Page 300 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
They are mostly female, above the age of 30 and like cities such as Beijing and Shanghai, thanks to rapid
incorporating silk into their wardrobe (Xu). industrialization and urbanization (Master).
Luxury Items Bain & Co’s analysts predict that sales of luxury goods
will grow 20-22 percent in mainland China in 2019, at
Chinese consumers already make up 32 percent of least doubling the rate of growth seen anywhere else
the global luxury market - a number predicted to rise in the world. The Chinese luxury market slowed down
to 40 percent by 2024. Roughly, 55 percent of all luxury considerably a couple years ago, after a years-long surge
purchases are now made on a portable device, and for that saw a torrent of Chinese shoppers entering the
Chinese consumer, that number rises to 77 percent, and market and making their first luxury purchases. Other
Chinese millennials will make up a large component factors that contributed to the stalling market were
of shoppers and a large driver of the growth in luxury. an economic slowdown in the country, a corruption
Even though the Chinese consumer is increasingly crackdown that curtailed the swapping of expensive
sophisticated, there’s still a real passion to follow and gifts among officials, and the tendency of big-spending
know what influencers and celebrities are wearing and Chinese to do their shopping abroad. The market
doing. It is extremely important for Western brands rebounded in 2018. Bain doesn’t expect a return to the
to have local teams on the ground in China. The need boom years of roughly 2010 to 2014, though, when
to understand local culture, behavior and language brands could practically sit back and watch their sales
is vital. Entering China’s digital commerce ecosystem rise. Now they have to work hard to draw shoppers. Bain
is just crucial. The influencers have always been very noted that revised local pricing, which aligns prices in
important in Asia. Many Western brands have retained China more closely to those abroad, and brands using
a more elevated position than they have in their home localized strategies to attract and satisfy customers
country (Smith). are helping to boost sales. The main reason for the
rebound, however, is the rise of the Chinese millennials,
Global luxury brands from such as Prada are a generation that has more spending power than any
investing in China for the first time since a crackdown other before it. These young Chinese are buying in large
on conspicuous spending in 2013, focusing on smaller, numbers online, in a shopping culture that is heavily
less developed cities even as the world’s second-largest influenced by social media and frequently playing out
economy slows. Increasing spend by cash-rich Chinese on networks such as WeChat. Many Western luxury
millennials, largely unhindered by a crackdown on brands are increasing their presence on this and other
corruption and extravagant spending, is prompting apps to reach China’s young shoppers. This shift in
brands to revamp some stores and open new ones in luxury shopping is having interesting side effects in
second and third tier cities where luxury spending is China: physical stores run by luxury labels in large cities
growing faster. can often be found empty. Instead, much of the action
is happening digitally (Bain, What’s Really).
The youngsters, who account for around 30 percent
of the sector’s China sales, are a demographic less Cosmetics
sensitive to wider economic factors. According to Jean-
Paul Agon, Chairman and CEO of cosmetics group The cosmetics sector on the Chinese mainland has
L’Oreal,“There is the emergence in China of a very strong been growing in tandem with the rapid development
upper class or upper middle class… and the difference of the Chinese economy in recent years. The total retail
is that now millennials from this middle and middle sales of skincare and make-up products in China reached
upper class are absolutely not hesitant to buy luxury 186.7 billion yuan and 34.4 billion yuan, respectively,
brands.” Often single children armed with family money, in 2017, achieving year-on-year growth of 10.3 and
the 20-34 year-old demographic started buying luxury 21.3 percent, respectively. China’s domestic cosmetics
brands at a young age and purchases more frequently, brands performed very well in 2017, the main reason
splurging on everything from jewelry and fashion, to being expansion into second and third tier markets.
cosmetics and handbags, industry experts say. Many They have also been developing online sales vigorously
millennials are also choosing to remain in the country’s and boosting advertising on new-media platforms
outlying provinces, shunning more expensive, larger to raise brand recognition. Chinese women’s most
300
They are mostly female, above the age of 30 and like cities such as Beijing and Shanghai, thanks to rapid
incorporating silk into their wardrobe (Xu). industrialization and urbanization (Master).
Luxury Items Bain & Co’s analysts predict that sales of luxury goods
will grow 20-22 percent in mainland China in 2019, at
Chinese consumers already make up 32 percent of least doubling the rate of growth seen anywhere else
the global luxury market - a number predicted to rise in the world. The Chinese luxury market slowed down
to 40 percent by 2024. Roughly, 55 percent of all luxury considerably a couple years ago, after a years-long surge
purchases are now made on a portable device, and for that saw a torrent of Chinese shoppers entering the
Chinese consumer, that number rises to 77 percent, and market and making their first luxury purchases. Other
Chinese millennials will make up a large component factors that contributed to the stalling market were
of shoppers and a large driver of the growth in luxury. an economic slowdown in the country, a corruption
Even though the Chinese consumer is increasingly crackdown that curtailed the swapping of expensive
sophisticated, there’s still a real passion to follow and gifts among officials, and the tendency of big-spending
know what influencers and celebrities are wearing and Chinese to do their shopping abroad. The market
doing. It is extremely important for Western brands rebounded in 2018. Bain doesn’t expect a return to the
to have local teams on the ground in China. The need boom years of roughly 2010 to 2014, though, when
to understand local culture, behavior and language brands could practically sit back and watch their sales
is vital. Entering China’s digital commerce ecosystem rise. Now they have to work hard to draw shoppers. Bain
is just crucial. The influencers have always been very noted that revised local pricing, which aligns prices in
important in Asia. Many Western brands have retained China more closely to those abroad, and brands using
a more elevated position than they have in their home localized strategies to attract and satisfy customers
country (Smith). are helping to boost sales. The main reason for the
rebound, however, is the rise of the Chinese millennials,
Global luxury brands from such as Prada are a generation that has more spending power than any
investing in China for the first time since a crackdown other before it. These young Chinese are buying in large
on conspicuous spending in 2013, focusing on smaller, numbers online, in a shopping culture that is heavily
less developed cities even as the world’s second-largest influenced by social media and frequently playing out
economy slows. Increasing spend by cash-rich Chinese on networks such as WeChat. Many Western luxury
millennials, largely unhindered by a crackdown on brands are increasing their presence on this and other
corruption and extravagant spending, is prompting apps to reach China’s young shoppers. This shift in
brands to revamp some stores and open new ones in luxury shopping is having interesting side effects in
second and third tier cities where luxury spending is China: physical stores run by luxury labels in large cities
growing faster. can often be found empty. Instead, much of the action
is happening digitally (Bain, What’s Really).
The youngsters, who account for around 30 percent
of the sector’s China sales, are a demographic less Cosmetics
sensitive to wider economic factors. According to Jean-
Paul Agon, Chairman and CEO of cosmetics group The cosmetics sector on the Chinese mainland has
L’Oreal,“There is the emergence in China of a very strong been growing in tandem with the rapid development
upper class or upper middle class… and the difference of the Chinese economy in recent years. The total retail
is that now millennials from this middle and middle sales of skincare and make-up products in China reached
upper class are absolutely not hesitant to buy luxury 186.7 billion yuan and 34.4 billion yuan, respectively,
brands.” Often single children armed with family money, in 2017, achieving year-on-year growth of 10.3 and
the 20-34 year-old demographic started buying luxury 21.3 percent, respectively. China’s domestic cosmetics
brands at a young age and purchases more frequently, brands performed very well in 2017, the main reason
splurging on everything from jewelry and fashion, to being expansion into second and third tier markets.
cosmetics and handbags, industry experts say. Many They have also been developing online sales vigorously
millennials are also choosing to remain in the country’s and boosting advertising on new-media platforms
outlying provinces, shunning more expensive, larger to raise brand recognition. Chinese women’s most
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