Small town China is driving up luxury sales thanks to the online revolution
LUXURY is no longer limited to urbanites in China. Brands like Louis Vuitton, Chanel, Gucci, and Prada are finding new customers in the country’s smaller towns.
More than half of consumers buying luxury goods live outside the top 15 cities in China – in areas classified as second, third, or lower tier.
This is mainly driven by digitization of marketing and purchasing processes by the brands, as Chinese consumers are increasingly accessing information about luxury goods online.
The findings were highlighted in a report released by the Boston Consulting Group (BCG) along with Chinese internet giant Tencent.
Previously, luxury goods were synonymous with city dwellers; today, they are a status symbol for the aspiring middle and upper class across the country.
According to the report, more than half of the luxury buyers spend their time online, especially as mobile becomes an increasingly prevalent part of life for the Chinese population.
Contributing to this is the rise in popularity of fashion key opinion leaders (KOLs) on social media platforms. This, combined with the online presence of the brands themselves through apps, advertisements, and third-party e-commerce platforms have helped drive up engagement.
The report showed that buyers in lower-tier cities are twice as likely to shop online compared to those in the top tier cities. E-commerce platforms such as the Tmall Luxury Pavillion owned by Alibaba and JD.com’s Top Life has also driven up online sales of luxury goods.
Having said that, close to 60 percent of consumers still prefer to buy from brick and mortar stores after researching online.
In fact, in those lower tiered cities where brands do not have a physical store, more than half of the survey respondents said they would not mind making the trip to a physical store in a nearby big city to shop.
“The battle for luxury consumers will quickly shift from offline to online. Within five years, this will move towards the era of luxury digitalization 2.0, where online and offline will be closely integrated,” said Wang Jiaqian, a Partner at BCG said in a statement.
China is a key target market for global luxury brands as affluent populations in the country has deep pockets, not to mention the size of the market as well. According to the report, China is expected to contribute 40 percent of the global luxury goods market by 2024.
Additionally, the report highlighted that the buyers in China are mostly young and well educated, with nearly two-thirds of them aged between 18 to 30 and has at least an undergraduate degree.
Besides the traditional e-commerce platforms, social commerce is also on the rise and contributing to luxury purchases online.
Social commerce is a form of e-commerce that incorporates social interactions among consumers via social media.
It gamifies shopping, providing incentives such as bigger discounts for users who share with more friends on a particular deal. Users can also share photos and videos, write posts, and tag items to link to e-commerce listings.