From luxury conglomerates such as LVMH to beauty giants L’Oréal and Estée Lauder, the high-end sector has suffered sluggish sales on muted recovery in mainland China, as a boom in consumption early in the year gave way to more regulated spending.
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A study by consumer insights platform LookLook delved into the mindset and evolving priorities of a select group of 100 female luxury buyers in China, revealing a notable shift in priorities.
While luxury handbags were previously a top priority, travel and investment pieces have now taken precedence in terms of spending. Participants expressed a cautious approach due to the economic situation, though approximately half of panelists said they had continued to spend the same amount on luxury goods.
Pragmatic choices are favoured, even as luxury consumers indulge in luxury travel and hospitality
While the desire for luxury handbags has subsided, pragmatic choices that retain value, like Chanel and Louis Vuitton, were favoured. Some participants shifted their investments from handbags to watches and jewellery, with brands such as Rolex and Van Cleef & Arpels gaining traction. In terms of luxury fashion, versatility and “quiet luxury” were valued over flashy labels.
Half of LuxuryVerse respondents said they had maintained spend on luxury, but that they are prioritising domestic travel experiences that offer relaxation and inspiration.
“One-third of luxury buyers prefer to remain within Asia, where they feel it is safer at the moment, and it is not so bothersome to obtain a visa,” says Malinda Sanna, founder and CEO of LookLook.
Said one respondent: “I’m not sure if it’s the epidemic making us stuck for too long, but sometimes I feel it is better to go travelling than buy a luxury object. Although the cost of travel is not cheap, I’m willing to spend more for the experience like premium hotels and business class which I may have sacrificed in the past. Now, the experience comes first.”
The rise of native Chinese brands
Native Chinese beauty brands have been on the rise in China for some time, with fragrance brands targeting Chinese culture, skincare brands addressing the unique needs of Chinese women, and makeup brands leveraging product innovation.
Bain & Company’s China Shopper Report highlights the conventional notion of luxury is facing challenges in mainland China as domestic alternatives gain prominence, and external economic factors prompt consumers to become more rational in their spending habits. Consumers are now engaging in careful evaluation of product value, comparing mechanisms and price variations across different platforms, and thoughtfully considering their expenditures in each category.
Sanna identified the following brands as those to watch in the beauty segment: Documents (fragrance), The Beast from the East (skincare), Proya (skincare), To Summer (fragrance), Florasis (makeup), Maogeping (makeup), and Into You (makeup).
“These are the brands female luxury buyers are most enthusiastic about. Each is innovative, creative, aesthetically beautiful, and enthusiastically Chinese in spirit,” Sanna says.
Investment pieces, ‘quiet luxury’ remain covetable
The performance of the most expensive and exclusive brands is expected to excel, as the affluent demographic continues to prioritise their spending and seek solid investments with robust resale value.
At Richemont, half-year growth for 2023 was led by the firm’s jewellery maisons, made up of Buccellati, Cartier and Van Cleef & Arpels, where sales increased by 10 percent.
Sanna predicts Chanel, Hermès, and ‘quiet luxury’ brands such as Celine, Bottega Veneta, and Loewe will outperform “flashier, trendier, less expensive luxury brands like Gucci and Balenciaga.”
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How brands across the spectrum can address shifts in consumer behaviour
To respond to the changing mindset of the Chinese luxury buyer, Sanna says it’s important to recognise what they are craving most.
“Indulgence and exquisite experiences, but within an environment where she feels secure and safe,” says Sanna. “The stress of life in China right now – the grind of professional life, economic unrest, geopolitical tension – translates into a desire for escape and immersive experiences that can reinvigorate pride in her own country.”
Sanna also predicts brick-and-mortar will reign over e-commerce, at least when it comes to the luxury sector in China, in 2024.
For luxury, Sanna says, livestreaming is on the wane, with buyers seeking more immersive, tactile experiences. “Exclusive invitations to experience new collections are a great way to get [the customer] in-store.”