghai are the first choice, followed by Xi'an, Chongqing and Chengdu. Despite the large number of GUCCI, VERSACE, BVLGARI, Giorgio Armani and other brand stores, there are still no brands covering 18 major cities. Hefei, Qingdao, Suzhou, Kunming and other cities, luxury goods market is still relatively blank.

From the distribution of new stores in 30 luxury brands in 2018, the luxury brand new stores accounted for 33% of the three cities in Xi'an, Wuhan and Hefei except Beijing and Shanghai. It can be seen that luxury brands are increasingly looking for market sinking opportunities outside Beijing and Shanghai.

At this stage, the development speed of luxury brands is relatively slow. On the one hand, the location requirements of the store are strict; on the other hand, after experiencing a slowdown, declining performance, and closing shop pains, brands are more conservative in opening up stores.

In recent years, typical luxury brands have mainly consolidated the market and improved their performance through the following measures:

Narrowing the spread and promoting consumer reflow

In response to China's value-added tax reduction policy, such as LV lowered the price of China's official website, the price dropped by about 3%; GUCCI adjusted its price in the mainland's online and offline stores, falling by 3%.

The implementation of the younger communication strategy brings huge flow and inspires potential young customers.

For example, LV invited "little meat" idol Wu Yifan to be the brand spokesperson; GUCCI broke through the routine, through the extremely complex style and subculture style product design, so that young people can produce emotional resonance and cultural identity; DIOR test water enters young users "flow pool" to vibrate, and release short video advertising.

Enter the electronic business platform and expand sales channels

For example, in December 2017, Prada launched its first e-commerce platform in China, selling all kinds of products. In June 2018, LV officially opened its flagship store in China.

03

Who are the key luxury shopping centers?

Judging from the luxury brand richness of shopping centers, Beijing SKP ranks first, with 28 of 30 luxury brands, accounting for 93%, followed by Nanjing's De Ji square and Shenzhen the Mixc.

Higher luxury brand richness helps to enhance the appeal of high-end consumption, attract more high-end brands to enter, and bring high sales performance. TOP1-3 is the national high-end consumer landmark, sales performance throughout the country in the forefront. In 2018, Beijing SKP sales amounted to 13 billion 500 million yuan, Nanjing De Ji square 100+ billion, Shenzhen the Mixc about 8 billion 500 million yuan.

The newly opened high-end shopping mall has brought opportunities for luxury brands. Xi'an SKP opened in 2018, adding new luxury brands such as Hermes, Cartier, Fendi, CELINE, Paris and Miu Miu to the Xi'an market, greatly improving the luxury brand richness of Xi'an and promoting the upgrading of Xi'an's consumption. This also reflects the increasing consumption level of Xi'an residents. The future high-end consumption "money scene" is huge.

04

What are the core characteristics of luxury consumer groups in China?

After 80, 90% dominated

Young people in China are becoming the main force of consumption in China's luxury market. Data show that in 2018, post-80s and post-90s luxury consumers accounted for 71% of the total, which contributed 56% and 23% of the total consumption of luxury goods in China respectively.

It is the main battleground of the consumer.

Although the purchase channel is becoming more and more rich, the entity store experience is still the main factor affecting consumer decision-making. Institutional research shows that 92% of Chinese luxury consumers will buy products online. Specifically, high-end luxury shopping centers have more attractive luxury stores than duty-free shops or ole discount stores.

I prefer buying clothes and jewelry.

Institutional research shows that Chinese consumers have the highest frequency of consumption on clothing and jewelry in many categories such as watches, jewellery, clothing, footwear, leather goods, clothing accessories, beauty and cosmetics. In 2019, about half of the Chinese luxury consumers surveyed plan to increase their consumption of clothing and jewellery.

Pay attention to brand innovation and trend leading

Compared with uniqueness, service, classic style, digital level and other factors, Chinese consumers pay more attention to the innovation and trend of luxury brands.

2019 China's high-end consumer market trends

To be careful

The rise of the millennial generation drives high-end consumption into a younger age.

Compared with other countries in the world, the average age of Chinese luxury consumers is even lower. The millennial generation has a strong desire to consume luxury goods and a strong spending power.

In the future, luxury brands need to adapt themselves to the new rules of the game and constantly meet the new needs of these groups, so as to establish long-term contacts with them, such as changing from "identity symbol" to "self symbol", from "high cold" to "friendly", from "scarcity" to "rare".

"New front-line" cities continue to release purchasing power, becoming the new favorite of high-end consumer brands.

Although Shanghai and Beijing are still the most concentrated market of the top luxury brands, with the development of the economy and the increase of residents' income, Chengdu, Xi'an, Hangzhou, Chongqing and other "new front-line" cities are gradually improving their competitiveness in attracting luxury brands.

Luxury brands are cautious to set up shop, benchmarking business drives high-end consumption in cities.

In the process of market sinking, luxury brands value the strategic market with potential growth potential and the unsaturation market. They will tend to choose the strategy of "one city, one store", so as to establish a large experience and service center, and create a time limited flash store instead of a fixed store.

The development of high-end consumption in cities is inseparable from the driving role of benchmarking business. Besides the urban economic growth and the consumption power of the residents, the criteria for choosing the location of luxury brands are also critical.

In the future, the development potential of "light luxury" exceeds that of traditional "heavy luxury".

According to the agency's forecast, China's light luxury consumption will increase to 620 billion yuan in 2025, and its growth rate will far exceed that of traditional luxury goods. Light luxury brands are "affordable luxury". Compared with traditional luxury brands, light luxury brands are more intimate, faster, and more innovative in design, and can be more widely penetrated into the middle and high-end groups to meet diversified needs.

The expansion of light luxury brands will become an important theme of China's high-end consumption in 2019. Nowadays, Calvin Klein, Michael Kors, COACH and other American luxury brands are expanding rapidly, and Kate, Spade, Jimmy Choo and other young fashion brands are also popular. In the future, China's light luxury market will show greater potential and promote the layout of the Chinese market.