Luxury Brands Go Digital in China: What Are the Major E-Commerce Trends in 2021?
With international travel inhibited across the world, luxury brands are seeking new ways to recover from stress on the global economic system caused by the pandemic. One strategy has seen dozens of luxury brands including Gucci, Cartier, Montblanc, and Prada set up online shops in China last year to help in generating sales.
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Chinese shoppers account for roughly one third of the global luxury brand market, according to a 2019 report by McKinsey. However, most of their shopping has tended to be conducted while travelling overseas.
“Eight years ago, it’s not even a question of selling luxury online,” said Digital Luxury Group China’s managing director Pablo Mauron. “The touch-and-feel experience and in-store services were considered more important factors in the high-end segment. Covid-19 really has accelerated a lot of things,” he added.
2021 might be the year for more luxury brands to go digital in China. According to Bain & Company’s 2020 report, the total global volume of luxury goods sold dropped by 23% in 2020, a record low. Meanwhile, the value of the personal luxury goods market fell from 281 billion euros in 2019 to 217 billion euros in 2020. China is the only country in the world that maintained continuous growth in the luxury industry. The personal luxury goods market in the country reached 44 billion euros, an increase of 45% year-on-year. Bain & Company estimated that China may become the world’s largest luxury goods market by 2025.
For now, millennials and generation Z consumers constitute the greatest purchasing power for luxury goods in China. According to domestic media, the rate of luxury goods sold on digital platforms in China has increased from 13% in 2019 to 23% in 2020, with a surge of approximately 150% in total sales volume. According to Alibaba’s e-commerce platform Tmall, 70% of millennials’ spending falls into the luxury category.
Tmall, Wechat, and RED Mall serve as the main platforms for luxury brands to promote themselves in China. According to e-commerce giant Tmall, more than 200 luxury brands have established digital shops on the platform since 2020, with an increase of 130% in sales value.
China’s most widely used social media platform Wechat also contributed to the luxury brands’ digitalization in China. The gross merchandise value of sales reached 800 billion yuan in 2019, and experienced a surge of 115% in 2020 between January and August.
RED Mall, known as Xiaohongshu in China where it shares a name with an affiliated social media site, is likely the country’s most trusted cosmetics purchasing and media sharing platform. More than 30 luxury brands have now joined RED Mall, and many have held live-streaming events to allow more Chinese consumers to get to know the brand.