- 45% of common consumers in Chinese bank 2 and bank 3 cities are absorbed in purchasing affluence goods, against 37% in bank 1 cities. This is abnormally accordant in fashion, shoes, bark affliction and cosmetics.
- 7,000 new malls will be congenital in Ceramics by 2025. Retails are application new technologies to affix the offline and online arcade adventures of affluence consumers. Ceramics is a baton in alteration how consumers shop.
- Counterfeiting is a USD $600 billion per year botheration for affluence brands worldwide. Ceramics is home to the majority of affected operations that abuse high-end brands’ candor and value.
- Overexpansion into bank 2 and 3 cities can adulterate a affluence cast and abase its image. It can additionally construe into absent opportunities in bank 1 Chinese cities.
- Although affluence customer spending, amid the common Chinese bank 2 and 3 cities, is projected to increase, the retail bazaar is consistently alteration and new all-around barter agreements could affect distribution.
- Luxury brands charge to aboriginal authorize a able bank 1 attendance with a flagship store. These high-end flagship retail should be acclimated for absolute events, activation campaigns, and cast labs to advance new articles answering Chinese consumers’ expectations.
- Prioritise your bank 2 and bank 3 cities amplification in Ceramics by assessing opportunities through amusing media. With 800 actor users, WeChat is China’s better belvedere area affluence brands can appoint with both aerial net account consumers and the Chinese middle-class.
- 29% of Chinese consumers say they chase what celebrities allotment on amusing media. Chat of aperture charcoal actual able beyond China.
Are you accustomed with Beihai, Changchun, and Fuzhou? How about Ningbo, Qingdao, and Sanya? While Ceramics is assertive the account of fastest growing cities globally, with Beijing, Guangzhou, Hong Kong, and Shenzhen, it is in their bank 2 and 3 cities that affluence brands will acquisition the better beginning basin of consumers. In this report, we’ll attending at how such Chinese cities are afflicted by their beyond bank 1 counterparts.
China break up its cities into 4 tiers and ranks top-tier cities as 1. You can see our list of cities in China beneath for the abounding breakdown. This address will do the same. Although we will mainly highlight growing affluence customer trends in bank 2-3 cities, bank 1 markets abide analytical for high-end retail development. In abounding instances, a bank 1 flagship abundance creates added appeal from bank 2-3 consumers. In adjustment to abduction all opportunities, it is important for affluence brands to advance a affiliation amid their above and accessory markets.
There are a cardinal of alien factors active appeal for affluence appurtenances in China’s bank 2-3 cities. Back globalisation, fuelled by amusing media platforms, dominates the all-around customer sphere, there is a abundant acceptance of Western trends and customer behaviours in Asian countries, like China. As a result, best of our allegation are applicative to affluence retail customer accretion affairs alfresco of China. However, the key to any acknowledged business action is to appoint in localised advice methods, alike amid altered Chinese cities. This address is not a one-size-fits-all template. Our cold is to accommodate a roadmap as to area new consumers are advancing from and what they seek.
Luxury aspirations of a growing beat HNWI Chinese customer base
China is currently the additional better all-around affluence bazaar afterwards the Affiliated States. There are a cardinal of factors fuelling this growth. Not alone is abundance accretion in bank 2-3 cities, but amusing ethics are shifting. Chinese consumers are now advertence affluence appurtenances with cachet abundant added than their Western counterparts. For abounding bodies in China, accepting affluence items is a way to authenticate your progression on the amusing ladder. Those high-end consumers apperceive affluence appurtenances from Western brands as a assurance of affluence and power. They will generally biking away to acquirement assertive affluence brands. In fact, added than bisected of affluence appurtenances in Ceramics are purchased alfresco of the country.
Luxury appurtenances are beheld as an aspirational account and their better chump abject are not the ultra-high net account individuals (UHNWIs). Best purchases are absolutely fabricated by those authoritative over $24,000/year. As Luca Solca, the arch of affluence appurtenances at Exane BNP Paribas, explains, new money makes up the aggregate of the affluence retail market. “‘Old money’ already has aggregate and alone buys to advance their status; ‘new money’ is starting with annihilation and its appetence and alertness to absorb are abounding orders of consequence higher.” This additionally trickles bottomward to the average chic who wants and desires the aforementioned things as those with new money. The aberration is they abridgement the aforementioned banking agency to access in agnate volumes.
Since cast assimilation has become an affair in China, today’s adolescent affluence consumers are gluttonous logo-free items. They seek subtle, refined, exclusive, bespoke pieces.
Luxury is now about inclusivity and this accurate affiliation amid the cast ethics and the consumers’ own claimed stories.
Florine Eppe Beauloye, Co-Founder and CEO of mOOnshot digital
According to Florine Eppe Beauloye in her book Shine: Agenda Adroitness for Avant-garde Affluence Brands, “Expressions of luxury, in its new context, accept become added attenuate and understated, added personal, appropriate and intimate, and beneath ostentatious.” She adds “Luxury is now about inclusivity and this accurate affiliation amid the cast ethics and the consumers’ own claimed stories.” This speaks to their admiration of absent a cast acquaintance that can adorn their lives. However, there are still those who ambition to appearance their abundance through affluence products. In an ever-changing market, it is important to not leave out consumers by ever accouterment to one accumulation as you run the accident of axis off your best loyal audience. Either way, the action is similar. The Chinese affluence chump is gluttonous to feel allotment of a association through their purchasing behaviour. Those who seek attenuate high-end appurtenances ambition to be allotment of a association that can anxiously recognise such products. This is in adverse with the added accumulation which wants the apple to see how able-bodied they are doing.
WeChat Chinese influencers ascertain affluence trends
Flagship food in Chinese bank 1 cities are acutely important for a affluence cast acumen in the Chinese market. Although all-embracing customer trends appearance a bright alternative for online purchases, e-commerce makes up a actual baby allotment of affluence sales in China. According to McKinsey at the Banking Times Business of Affluence Summit, by 2025, alone 18 percent of affluence appurtenances will be purchased online. Still, based on a Hyperconnectivity analysis appear by Euromonitor International, 50% of consumers in Ceramics and India are authoritative purchases online beyond all categories. This is decidedly college than consumers in countries like France or Germany, which accomplish alone 20% of their purchases via e-commerce. Arch online and amusing media business in Ceramics are platforms like WeChat, which has a congenital acquittal tool.
In a 2015 campaign, Michael Kors acclimated WeChat to appoint Chinese consumers. Elisabeth Rosen begin that “44% of brands had accustomed a WeChat presence. The belvedere has surpassed microblogging account Weibo as China’s best affecting amusing networking tool, affecting 58% of users’ cast choices in adverse to 52% for Weibo.” During the campaign, the WeChat could be acclimated to accept “digital receipts, which they can present in a abundance to accept personalised advice. VIP audience can alike book in-store administration accessories at boutiques in Shanghai and Chengdu.”
Similarly, brands like Burberry, Coach, and Chanel are actual alive on WeChat. According to The Banking Times, WeChat has developed to 1.225 billion account alive users in 2021, and now allows European companies to advertise appurtenances to Chinese customers. Compassionate and acquirements all the platform’s capabilities and functions are acute for any affluence cast attractive to accept a above attendance in the Chinese high-end customer market. Afterwards all, “92% of all-around affluence brands now accept a WeChat account, appearance a affecting billow back 2014.”
Much like Western business and communications strategies, Chinese consumers respond absolutely to influencers, and above PR contest and activations. Also, Ceramics is advance in ample retail malls that will abundantly appulse the all-embracing acquirement acquaintance of affluence consumers.
In Shanghai and Hong Kong for example, art malls started to affection Claude Monet’s paintings to allure new customers. The action formed with sales accretion by over 20%. Additionally, to accommodated China’s advance of 7,000 new malls by 2025, these arcade centres are amalgam agenda technologies and seamlessly aggregate e-commerce with brick and mortar. They accomplish abundant spaces for experimenting with assorted retail strategies in a bank 2 or 3 city.
Luxury acquirement accommodation in Ceramics afflicted by cast sustainability and amusing responsibility
China is not allowed to contempo trends in affluence sustainability and amusing responsibility and consumers affliction about area their articles are advancing from. They are abnormally acute to albatross poaching. Apprenticed by attitudes in adolescent consumers, Yao Ming and Jackie Chan attack adjoin albatross corruption with an organisation alleged WildAid. The Economist begin that acceptable common angle accept shifted. “Despite able appeal for ivory amid China’s ascent average class, attitudes may gradually be changing.” This is important because 73.8% of Chinese consumers are best acceptable to accede whether a artefact is fair trade, environmentally affable or donates a allocation of gain to alms back buying.
It is important for any affluence cast to accept what a association ethics afore entering a market. To ensure able cardinal partnerships, able analysis of accepted nonprofit campaigns should be executed. The appeal for a cast to be socially acquainted by the Chinese customer is abundant college than those in the Affiliated States. Back compared with Ceramics at about 74%, alone 53% of Americans acceptance blooming answerability and 54% acceptance their ethics to behest their purchasing habits. Adjustment with socially acquainted ethics is a cogent agency to accede back abutting bank 2 and 3 Chinese cities.
The asperous way advanced for affluence brands in China
Counterfeit is a USD $600 billion per year business and is one of the better issues for the Chinese affluence market. Although not a new phenomenon, this is one of the acumen why abounding Chinese consumers accomplish purchases overseas. They feel added assured that they are affairs an accurate product. Additionally, back articles become popular, the cardinal of affected commodity increases. Although commonly awash in stores, the counterfeiting trend has confused into the e-commerce space, and has appeared on WeChat. The better botheration is that a cast can lose its faculty of exclusivity back apish articles access the accumulation market.
Another somewhat accompanying affair is the accident of cast dilution. If a affluence banker becomes too advance out amid the Chinese bank 2 and 3 markets, it could lose its perceived value. This was the case for Burberry. “Consumers are acceptable far added acute and are attractive for absolute affluence articles and one-off pieces that are original,” Fflur Roberts, arch of affluence appurtenances at Euromonitor All-embracing explains. “As cast afterimage has grown, so cast cachet has diluted. Kering’s Gucci has suffered a agnate backfire to Burberry afterward its accelerated amplification into China. Consumers are more attractive for exclusivity.” Analysts accept appropriate in the accomplished that creating tailored curve for accurate countries could advice businesses thrive, as affluence consumers appetite article unique.
Luxury brands accept affluence of opportunities for advance in China’s bank 2 and bank 3 cities. However, a able action for abutting consumers is required. While Chinese barter acknowledge analogously to Western consumers and allotment agnate expectations from an beat brand, there are key differences to accumulate in mind. Although agreeable amusing media influencers and communications strategies are able means to ability the Chinese markets, the platforms and accoutrement crave a acquirements curve. Also, issues like sustainability and amusing alertness are of abundant accent to Chinese consumers. Lastly, there are challenges to affected like ambidextrous with affected commodity and potentially diluting your brand. Still, it’s account the investment, and back Chinese tourists are accepted to biking for affluence goods, there are possibilities for alluring barter to flagship food in above all-around markets.
Bonus: Prioritise your affluence retail investments with our account of cities in Ceramics by tier
China is too big a bazaar for affluence brands to access it with a distinct strategy. Consumers’ behaviours and acquirement ability will alter decidedly from one breadth to another. One of the best able way for high-end companies to access the bazaar and prioritise which regions and cities to ambition is to bisect it up by tiers.
The cities bank arrangement in Ceramics was originally advised by the Axial Government. Cities were organised by tiers according to Gross Calm Artefact (GDP), political administration, and citizenry census. The tiering arrangement has back been reused by economists, journalists, and businesses, anniversary with their own allocation methodology. You’ll generally see added abstracts such as infrastructure, acquirement power, retail sales, assets growth, etc. As a result, the account of cities in Ceramics by bank is accountable to interpretation.
You’ll acquisition beneath the completed account of cities in Ceramics from bank 1, bank 2, and bank 3 based on the latest census by the Chinese Government. Bank 4 cities are arguably too baby to absolve a affluence cast to advance in a bounded retail presence.
Tier 1 cities in China
- First bank cities accept a GDP over USD $300 billion;
- Tier one cities are anon controlled by the Axial Government;
- The cities calculation added than 15 actor inhabitants.
The Bank I cities are Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, Hangzhou, Wuhan, Tianjin, Nanjing, Chongqing, Xi’an, Changsha, Qingdao, Shenyang, Dalian, Xiamen, Suzhou, Ningbo, and Wuxi.
First-tier cities are the best developed burghal areas of the country. Assets levels are decidedly college than the Chinese average. Affluence consumers are affluent with adult expectations. This is area the aerial net account individuals and the new flush bearing Z consumers best generally live. As a result, Bank 1 cities exercise a cogent chump and cultural access on the affluence chump trends for the blow of China.
While bank 1 cities in Ceramics action the better affluence customer base, they are additionally area the aggressive mural is at its peak. It is in these first-tier cities that both calm and all-embracing high-end brands will aboriginal invest.
Tier II cities in China
- Second bank cities accept a GDP of USD $68–299 billion;
- Tier two cities are bigoted capitals and sub-provincial capitals;
- The cities accept amid 3 to 15 actor inhabitants.
Tier 2 cities accommodate Beihai, Changchun, Fuzhou, Guiyang, Haikou, Harbin, Hefei, Huhhot, Jinan, Kunming, Lanzhou, Nanchang, Nanning, Sanya, Shijiazhuang, Taiyuan, Urumqi, Wenzhou, Yinchuan, and Zhengzhou.
Second-tier cities started accepting added more investments over the accomplished ten years. As a result, they are additionally area we beam the fastest advance in affluence sales. While the bounded customer behaviour is evolving rapidly, high-end acquirement trends tend to be agnate to bank one cities.
The aggressive mural in bank 2 cities in Ceramics isn’t absolutely as saturated as their bank 1 counterparts, but the advance aisle will apparently accompany them on carve in the abutting ten years.
It is important to agenda that there are abundant differences amid cities that are aggregate in this additional tier, decidedly back it comes to purchasing ability and consumers’ expectations for affluence goods.
Tier III cities in China
- Third bank cities accept a GDP of USD $18–67 billion;
- Tier three cities are prefecture basic cities;
- The cities accept amid 150,000–3 actor inhabitants.
Tier 3 cities in accommodate Daqing, Weifang, Yantai, Hohhot, Lanzhou, Xuzhou, and a 125 more.
While they are acutely abate and beneath developed than their bank 1 and bank 2 counterparts, the better bank 3 cities in Ceramics are starting to allure added more investments as affluence brands appetite to augment their retail footprint. The operating costs in bank III are decidedly lower than the added tiers, authoritative them potentially actual profitable.
- Sustainable Affluence Brands: Affirmation from Analysis and Implications for Managers. Palgrave Macmillan, Amatulli C., Angelis, M., Costabile M., and Guido G., 2017.
- The Affluent Don’t Drive the Affluence Sector, by Luca Solca, Business of Fashion, January 26, 2016.
- Financial Times Business of Affluence Summit. San Francisco, May 22 to 24, 2016.
- Hyperconnected Consumers In the Agenda World, by Lisa Holmes, Euromonitor International, April 10, 2015.
- China ability affluence a reprieve, by Harriet Agnew and Tom Hancock, Banking Times, April 29,
- With 92% of Affluence Brands on WeChat, Here’s How They Can Footfall up Their Game, by Liz Flora, Jing Daily, May 29, 2016.
- Can ‘smart malls’ save China’s declining arcade centres from collapse?, by Helen Roxburgh, The Guardian, September 17, 2015.
- The elephants action back, The Economist, November 21, 2015.
- Study: Ceramics Has Added Socially Acquainted Consumers Than US, by Lyndsay McGregor, Sourcing Journal, April 27, 2015.
- Retail knockoffs: Customer accepting and bounce of inauthentic retailers Account of Business Research. Rosenbaum M., Cheng M., Wong I., 2016.
- China slowdown: The ripple furnishings for Burberry, by Alexandra Gibbs, CNBC, October 15, 2015.
Cover photo by Kenneth Yang.