Final project How luxury consumer preferences and buying behaviors are shifting in China as a result of COVID-19 Specifical focus on n Chines Chinese digital market
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Introduction Formerly immersed in the realm of Fine art, it has contributed to her heightened awareness in working with creativity and colors, intending to fuse lifestyle with fashion and innovation projects. In her mind, the design isn't merely a hobby or passion but a way of living, a lifestyle. She creates works that are substantially driven by the social and cultural influences of human behavior.
Eve Xia.
During the studying process in SCAD, she finds herself more in problem-solving and strategic thinking. The challenges in different tasks and achievements in projects develop her strong organization and execution ability and resiliency to stress, which leads her considerable interest in crisis management and contingency planning.
acknowledge I would like to express my special thanks of gratitude to my professor Gina Kwok, who gave me the golden opportunity to do this wonderful project on the topic-- How luxury consumer preferences and buying behaviors are shifting as a result of COVID-19 , which also helped me do a lot of research. I came to know about so many new things I am thankful to them. At any level, any attempt can't be satisfactorily completed without my parents' and friends' support and guidance. I want to thank my parents, who helped me gather different information, collect data, and guide me from time to time in doing this project; despite their busy schedules, they gave me other ideas for making this project unique.
RESEARCH GOAL The main objective of this study is to investigate the impact of the corona-virus on luxury Chinese customers‘ buying behavior and get real-time customer insights. The study seeks to answer the research question, How are luxury consumer preferences and buying behavior shifting as a result of COVID-19? The goal is to analyze the Chinese consumers' value perception changing towards luxury products during pandemic further explore the key differences of each digital platform the customer attitudes shifting towards the platforms at this new norm, in a concrete level, provide key recommendations for the luxury industry which are inspired by China during the post-pandemic by evaluating the crisis management actions.
Case studies Scope of study Research context - post pandemic luxury market Chinese luxury market Chinese digital market Potential luxury buyers in Chinese market Digital player in China Primary research analysis interviews surveys Conclusions
TABLE OF CONTENT
GUCCI OFFICIAL ACCOUNT ON TIK TOK CHINA
Many users claim they initially did a double take because Gucci’s official account looked so eerily like a “knock-off fan account,” especially with its questionable featured influencer choices, outdated special effects, and confusing visual
Gucci's TikTok (the international version of Douyin) account, which has fared slightly better by posting a video following the viral #iusedtobesobeautiful trend, and another video released recently with asia pop star Rich Brain has show strong connection with young generations, showing with 21K comments and 2,46M likes. Although the account still faces a bit of backlash from users claiming their TikTok video quality doesn't match their luxury background, its Tiktok account has surpassed its Douyin counterpart, with one of its videos receiving over eight million views.
LIKES
2.46M 21k COMMENTS
4.96M
On April 29, Gucci officially opened an account on the Chinese short video platform Douyin. Jing Daily learned from Gucci that this move was part of its “Digital First” business strategy, resulting in it becoming a fast growing luxury brand on Douyin.
VIEWS
Christian Dior, different from Channels' barely appeared in digital market, though initially cautious, has become a pioneer on social media platforms in China and is making efforts to target young, digitally native Chinese consumers.
However, Dior reacted quickly to fight back. On February 25, 2020, a "Cloud LiveStream" of Dior's fashion show was launched on China's social media platforms WeChat and Weibo. Before the live broadcast began, Dior released a short campaign specially for the Chinese consumers. Then, Dior released a documentary formate short film, behind-thescenes, to showcased workshop craftsmen and processing of the primary stage of series. Simultaneously, Dior China's brand ambassadors are shifted, including six new brand ambassadors, six KOLs, and 16 domestic Fashion practitioner. They interacted and discussed with the Chinese consumers through the digital live-streaming sections.
During the fall/winter 2020 fashion week, the global coronavirus epidemic was the most crucial topic of discussion besides fashion. At that uncertainty time, the extended absence of fashion arbiters from Asia and the brand's PR team in China was a major loss to brands' media value. Under this situation, luxury brands began to consider countermeasures.Â
FASHION SHOW
10+ million live viewers
100+ M
800,000+ comments
reviews
Dior hosts livestreaming events engaging with invitation-only for its VIPs. The brand introduced Gem Clutch, a bespoke hybrid between fine jewelry and fashion handbag in China on WeChat a day before the brand begins to roll it out in the West. Dior released a video featuring its China ambassador Angelababy touring its Shanghai flagship
2016,Dior made its first significant digital splash, when Dior became the first major luxury fashion brand to sell through WeChat's ecosystem. After a limited-edition of 200 Lady Dior bags produced for the Qixi Festival, one of China's local variations of Valentine's Day, were offered on the platform they sold out within hours; buyers used WeChat Pay to purchase the 28,000-yuan ($4,210) bags. Key to Dior's test-and-learn approach in Digital China was to be the first or one of the first luxury brands to experiment with new apps and features.
It was a major turning point and changed the previously accepted wisdom that online shoppers in China were primarily interested in discounts and cheaper products parallel-imported by daigou agents to avoid taxes.
Dior relives its Spring/Summer 2018 couture fantasy in Shanghai and launch a 12-piece couture capsule for its Chinese patrons.
Dior' Valentines day products for May,20th, which the pronunciation of the date is similar to Chinese I love you.
SCOPE OF THE STUDY
COVID-19
Around the world, Covid-19 has accelerated retail's transition to a digital future; however, developing online strategies to sell luxury brands to China market has been a massive issue over the decade.
Luxury companies have lagged in the digital market since the introduction of the internet; they remained a hesitant attitude upon entering the Chinese digital market because of numerous segmentations of consumers and political and cultural conflicts.
It has never been so specific that luxury industries' fate bets on one particular market in the most reluctant methods.
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CHINESE DIGITAL MARKET
Chinese consumers segmentation, Chinese consumer perception values towards luxury,
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This study would cover three broad areas：
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Chinese digital market,
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In the first quarter of 2020, Bian&company predict that global luxury sales will suffer a year-over-year decline of 25% to 30%, although there are signs of recovery in China.
Every sector, from finance to hospitality, could suffer from disruption from the outbreak. However, fashion, especially luxury, may suffer more than other segments due to its reliance on discretionary spending. (AMED et al., 2020).
Beyond the public health crisis, economies have been severely impacted across the world. Covid19 could spur the most significant economic contraction since World War II(NEWS WIRES, 2020). The impact on fashion and luxury is expected be more severe this year than the recession a decade ago, with total sales dropping between $450bn to $650bn from 2019 levels. The impacted categories include : apparel and accessories, watches and jewellery, and perfumes and cosmetics
CHINA SHOWS A SIGNIFICANT SIGN OF RECOVERY
CHINA
CHINA
CHINA MARKET
Chinese consumers' spending accounted for 90% of the personal luxury goods market, with a $21 billion growth in sales, which also generated 35% of global luxury spending( See in figure 4). By comparison, American and European consumers generated only 22% and 18% of the industry’s sales, respectively, while China’s share has grown more than 17 times shares from 2% of the sales since 2020.
PEST ANALYSIS
POLITICAL
ECONOMIC
Emphasis on culture development: 'culture going
Expanded online market lead to sales: Digital channels, especially content
out' campaign.
sharing platform, play important role when luxury consumers deciding their
Loosen policy toward digital e-commerce.
purchase intent before action. In addition, consumers increasingly rely on the
Deepen technological upgrading Plan
collective wisdom of social networks to influence their purchase decision.
China maintained a centrally planned, or
These findings have encouraged a growing number of luxury companies to
command, economy. China’s top-down strategic
further engage with their consumers through social media marketing.
planning has the advantage of quick mobilization
Ultimately, all the content creation is intended to lead to sales, and social
of resources, leading to the new wave of global
commerce is growing fast.
change (Savic, 2020). Acceleration of digitally accessible forms of consumption has occurred which will still provide the companies and government to simulite consumption. SOCIAL Ever-increasing digital user:
TECHNOLOGY Booming Mobile Terminal, increasing internet users
CHINESE DIGITAL
Increasing Middle-class Digital shopping trends: Digital shopping trends are
5G Expansion: China has made a concerted effort to its domestic
also accelerating in China, including contactless
expansion.
payment, virtual brand engagement, curbside delivery, and checkout-free experiences, mostly because of the need to shift to more online shopping and purchasing services from traditional in-store visits and the like.
PEST ANALYSIS
POLITICAL
ECONOMIC
Emphasis on culture development: 'culture going out' campaign. China aims to use its ascendency to transform itself from ‘going out’ of industrial heavyweights(Wang and Miao 2016) to the ‘going out’ of cultural economies. Loosen policy toward digital e-commerce: The Chinese government’s loosening policy towards digital ecommerce -- in cost reduction in communications, production, and transport.(Godement & Drinhausen, 2020). Deepen technological upgrading Plan: The government has initiated a string of technological advancement policies to boost their catch-up with more advanced economies. Shortly after China’s economy took a severe beating from Covid-19 due to coronavirus-induced shutdowns across the country, China’s policymakers decided to deepen their technological upgrading.
CHINESE DIGITAL
China maintained a centrally planned, or command, economy China’s top-down strategic planning has the advantage of quick mobilization of resources, leading to the new wave of global change (Savic, 2020). For China, the political aspect is always playing an important role, especially when the luxury business comes across the digital ecosystem. For example, the Open-door Policy introduced in 2005 led to China’s most prominent luxury consumption record.
Expanded online market lead to sales: According to Babara, J.& Jan, P (2016), the majority of luxury consumers use digital channels when deciding their purchase intent before action. In addition, consumers increasingly rely on the collective wisdom of social networks to influence their purchase decision. These findings have encouraged a growing number of luxury companies to further engage with their consumers through social media marketing. Ultimately, all the content creation is intended to lead to sales, and social commerce is growing fast. By 2023, it could account for a fifth of all online sales in China, which is predicted to be a staggering $166 billion. (McKinsey,2020). The total volume of sales on social commerce is expected to keep growing at a fast pace to reach 1.3 trillion yuan (US$185 billion) in 2020 and more than doubling to reach 2.86 trillion yuan in 2021, according to a report released by China Internet Watch (CIW) Acceleration of digitally accessible forms of consumption has occurred: during the pandemic, in China, physical stores still exist, but mostly as showrooms open for buyers and retailers. It’s clear which region has already gotten there first: China.((Aloisi, 2020)) During this time of sheltering-in-place and quarantining, an acceleration of digitally-accessible forms of consumption has occurred. Consequently, exponential growth in the digital market luxury industry and online sharing conference & communities has occurred in China.(Achille & Zipser, 2020).
PEST ANALYSIS
SOCIAL
TECHNOLOGY
Ever-increasing digital user: As of the first quarter of 2020, about 904 million people had access to internet in China, resulting a fast-growing mobile app market in the country. The largest online community,China, accounted for more than onefifth of the four billion internet users worldwide. (Statista, 2020) This represents over half of the population, but numbers are rising fast and existing users make extensive use of digital technologies and mobile access for information, communication, payment, e-commerce, and transport.
See in Figure 4.5 in 2017, 80% Chinese mobile Shoppers are shopping in a monthly basis at least, compare to the 33% of counterparts in global scope.
Figure 4.4Chinese internet user v.s Domestic Population v.s. Mobile users
CHINESE DIGITAL
Increasing Middle-class: China has attempted to shift its gargantuan manufacturing-driven economy to one that is services and consumption-led (Matsangou, 2020). Tracing back to the time before the pandemic, China was an upper-middle-income country and the world's second-largest economy (Matsangou, 2018). With their growing purchase power and large market size, Chinese consumers have become a very important and strategic segment for the global luxury market. Digital shopping trends: Digital shopping trends are also accelerating in China, including contactless payment, virtual brand engagement, curbside delivery, and checkout-free experiences, mostly because of the need to shift to more online shopping and purchasing services from traditional in-store visits and the like. These trends may have been prevalent before COVID-19, because China, a major cyber power, has already had the fundamental and trustworthy platforms and various content sharing applications, and for now the epidemic has forced the luxury industry to move quickly into a new
Figure 4.5 Chinese internet Mobile shopper behavior
Booming Mobile Terminal : Chinese digital market is a booming and promising market with even increasing online shoppers are using mobile devices. As of the first quarter of 2020, about 904 million people had access to internet in China, resulting a fast-growing mobile app market in the country. The largest online community In 2018, China accounted for more than one-fifth of the four billion internet users worldwide. (Statista, 2020) 5G Expansion: China has made a concerted effort to its domestic expansion. In June of 2019, Beijing issued operating licenses to telecom operators, and in November, Chinese giant telecommunication networks began rolling out a functional 5G network allover the country. By the end of 2020, the country would be covered with 550,000 5G base stations, which means more than estimated 300 cities would cover the highest speed of network.(Blanchette, 2020)
CHINESE CONSUMER SEGMENTATION As the Chinese economy matures, its consumers are becoming more and more diverse. (Walters et al., 2017). Based on different segmentation schemes and technology assistance, numerous consulting companies have divide Chinese consumers into distinct groups.
Online Shopper Segmentation
Special insightAccording to the first China Online Shopper Report by the Bain company, they have identified eight strategic segments of China’s online consumers. Those consumer groups are: Rookie White Collars, Wealthy Middle Class, Supermoms, Small-Town Youth, Gen Z, Urban Gray Hairs, SmallTown Mature Crowd, Urban Blue Collars. Collectively they account for 80% of FMCG platform users and represent over 90% of gross merchandise volume. (Ding, Lannes & Deng, 2020)
Upon further analysis, They determined that these eight groups fall into three clusters: Backbone consumers (Rookie White Collars, Wealthy Middle Class and Supermoms); 30-50years old New Power consumers (Small-Town Youth and Gen Z); below 30 years old Blue Ocean consumers (Urban Gray Hairs, Small-Town Mature Crowd and Urban Blue Collars). over 50 years old
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China's affluent consumers.
China's general consumers trends
In the past, it was sufficient for companies to apply the word "middle-class consumer" to roughly describe the most massive luxury consumer segmentation("The State of Fashion 2020: Navigating uncertainty", 2020); However, in China's rapidly evolving economy, high net worth individuals are far more differentiated and distinct. There are many "types" of HNWIs that luxury brands must account for. According to Jing Daily, different segments of HNWIs (high net-worth individuals) will have different purchasing patterns and behavior. These people differ enormously in terms of internal factors (psychological purchasing habits and motivation) and external factors (life satisfaction and demographics). By sorting the highest income to lowest, seven categories have been formulated to understand Chinese HNWIs better.
For instance, in 2015, research that BCG collaborates with Alibaba highlighted some of the macro-trends driving spendings, including the growth of China's emerging upper-middle-class and affluent households: expenditures by the younger generation and the expansion of ecommerce(Brennan, 2015). In the report, five specific profiles are introduced to illustrate China's emerging consumer economy, which are
Luxuriant (22%) Demanding (13%) Urbane (14%) Climber (8%) Down To Earth (10%) Enthusiast (11%)
the Savvy Shopper, the Single Person, the Eco-conscious Consumer, The Passionate Trend Seeker, The Connected Consumer.
CHINESE DIGITAL MARKET
China's digital consumers trends
In general, these consumer groups account for 90% of Chinese digital consumption's gross merchandise volume; the three clusters make up the triple engine of online sales (Ding, Lannes & Deng, 2020).
Backbone consumers (Rookie White Collars, Wealthy Middle Class and Supermoms); 3050years old New Power consumers (Small-Town Youth and Gen Z); below 30 years old Blue Ocean consumers (Urban Gray Hairs, SmallTown Mature Crowd and Urban Blue Collars). over 50 years old
Shifting challenges US$ 60 Billion expected to be wiped out of the largest global apparel market, putting most apparel players at risk Further growth of e-commerce with accelerated penetration into sub segments such as high income customer groups, requiring further strengthening of online offering to cater to their needs Offline stores still important but imperative for retailers to re-exam the role and footprint of their offline stores, and fundamentally change the format / offerings / experience in stores Further polarization of the market (across income levels and city tiers), brands stuck in the middle will need to rethink their positioning to survive in this market: either be truly value for money or have a clear and proven higher quality
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proposition
China digital players
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China digital players
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China digital players-Tmall and JD.com
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The shortage of the platform is also obvious-“Anyone can do a store [on Douyin], they can sell fake products, they can offer shitty customer service and [Douyin has] no way to control that" interview from YIRANTIAN designer
As the No.1 short video app in China, and the Chinese version of the international phenomena TikTok, Douyin is one of the most important marketing channels for brands. But it can be extremely complicated and challenging for international marketers to advertise on Douyin.
Douyin is a powerhouse social media platform within China, with more than 600 million daily users — many of them young and from first and second tier cities — hooked on its viral content .Until now, the company has largely relied on advertising for revenue, but things on that front are getting complicated: More than half of China’s online population already use Douyin daily, which makes it increasingly hard to sell advertisers on the prospect of significant audience growth. International expansion plans are tricky too, thanks to bans or threatened bans on TikTok by authorities in major markets like the US and India.
But the company is playing hardball, making it increasingly difficult for brands to use its platform for marketing if they’re not also using it as a sales channel. Since September 6, merchants have had to go through Douyin to partner with key opinion leaders (KOLs,, essentially influencers) on its platform. They also can’t promote products from third party e-commerce websites through Douyin’s livestreaming service any more. Things are also difficult for brands strategy, for example Prada, another global luxury brand on Douyin, one successful strategy has been leveraging the power of working with the popular Chinese singer and influencer Cai Xukun. However, followers commented that they solely discovered Prada's account only through Cai's fame, suggesting that Prada needs a more consistent strategy with its brand DNA on Douyin. PRADA OFFICIAL ACCOUNT ON TIK TOK CHINA
Xiaohongshu, at a glance, looks like Instagram and Pinterest but functions more like web portals (cross-functional platform), meaning that the app works as a launching point to enter the online world to do browsing, searching, socializing, and shopping altogether.
RED
Therefore, the young Chinese go on Xiaohongshu multiple times per day whether to buy the trendiest red lipstick, check out a review of new snacks or see friend’s updated social feeds. Home pages of Pinterest and Xiaohongshu in order (left);
Account page of Instagram and Xiaohongshu (right)
WeChat is a messaging app that combines communication, sales, entertainment and financial functions with messaging, sharing moments, miniprograms, mobile payment, games and e-commerce. Luxury marketers should pay attention to this social network because all internet users in China use it.
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Primary Research
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CHINESE DIGITAL MARKET
Primary research BIggest Challenge： luxury Chinese customers' buying behavior and get real-time customer insights.
Interviews Six interviewees range from leader of Chinese designer brands to Corporate Strategy department in the International bank are invited to have a phone interview with 14-18 questions to provide external and internal opinions and insights about the current status， crisis management of the sectors they worked at.status， crisis management of the sectors they worked at。
Survey 1000 participations with 18 questions The survey hold by a Chinese digital platform, WeChat. The survey was sent to Chat groups, and I have specifically asked 20 friends from different cities ( including Tier 1–4 cities, smaller towns) to send the survey to their WeChat moments. The survey aims to have 1,000 or more precipitants.
Interviews
INTERVIEWS Fashion sectors： Brands’ perspective：leaders of Chinese designer brands (Yirantian) communities perspective： Tmall China-cool Fashion collaboration External perspective：The senior buyer in collection store based in London
Other Sectors Digital technique perspective：a friend works in Alibaba as a junior consulter Economic perspective：Corporate Strategy at HSBC，Senior Consultant of Deloitte based in NYC
The pandemic is certainly unprecedented. I have been working from home for over 200 days this year since March. At the beginning, it was uneasy both physically and emotionally. Physically, we are limited to a confined space for both work and life and line between work and life gets blur.
Experienced professional skilled in business strategy, valuation, financial modeling and other analytical tools. Passed all 3 levels of Chartered Financial Analyst (CFA) exams. Bilingual in English and Mandarin Chinese.
Emotionally, we are separated from our friends, family and colleagues and all connection became virtual, which takes time to get us
The similar feeling are all happens through out the six interviews, when it comes to shopping intentions, with income level: 150~ 200k annually, she mentioned “…there is no shopping demand and occasion needs for me at this time. And as for this time, there is no promotion activity or any online consumer engagement method such as live-streaming are used as a trigger for consumption in US. …And nearly all of my friends around me felt the demand and temptation ( such as discount or Money Off) is limited. Without in-store visit and occasion requirement, we are losing the passion for shopping (even online) after over 11 hours working on computer.
She also provided several insights that as an experts in the financial sectors “Faced with a global collapse driven by lockdowns and partial branch shutdown, Financial sectors like us respond immediately. one of the first responders to release a guidance notification to both our clients. It guided our consumers on how they could get the help and service they need during a pandemic provided our customers with a series of disaster relief such as increase credit limit, waiving of fees, etc. We also increased communications to our employees. We moved all nonessential employees to work from home, provided them with tips and tools on mental health. Later on, we created a program specifically focuses on homeschooling tips / tools for parents who are struggling to work and babysitting at the same time. These crisis management actions could be good inspirations for the luxury industries, as they are both infected by the virus the most.
China's young shoppers are more global than ever before. They have a larger worldview and are no longer looking for strictly traditional luxury designs. We’re seeing that in trends like luxury streetwear and activewear, but they still really enjoy traditional culture, and they're looking for designer's to use history and heritage to create something new.
Joined Alibaba Group in 2009, firstly worked at taobao.com, now he is working in tmall.com and experienced 6 times “11.11” as tech Leader. No matter which department you are in ， all the staff have the same MISSION “ TO MAKE IT EASY TO DO BUSINESS ANYWHERE”in Alibaba.
Americans are used to Amazon. You go to Amazon to save time. You go on Tmall to spend time. Just that mentality alone takes a little bit for someone to understand. We have 700 million consumers on our app. Every single person has a different homepage. It’s about personalization. They don’t understand the big consumer knowledge and insight that we have that’s built into our platform.
Tmall aims to build up the communication between young Chinese consumers and brands range from chinese designer brands to luxury brands. China has a smart, engaged audience that’s hungry for information about new designers, and we, of course, have financial and platforms supports for brands We are looking to bring lots of oversea designers to China later this year, so now it’s really about creating demand and excitement around that. One of the brilliant things about working with digital company like us would be digital footprint, It could help brands understand consumer preference information and data and we could help brands see what’s selling and what customers are looking at.
WEI: Generally speaking, I think Chinese young shoppers' attitude towards shopping is relatively impulsive. It will take some time to enhance their brand awareness….so many customers have no sense of the deeper concepts or pedigrees conveyed by the brands…
WEI: This is especially true for brand agents — when they start to sell luxury brands, they totally disregard the concept of brand education, so many customers have no sense of the deeper concepts or pedigrees conveyed by the brands. Even though Chinese consumers account for one-third of luxury sales, the local e-commerce is still sometimes falling behind in meeting customer expectations compared to their western counterparts.
Senior buyer in Lab store， which is a High-end Avantgarde /Experimental Fashion Retailer. Based in London. Gathers the most forward thinking fashion.
leader of Chinese designer brands (Yirantian) In addition, in the interview of Yirantian Guo, designer of leading individual brand in China. She mentioned the content sharing platforms are playing a key role in maintain customer relationships during the pandemic: Guo: We interact with people on social media platforms, Weibo, and we do around four times of live-streaming to capture more consumers and present the new collections. To attract more consumers, we planned several activities, such as the Lottery for our brands' free products. We invited several lucky audiences to come to our show and talk about brand development processes through interaction with consumers. Most importantly, we understand their demands better, no matter the design aspect but also in more detail. ( for example, some audience said our trousers size are relatively small compared to other brands) At the end，Guo also mentioned the importance of Tmall, since Yirantian are the first group of the brands who have the flagship store on Tmall:
" showcase the power of Chinese feminism, a modern and fashionable
Tmall as China's largest online platform has better understanding of the Chinese consumer and their consumption habits…. It intuitively helps you to know where your customer base is, the best-selling price, the most unsalable styles and so on. … however it doesn't has shortcome…The downside could also because of the big data. Most of the time, designer brands are really niche, big data activities and promotions provided by Tmall are ignoring the design elements, only commitment to consumers, for us, it is the biggest challenge to balance the tradeoff between design and sales. Douyin has a shot… the virality of the platform is worth testing for commerce. However, as for us, we want every platform to be consistant, otherwise, it will only bring damage to the brand images and rise the risk in management
online survey
Survey
1089 participations, based on the question "Have you ever purchased luxury goods" I filtered out 759 valid answers that answered yes
The survey was hold by a Chinese digital platform, WeChat. The survey was sent via Chat groups, and I have specifically asked 20 friends from different cities ( including Tier 1–3 cities, smaller towns) to send the survey to their WeChat moments. The survey aims to have 1,000 or more precipitants., In terms of age: the group is mainly 30-49 years old, accounting for 38%, who has the power of purchase； 55% of people who took the survey are live in first-tier cities. In terms of household monthly income, 32% of people have monthly income of 15,00025,000, It This fits the portrait of luxury consumers。 ,
1. NO NEED FOR NEW CLOTHES AND A LOWER INCOME ARE THE TOP REASONS FOR REDUCED SPENDING
48%
of consumer reduced their consumption of Luxury goods
as for the reason
，
33%
，
participants think it is caused by the decline in income
2.DISCOUNTS ARE A KEY DRIVER FOR RECOVERY IN SPENDING IN APRIL AND MAY, ACROSS ALL INCOME GROUPS 3. HIGH AGE GROUP JUMPS FROM THE LOWEST USE OF SCREEN TIME TO THE HIGHEST DURING COVID-19 4. CONSIDERABLE INFLUENCES OF INTENTION TO SHOPPING ONLINE AFTER-SERVICE AND DELIVERY ARE IMPORTANT PREFERENCES FOR CHINESE CONSUMERS FUTURE PURCHASE WOULD BE TRIGGERED BY OMNI-CHANNEL, HIGH-TECH ACTIVITIES AND EXCLUSIVE SALE 5. Wechat and Weibo has biggest user group and content sharing platforms are also becoming more popular(VIDEO/ LIVE STREAMING) 6.THE PROPORTION OF PERSONALLY PERCEIVED MOTIVATION (SELF-SATISFACTION) WAS MUCH HIGHER THAN THAT OF SOCIALLY PERCEIVED MOTIVATION.
2.DISCOUNTS ARE A KEY DRIVER FOR RECOVERY IN SPENDING IN APRIL AND MAY, ACROSS ALL INCOME GROUPS
people of different ages would be attracted by different reasons on why they increased spending on luxury goods during April to May, the recovery period of time in China People over 50 mainly would be attracted by sales promotion and brands are on discount. Age group below 30s would increase their consumption on after Watching the livestreaming. People who are range from 30 to 49 they believe they have reduced their consumption during the epidemic period, so they make up for it after the epidemic period.
High age group will embrace online as a major channel for apparel, surpassing other income groups Further increase in pure online shoppers, especially for younger age groups
screentime
Among those who considered purchasing luxury goods, the proportion of personally perceived motivation (selfsatisfaction) was much higher than that of socially perceived motivation. As a result of the outbreak, the decline in people’s disposable income will tend to take personal perception into account rather than social perception.
self perception
>
Social perception
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conslusion
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Pre-COVID
Post-COVID new normal
Further shift to online
• E-commerce represented 34% in 2019, up from 12% in 2014 • A multichannel journey • A small share of pure online shoppers
• The shift to e-commerce is accelerated, expected to be 40- 50% in 2020 with increasing screen time • High age group will embrace online as a major channel for apparel, surpassing other income groups • Further increase in pure online shoppers, especially for younger age groups • Brand online flagship stores on major platforms will gain even more attention, potential for brand's own app / online store / mini-program remains to be unlocked
Rise of omnichannel demand
• Offline stores already under pressure, with many players slowing down offline expansion or even closing stores
During the epidemic, Chinese consumers’ channels preference for purchasing luxury goods is shifting to omnichannel, but more online. According to survey result that, over 86% of consumers—over three times than the percentage of choosing “in-store shopping” — said the omni-channel are providing better shipping experience and they would apply both methods during luxury purchase, for example, fitting at physical stores and purchase online at a lower price.
• Some leading players have started to reinvent offline experience combined with online channels
Pre-COVID
Post-COVID new normal
Potential digital luxury shoppers
• Mostly middle-class • lack consumer relationships with young chinese luxury shoppers
• During pandemic, the 31% (n=234) said the epidemic had a little impact on their purchase behavior; to be specific, 12.75% of respondents said they still purchase as usual, and 18.4 percent of respondents are buying even more compared to pre-pandemic. This group of people is mostly the age around 30-50, and their income is not impacted by the Covid-19 severely. Most of them are having their own business, and This group of active middle-classes could be considered as the most significant potential consumer for the luxury digital market online.
Self more than Social
• Liang, Ghosh and Oe(2017) finding shows that Chinese consumers’ luxury value perception is affected by both self and societal affecting factors, but mostly on social aspects
However,Among those who considered purchasing luxury goods, the proportion of personally perceived motivation self-satisfaction was much higher than that of socially perceived motivation-increased social identity by 48.5%. As a result of the outbreak, the decline in people’s disposable income will tend to take personal perception into account rather than social perception.
Development of Content Sharing Platforms
Pre-COVID
Post-COVID new normal
• Phonmeone has already appeared, but not highly accepted by luxury shoppers and most importantly, luxury brands • luxury brands hesitate on entering content sharing platform. • Content sharing has already helps numerous KOL capture millions of fans
• Younger generations; they follow the hashtag #OOTD and #WIWT, popular on Instagram. ( represent "outfit of today" and "What I wore Today"), to show different outfits. It is hard to say which side accounts for more between the social-and-self value perspective for Chinese consumers, especially under the uncertain pandemic situation and various consumer segmentation in China. •Even increasing screen time lead to the accelerated shifting of e-commerce , expected to be 40- 50% in 2020. Content sharing platforms are playing significant role every time Chinese consumers' luxury purchasement.
Further Recommendation "A lot is changing in China, but the fundamental story is one of very strong growth through 2021," says BCG’s Walters. “This market is growing by trillions of dollars, and companies that take the right steps today will set themselves up to win over the long term.� China is one of the certainty in the uncertain world; Although China's recovery remains uneven, China is still one of the few countries whose economy has started to rebound from the COVID-19 induced shock. As e-commerce becomes more prevalent, the market will be fully occupied and competition could be fierce. Luxury brands should design meaningful touch points that deepen their engagement with consumers, and deeply understanding of consumer demands and keep the loyalty.Most importantly, the diversification of every platform makes there is no one-size-fits-all approach to winning China's ecommerce game. However, the good news is, there's no shortage of options for those who want to play. At this new digital norm, consumers' preferences and behaviors are ever-shifting, researcher and brands should never stop analysis them as to get the real-time consumer insights. 2020 is hard and marked by the pandemic, however, we have stepped into the end of the year, the luxury industry will bounce back more strongly than perhaps anyone could have anticipated.
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