28 March 2019 | MOF Team
Beyond a year of good fortune and wealth, 2019 is an auspiciously good year to invest or finally start something that you have long been thinking about. Prosperity is already ringing true for the luxury retail market.
Despite woes over a depreciating Yuan and widely reported trade war with the US, luxury retail has flourished. Retail sales rose by rose by 8.2%, bucking a downtrend in the slowest Chinese GDP growth since 1991.
In fact, more than 75% of the total growth in global luxury spending — over $65 billion — can be attributed to Chinese consumers, both domestic and abroad. They account for an incredible 30% of all luxury purchases.
“Over 75% of the total growth in global luxury spending can be attributed to Chinese customers, domestic and abroad.”
At the same time, the burgeoning luxury sector is undergoing a unique paradigm shift. Designers of Chinese heritage are reclaiming their roots as the concept of identity plays a growing role in popular culture.
High-end consumers are increasingly opting for brands that resonate with them on a cultural level. Multinational firms are introducing local, boutique brands to incorporate new Chinese aesthetics into modern day product to increase their appeal to Chinese buyers.
Read on to discover associations between ‘local’ and ‘luxury’ in the Chinese retail market and how this affects branding as we enter the lunar year of the pig.
Given the tumultuous political relationship between China and the US, the consumer shift to domestic brands within China seems somewhat inevitable. No longer do Western brands carry the same weight among Chinese consumers, with many choosing to boycott US goods entirely.
To counter the burden of international tariffs, the Chinese state has invested heavily in domestic produce. ‘Made in China 2025’ as one state-led program aims to lavish advanced sectors – such as new-energy vehicles and robotics – with subsidies and other support to create national champions capable of taking global markets head-on.
As reinforced by the Financial Review, ‘the vibrant Chinese private sector is fully capable of developing cutting-edge products on its own’.
But, the trade war doesn’t explain everything. Apple was quick to blame rising tension with the US and China’s slowing economy for its shortfall in Asian smartphone sales last month.
While it is true that GDP growth is slowing, the magnitude of economic deceleration is not nearly as large as the firm suggests. Apple’s sales are slumping because of the proliferation of local competitors producing smartphones far better targeted at the Chinese consumer.
Not merely a country of luxury consumers, China’s clout as a luxury brand’s ‘incubator’ remains somewhat under the radar. New brands such as Hisense, Huawei and Xiaomi are redefining global perceptions of “Made in China.”
Why? Unprecedented investment in research and development and a penchant for sophistication has contributed to new perceptions of pioneering quality surrounding China’s luxury goods. Each year, Huawei, for example, spends US$20bn on R&D – no less than 15% of its total annual revenue and one of the biggest such budgets in the world.
Perhaps this explains why Huawei boosted its domestic smartphone shipment volume by 15.5% last year, despite overall shrinkage in the market.
Renowned luxury designer, Alexander Wang, explains: “China used to be known as a copycat country but now, whether it’s digital companies or shopping malls, every brand [wants to test out] that market because it’s the most advanced.”
Domestic Chinese brands have immediate access to the world’s largest luxury consumer base, one they know and understand very well. They can make better use of China’s growing eCommerce solutions and surrounding ecosystem with greater agility and relevance than their Western counterparts.
For example, Tmall (Alibaba’s eCommerce platform) saw Chinese labels undergo triple-digit growth over the last year. Jessica Liu, the platform’s president of fashion and luxury, puts it down to “a growth in designer talent, but also because Chinese people see that these designers have closer relations to Chinese culture.” Meanwhile, a McKinsey survey last year found that more than 75% of Chinese consumers prefer local apparel and footwear brands than Western counterparts.
While Chinese consumers are showing an increased affinity to local brands, the world around them are also hungry to understand the cultures and motivations of the Eastern customer. Global businesses see the giant consumer reserve in China and try to establish a connection between Chinese heritage and global luxury.
For instance, during New York’s SS19 fashion week Xue Gao held her show at Jing Fong, a dim sum restaurant in Chinatown. Models donned 60s-inspired, East-meets-West looks while playing the historic Chinese game, Mahjong. It was a scene straight out of a Wong Kar-Wai film: red-hued panels and neon stage lighting.
It remains up for debate whether this sort of design truly aims to represent the Chinese consumer of today, or simply caters for foreigners with preconceived ideas of a 'Chinese aesthetic’.
The former demographic is less influenced by oversimplified tropes and traditions, and more by a specific set of aspirations. Aspirations unique to the remarkably dynamic socio-cultural environments of China.
‘Businesses should not approach or target this demographic of people as an economic opportunity. Rather a culture to be learned, admired and adapted to’, comments Matter Of Form’s APAC Consultant, Kim Ing.
“Such an approach brings great excitement in the realm of creative opportunity, and a new-awakening to how the western world views Asian and particularly Chinese culture.
The new face of the Asian customer is rising, and much to people’s surprise, it’s unlikely there will be any dragons or imperialist embroidery in sight.”
Chinese consumers are forging their own distinctive path in the retail world. A path that not only diverges away from preconceived, often stereotyped notions of Chinese heritage, but also away from imposed Western ideals and fashions.
East Asian product innovators are at the cutting edge of design and technology. New perceptions of ‘modern’ that speak to a way of life and level of aspiration specific to the Chinese consumer creates a powerful market for retailers.
Matter Of Form’s recent opening in Hong Kong has offered opportunity to directly engage with East Asian digital discourses and emergent technologies. We have partnered with iconic luxury retailer, Shanghai Tang, to reinvigorate the brand with digital prowess in line with new visions of Chinese modernity. We are incredibly excited to pursue this partnership with the expert guidance of our APAC Consultant, Kim Ing.
Retailers should not take the Chinese market potential for granted by assuming Asian consumers will subscribe to a generalised set of values. For those attempting to enter the world of Chinese luxury retail, authenticity remains absolute. Gauging a true and meaningful understanding of the Chinese identity will set brands apart as we enter the Lunar Year of the Pig.