China’s luxury market, even if during a period of general economic crisis like the current one, continues to be the Eldorado for many international luxury brands while in other regions and markets around the world there is a general asphyxiated consumption situation. Indeed in China, as all the official data show, the consumption trend of that kind of goods is always rising up without any interruption as well as was happened in the past years. The continuing record of sales and turnovers is never ended as it was demonstrated too by the expansion of the new shopping malls and the luxury flag stores of the most famous brands into the first tier cities like Beijin or Shanghai or Guangzhou as well. The incredible success of sales and the new stores opening strategy have contaminated too the new cities of the second tier that are coming out like a new potential places where continue to expand the luxury market. But it’s not all gold that it’s lighting around. Indeed beside the great rising opportunities, there are also some potential risks that need to be considered with the maximum attention during the phase of expansion from the cities on the coast to those ones on the internal area of China.
The first one is linked to the prices level inside China mainland and the attitude of Chinese consumers of luxury goods to buy them abroad during their always more frequent travels of leisure. Indeed, the frequent situation of some “shopping travel” to Hong Kong is not ended yet and at this traditional destination were added also those ones like the shopping capitals abroad, in Asia or in Europe as well. This means that the luxury market for Chinese consumers is not only inside China, but continues to be also abroad (and in some not marginal situation, overall abroad). This for two main reasons: the first, is that the prices of luxury goods are cheaper abroad than in China (the import duties are still high); the second, is that it’s more exclusive be a consumer that buy some bag or jewel for example in Rome or Paris or New York than in a Chinese city.
The second risk is that the expansion of the stores network inside the mainland China can be considered by the luxury goods Chinese consumers like a loss of charm and exclusivity. Indeed if a brand’s store can be found everywhere, and if this can be a sign of its expansion and great presence on the market, on the other side this can be also a sign of its loss of exclusivity. Why a Chinese luxury goods consumer should choose a brand that it’s potentially close to a crowded area of people and in this way cannot be a sign of exclusivity? We should always remember that one of key that induces the consumer to choose a luxury good is its exclusivity, or in other words, to be the “only” one that has that kind of good. So. If a brand decides to over expand its presence everywhere, this cannot mean necessarily a proportional expansion of its sells. On the other side, if a brand decides to concentrate its presence only along the most famous shopping streets in the biggest cities, for sure this can rise its exclusivity up and on consequence its appeal for a luxury goods consumers population. And this is for sure more true in China than in other places.
Finally, one more risk or a difficulty that should be considered is about the management of the new staff inside the new opened stores. Generally speaking, overall in the cities of second or third tier, there is a lack of people able to perform in the right way as sellers into a luxury shop. The way to keep them up to an acceptable level of skills and elegance is longer than expected and also quite difficult to get. This means that during a first period, that luxury store could be managed not so well as expected and the customers could not live inside it the right purchase emotional experiences. And this point is exactly the opposite one that the consumers expect for a luxury brand purchase.
So, at this point there is a decision to make: to implement the actions about how to drive the expansion in the Chinese luxury goods market. A right combination can be achieved by implementing the right level of presences of stores overall in the most famous and biggest cities and to develop a right own self e-commerce platform that can attract an important part of potential customers. Indeed in China, the e-commerce sales are continuing to rise up, in China that kind of sales has a total amount of value as for example the GDP of a country large like Pakistan, in China the users of the internet purchases are overall the young generations that are also the biggest part of richest consumers. Both the stores and the e-commerce platform must be a fundamental goal to rise up not only some number of generic customers but overall a faithful community of people that lives daily the emotions to be part of the brand and that can feel themselves as part of identity of that brand. The luxury experience means also and overall it, not only have money in half to buy something that is quite expansive. The luxury is a culture that needs time to build up. No matter only about level of income and extension of the population. So China is a new luxury market that like a baby needs to be helped to perform day by day better than before till to become the most large luxury market in the world.