Key Takeaways on China Under This Post Pandemic Time

The severity of the COVID-19 pandemic is now completely exposed worldwide. While most of the Western countries are still trying to contain the situation, China is now stepping into a new normalcy.

China’s luxury market still has great potential even after COVID-19

Citizens are back to work and the consumption is recovering. Bracing for its worst year possibly in modern history, the luxury industry worldwide, under tremendous financial and operating pressure, has been adapting itself accordingly and closely following up the latest trend on Chinese market.

The reasons underlying is obvious – as estimated by Bain and Altagamma, by 2025 Chinese shoppers’ importance to luxury will be even greater. By then they will account for nearly half of global luxury purchases, up from about 35% in 2019.

People can only enter the shopping mall after being tested their body temperature.
Source: Reuters

Though the Chinese luxury market has indeed suffered a great loss, with a series of factors that include panic, uncertainty and shuttered supply chain, it is still the market which is most likely to rebound, and it is more and more confirmed by facts and numbers. For example, LVMH just reported a 50-percent rise in sales of its top brands in Mainland China during April.

The market players’ emphasis on China is a joint effort by consumers, purchasing channels and the Government

China’s potential in further development of luxury market is in fact a joint effort by the consumers and the Government. From a global perspective, Chinese consumers contribute 90% to the continuous growth of the global personal luxury goods market, accounting for 35% of the total global luxury goods consumption. The Government, on the other hand, has worked to bring spending home by lowering duties in Mainland China and cracking down on oversea agents called “daigou” who buy products abroad and then ship them to buyers in China.

From the perspective of purchasing channels, China also has a great advantage of online sales and it is especially the case even during the lockdown period during the first quarter this year. As per report by Kantar, in January and February, beauty and cosmetics sales have dropped by 13% year-on-year, yet online channels saw 7% growth. In particular, Tmall saw an 41% growth in cosmetics sales from same period last year, and 51% year-on-year growth for March. 

In the same vein, since March, luxury goods consumption on Tmall has increased significantly. On the first day of 3.8 Women’s Day Shopping Festival, its luxury goods sales increased by 140% year-on-year.

Swift and decisive brands are taking the lead in the recovery

Apart from the traditional e-commerce channel, live streaming is the new hit among luxury brands. According to China’s Commerce Ministry, the number of e-commerce livestreaming sessions topped 4 million in the first quarter. Live streaming enjoys the benefits of real-time responses and can showcase the products or the offline stores in a more dynamic way and to further infiltrate to lower-tier city users.

Adaptive market players like Louis Vuitton are already trying their hands at live streaming during the shadow period of COVID-19. On the evening of March 26th, Louis Vuitton invited famous fashion blogger Yvonne Ching and one of its brand friends Elaine Zhong together to host a live streaming to showcase Louis Vuitton’s summer 2020 collection on Xiaohongshu, China’s leading UGC platform, making itself the first luxury brand to create interactive original content in China through live streaming.

Elaine Zhong visiting one of Louis Vuitton’s workshops
Source: Louis Vuitton’s official Weibo account

Besides utilizing this new communication tool, the brands are turning to the live streaming and short video platforms. To promote its “5.20 I Love You Day” campaign, Dior launched an online pop-up on Douyin’s newly added e-commerce mini program, creating a new channel of online sales.

Diversified platforms are making China’s online users more segmented and challenge the sensitivity and adaptability of luxury brands. How to approach more potential consumers and how to stay connected with current consumers in this post pandemic time are not problems with obvious answers. Brands which have been focused, swift and decisive in branding and marketing will have a strong rebound and a significantly strengthened market position.