20150120-Bain___Company-2014_China_LuxuryMarket_Study_Priming_brands_for_redefinition_25页_3mb

2014 China Luxury Market Study Summary

Core Content

The 2014 China luxury market experienced a slight contraction of approximately 1%, reaching ~115B RMB, marking the first time the market had not grown since the beginning of the study. This contraction was primarily driven by a slowdown in watches, men’s wear, and leather goods. The market is undergoing a fundamental "rebasing" as consumer behavior evolves, with a growing focus on ready-to-wear goods and a shift in priorities from brand names to exclusivity, quality, and value for money.

Main Trends and Observations

• Market Contraction: The luxury market contracted slightly in 2014, primarily due to the slowdown in key categories and the impact of anti-corruption campaigns and economic slow-down.
• Changing Consumer Preferences: Consumers are showing a preference for new or aspirational brands over traditional luxury names. They perceive these emerging brands as equally desirable and stylish, contributing to a broader selection and increased basket sizes.
• Decline in Logo Importance: As consumers become more sophisticated, logos are less important, with a growing emphasis on design, exclusivity, and personal identity.
• Shift to Experiential Luxury: More consumers are shifting their share of wallet towards luxury experiences, such as travel and lifestyle-oriented shopping.
• Growth in Daigou Sales: The parallel purchase (Daigou) market grew significantly, estimated at ~55B to 75B RMB, with consumers increasingly habitualizing this channel. The rise of e-commerce and professional Daigou agencies played a key role.
• Outbound Travel Growth: Travel to Japan and Korea saw a ~60% increase, driven by convenient flights, simplified visa processes, and favorable exchange rates.
• Cross-Border E-Commerce: The Free Trade Zone (FTZ) is expected to act as an incubator for cross-border e-commerce, offering price advantages and convenience through lower tariffs and direct sales models.

Top Brands and Market Dynamics

• The top five brands in the luxury market underwent significant shifts in their market dominance and positioning, with some brands consolidating their store networks and focusing on flagship stores.
• Established brands were more conservative in their store expansion, emphasizing VIP experiences and exclusivity to retain their premium status.
• Emerging brands gained traction through fashion collaborations, limited editions, and unique positioning, especially in ready-to-wear and bags categories.

Channel Evolution

• E-commerce and brand aggregators saw an increase in luxury purchases, while outlet stores remained less popular.
• Consumers are increasingly shopping online and through Daigou agencies, with 70% having made purchases via parallel channels. The price gap across channels and geographies is a major driver for this shift.
• Lifestyle-focused shopping malls are becoming more prominent, with a growing mix of food, experiential shops, and entertainment.

Key Drivers for Brands

• Rebasing of the market is expected to be completed by 2015, with growth now more dependent on consumer behavior, economic conditions, and brand innovation.
• Brands are focusing on revitalizing core store networks, enhancing in-store experiences, and adopting an omnichannel strategy to cater to luxury product-savvy and experience-oriented customers.

Consumer Behavior Insights

• Younger and more educated consumers are driving changes in the market, seeking personal identity and product design over traditional brand status.
• Experiential spending is on the rise, with travel for leisure expected to increase in 2015.
• Daigou is becoming a mainstream purchasing method, with consumers citing price advantages and access to exclusive products as key reasons.

Strategic Recommendations

• Revamp core networks and focus on flagship stores to maintain exclusivity and elevate customer experience.
• Embrace digital innovation and integrate brand stories and collections into online platforms.
• Launch social media campaigns and key opinion leader (KOL) programs to engage with sophisticated consumers.
• Adopt a regional strategy rather than a China-specific one to better serve cross-border shopping and luxury experience demands.

Conclusion

The 2014 China luxury market is transitioning from brand-centric to consumer-centric, with a growing emphasis on exclusivity, fashion, and experiential value. Brands must adapt to these changes by focusing on core store networks, digital engagement, and cross-border strategies to remain competitive and meet evolving consumer expectations.