Olivier Abtan
À savoir | 24 mai

Raid on luxury
The Chinese buy 1 luxury product out of 3, an appetite which propels the luxury market in a new dimension.

 © Wikipedia
Only twenty years ago, the Chinese clientele represented a marginal part of the world’s luxury sales. Today, one out of three luxury products bought in the world is bought by Chinese consumers. And, out of the 100 billion euros they spent in 2015, the Chinese spent three quarters abroad and over a third (35 billion €) in Europe, according to the BCG study True Luxury – Global Consumer Insight: What's Happening to the Chinese released on the 31st of March 2016, which represent a major stake for local luxury markets around the world.
In this environment, Paris became the luxury shopping capital for the Chinese in 2016, ahead of the big Asian capitals, Hong-Kong (2nd) and Tokyo (3rd). The attractiveness of exchange rates plays a big role in this new trend, since the weak euro generates attractive prices for Chinese consumers. But this is not the only parameter that makes a difference. For 39% of the polled clients (1000 Chinese clients interviewed among 10 000 luxury clients in 10 different countries: China, Japan, South Korea, Italy, France, Germany, Brazil, Great Britain, United States, and Russia), the variety of products is one of the most important criteria. For 31% of them, it is the origin of the brand – French for our beautiful establishments – that matters the most. Finally, for 30% of the polled, a superior consumer experience (and often a European one) is looked for.
These Chinese consumers, who set the tone on the luxury planet, change and transform very quickly, which pushed the luxury industry in a new era that is here to stay.

The local clienteles and the Chinese Sugar Generation

This new era is primarily characterized by the end of the Chinese’s luxury spending’s growth. Which forces luxury brands to turn to – or to go back to – more local clienteles. Through a personalized selling ritual in stores, selective events such as previews, parties, diners or exclusive products’ discovery. Brands must now also come up with more and more local offers, that is to say personalized for each type of clientele, in order to fit them best.
At the same time as this sales’ erosion which started last year, a new Chinese generation, the Sugar Generation, is taking control of luxury consumption. Born in the 1980s, at the heart of a society that already knew the capitalist system, it has height times more diplomas than the previous generation. It knows on average three times more brands than its elders. More educated, more cultured than their parents, the Sugar Generation’s young adults are more sophisticated in their luxury consumption. They focus on authenticity. The show-off time has definitely passed. By 2020, 65% of the Chinese consumers will be born in the 1980s-90s. You can imagine the impact of their choices and of their vision of the luxury world.
With the rising power of these young adults, more Upper Class than their parents, luxury must adapt and come back, paradoxically, to more traditional values. Values that date from its birth: luxury for itself, original craft industry. Luxury meant to impress becomes partly obsolete. The purchasing experience takes precedence over its social symbol with the generation change.

Tradition… and digital

In order to know your clients better, whether they are local clienteles – in Europe or in the United States for instance – or Chinese Sugar Generation young adults, digital is the best tool. With digital canals, one can create a link and an exchange with clients, and, from now on, to sell: 42% of the luxury consumers’ growth should come from digital by 2020. As many opportunities to collect data and offer, in stores, the product that fits best the client’s expectations.
So two trends are deeply impacting the new luxury era, two trends which seem opposed at first sight: authenticity and purchasing practices’ digitalization. Traditional stamps don’t want to miss tomorrow’s fashion train. To make the clients dream today, you have to offer them a smart mix of tradition and innovation. Two masters cards to approach luxury in 2016.
Olivier Abtan
Partner and Managing Director Boston Consulting Group
Olivier Abtan is a Partner and Managing Director at the Paris office of the Boston Consulting Group (BCG). Olivier is today leading the global BCG Fashion & Luxury sector where he spends most of his time with clients throughout the world. His clients include global Luxury Maisons, fashion brands and retail chains.
Crédits photo : Wikipedia
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