Despite the slowdown observed by many luxury brands in the China market, overall market dynamics are unchanged and consumer confidence remains high, according to the sixth edition of the 2015 China Luxury Forecast by Ruder Finn and the IPSOS Group.
The report, which covers Greater China in depth, with 1,616 consumers from over 14 major mainland Chinese cities and 317 consumers from the Hong Kong Special Administrative Region, found that travel is now the number one category of luxury for Chinese consumers.
Spending by Chinese travellers is expected to drive more growth in luxury markets outside China. The rise of e-commerce represents both the next major challenge and opportunity for luxury brands.
With the growth of outbound travel, the report predicts that Chinese consumers will continue to drive growth in overseas luxury markets. Duty free shopping is becoming a leading distribution channel for luxury goods, with 53 percent of mainland consumers shopping at duty free stores in the past year.
The report said the vast majority of consumers are dissatisfied with luxury retail services in mainland China. Only 19 percent of Mainland China consumers and 10 percent Hong Kong consumers said they were very “satisfied” with luxury retail services at home.
Consequently, when shopping overseas, these consumers expect high service standards and understanding of their needs, as well as a broader product selection.
The survey also noted that a large majority of mainland consumers said they would spend more, or at least the same, on luxury in the next year.
Around 18-38 percent of Hong Kong consumers planned to spend more on luxury in the next year, and 52-62 percent said they would spend the same.
“We predict that the market momentum will remain relatively unchanged. Hong Kong luxury consumers continue to pursue innovative products and design,” said Simon Tye, Executive Director of Ipsos. “They seek new perspective from brands and are ready to embrace new offers that incorporate strong creative and empathetic services. There is continued strong demand for unique and customised products that retain the heritage of the brand.”
“Despite the impact of the anti-corruption campaign on the luxury industry in China, consumer maturity has grown since last year, with shoppers looking to spend more on rewarding experiences than products,” said Anne Geronimi, Vice President, Lifestyle & Luxury Practice, Ruder Finn Shanghai. “The challenge today for luxury brands is maintaining the brand loyalty established in China, as consumers travel and purchase high-end goods overseas.”
Lastly, the survey found that consumers are more willing to purchase luxury goods online.
Shoppers in both mainland China (57 percent) and Hong Kong (54 percent) reported greater confidence in purchasing luxury online over the past year.
However, both groups still raised concerns over service, trust, and overall professionalism of the website when asked about the credibility of online stores.
The majority of Chinese shoppers (81 percent in Hong Kong and 78 percent in mainland China) said they still preferred to visit physical stores before deciding to purchase to seek further product information and check product attributes.
“E-commerce is both the next big opportunity and challenge for luxury brands. To fully tap the potential of the luxury online market, brands need to consider two options: either creating their own platforms or riding on existing ones,” said Gao Ming, Senior Vice-President and General Manager of Ruder Finn Shanghai.