SHANGHAI (AdAgeChina.com) -- China is expected to surpass the U.S. to become the world's second-largest consumer of luxury goods in the coming decade, perhaps within the next five years. According to the Hurun Report, the mainland has 875,000 affluent Chinese with more than RMB 10 million ($1.47 million). Here are five tips to help luxury marketers reach those consumers.
1.?Go digital
With the largest population of internet users in the world, China is a digital playground for marketers.
China's luxury buyers are younger compared with those in traditional luxury markets. They are tech-savvy and spend an increasing amount of time on computers and smart phones.?In the next couple of years, the dominant luxury buyers will be 25-to-35 years old.
The potential for buying luxury goods online is huge, but not enough brands take advantage of e-commerce opportunities. Recently Emporio Armani launched a Chinese-language online shop, emporioarmani.cn, the first example of a high-end fashion brand launching an online shop for China. Official online stores also help reassure people that they are buying genuine items--not a small concern in a country full of fakes.
Cross-border e-commerce plays a role here, too. Far more e-tailers such as www.net-a-porter.com and Saks.com offers overseas shipping. American Express, meanwhile, has launched its globaleshop.com in China, offering AmEx cardholders a personalized address in the U.S. and U.K. so they can shop online and ship goods to that address. A logistics service then sends everything to China. Borderlinx.com offers a similar service.
2. Embrace diversity
The sheer size of the country and huge disparities in economic and cultural development among regions means that there is no "Chinese" luxury consumer. It's a heterogeneous market with distinctively different groups. While the majority of the country is still in the process of being introduced to the concept of luxury, the most affluent and discerning luxury consumers are going beyond fashion and accessories. Art collections, private jets, European-style private education and customized luxury trips are just a few examples of China's luxury market becoming more mature and diverse.
3. Keep an eye on Chinese brands
China is a very new market and currently does not offer much in the way of tradition and heritage, nor its "own" luxury brands--but that's changing.
Hermes, for instance, launched the Chinese brand "Shang Xia" last year in Shanghai. Everything about Shang Xia is made in China--it is a Chinese brand, developed in China by a Chinese team. It's still early days but the brand is already looking at expansion and Florian Craen, managing director for Hermes in North Asia, sees considerable potential for homegrown luxury brands, while noting it will take time to build local luxury brands.
Shanghai Jahwa has created Shanghai Vive, a new line of homemade and high-end cosmetics. Jahwa opened the first Shanghai Vive boutique last summer in the newly refurbished Peace hotel. The brand brings a touch of old Shanghai history and glamour, reflecting the town's heyday in the 1930s. It's the first such high-end local cosmetics line, with beautiful lavish packaging--and prices to match.
4. Look north and west
Luxury is expanding beyond first tier cities, because China's rich do not just live in Shanghai, Beijing, and Guangzhou. Luxury brands are waking up to this fast and focusing their efforts on building brand awareness in second and third tier markets. Chongqing, with one of China's highest GDPs, is becoming a mecca for luxury brands. Gucci, Prada, Louis Vuitton are all setting up shops there. But don't forget cities like Harbin, Dalian, Wenzhou, Taiyuan, and Urumqi. The battle of the luxury brands will definitely be played out in these other areas.
5. Offer experiences and get personal
Success for luxury marketers depends on more than good branding. They need to go beyond the big numbers, and understand what consumers are trying to achieve, then help them fulfill that dream and goal. What makes a luxury item seem luxurious is how it makes the consumer feel, what experience it provides, and the message it sends to the buyer's entourage.
Luxury marketers need to offer a personal relationship and realize customers are looking to gain knowledge and expertise. For these wealthy consumers, the big price tag and the label alone do not necessarily equate luxury, but personalized service and a unique experience will give them an edge over their peers.
Appealing experiences range from Louis Vuitton's home shopping visits for VIP customers, and the flagship stores for Vacheron Constantin and Alfred Dunhill located in colonial villas in Shanghai. Vacheron Constantin has installed a handmade leather safe made up of around 15 individual safes. Avid watch collectors store their watches here and make appointments with the Swiss watch specialist when they wish to use them and show off to friends. Alfred Dunhill, in an identical villa next door, showcases products alongside elegant museum pieces, a bespoke tailoring room, and a traditional English gentleman's barber.
Luxury brands will continue to thrive by establishing a one-on-one relationship, and focusing on educating customers.
Chloe Reuter is the founder of ReuterPR in Shanghai, which specializes in communication for luxury brands.
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