By 2025, China will be the world’s largest luxury market. However, with the borders closed, and no travelers leaving China, luxury consumption and travel are 100% domestic. Consumers are more confident than ever before, and China pride is giving rise to evermore innovative and successful Chinese brands. Recent political shifts such as Xi Jingping’s call for “Common Prosperity” are yet to be fully rolled out. What will that mean for Luxury in China?
In brief, luxury brands should expect more complexity in 2022. Below, we outline six key trends we believe will shape the market in 2022, and how they will impact luxury brands. Get in touch with us at Gusto Luxe to understand more about how to navigate the market – what to do, how to be prepared, and how to thrive.
Health is the New Wealth
The pandemic accelerated a move towards the pursuit of a more health-conscious and physically active lifestyle. In China, this has manifested in a number of key ways: from the boom of fitness centers to the increased adoption of clean and conscious beauty and wellness practices. We’re also witnessing the growing popularity of outdoor activities such as mountain climbing and camping to widening selections of competitive team and individual sports. The pursuit of good health is a rapidly growing, multibillion-dollar industry.
One key sector to watch is none other than winter sports. With the Beijing Winter Olympics kicking off on February 4th, 2022, it seems like winter sports have become the nation’s favourite pastime. Luxury Malls have dedicated areas for ski brands including indoor ski training to keep the children (and parents) busy as they buy the latest ski gear. Wintastar Shanghai, the World’s Largest Indoor Ski Resort will be opening soon. By 2025, the Chinese government aims to have 5,000 elementary and middle schooled focusing on winter sports. The Chinese Ice and Snow equipment industry gains an average annual growth rate of more than 20%.
Wintastar (L) and China National Sliding Center(R). Sources: KPO Properties & Xinhua
This is an opportune time for winter sports brands from apparel and equipment to hospitality and schools with growth ambitions. In September, Prada exclusively launched its “Prada On Ice” collection at Beijing’s luxury mall SKP. The brand drew inspiration from winter sport yet added a modern twist for the collection to celebrate the forthcoming 2022 Beijing Winter Olympics.
“Prada On Ice” collection at the SKP Atrium in Beijing. Source: Prada
According to a recent report introduced at the Health, Wellness and Fitness Expo in Shanghai, in 2001 China was home to approximately 500 gyms but today boasts over 50,000 fitness clubs. China’s fitness and gym industry saw a growth of 160% in the past 5 years from $4.4 billion in 2015 to $11.4 billion in 2020. The rise of exercising, gyms and fitness clubs brings about the rapid growth of the athleisure market and usage of fitness apps.
China’s sportswear market sees no signs of slowing down. While key international players such as Nike and Adidas have seen their popularity rise in recent years, homegrown brands including Li Ning and Anta have also grown their market share rapidly. By collaborating with international brands and artists such as Disney, Jason Wu, and Steven Harrington, Li Ning continues to increase the brand appeal to young Chinese consumers. Anta scored a valuable partnership as the apparel designer for China’s ski team at the 2022 Winter Olympics.
Anta introduced its designs for China’s Winter Olympics skiing team at a recent press conference. Source: Anta
When it comes to outdoor leisure activities, young Chinese people are discovering camping, trekking, and surfing etc., in increasing numbers, largely due to restrictions on foreign travel during the Covid pandemic. Brands from Lululemon and Maia Active to Li Ning are cashing in on this new trend by doubling down on their strengths, and in many cases, they also introduce capsule collections, for example, Li Ning’s urban outdoor in collaboration with Chinatown Market.
Sources: Maia Active (L) & Li Ning (R)
In the beauty and wellness sector, observers see the soaring demand for clean and niche beauty brands, fueled by consumer interest for conscious brands and the relaxation of animal testing regulations in China allowing new brands to enter the market. Clean, conscious, cruelty-free skincare, fragrance, and make-up brands are expected to see success in 2022. Health supplements will also gain in popularity. A recent iimedia survey indicates that nearly half of the participants opt-in for health supplements as their first choice to improve their health condition.
China Rediscovery
China’s borders are expected to remain closed till late 2022. This continues to give rise to some interesting shifts in travel trends. A deep appreciation of the breadth of what China has to offer for domestic travel has spurred exciting travel brands and new experiences. Ahead of the border reopening, it’s key for brands to remain engaged, and drive desirability and awareness to be ready for when travelers begin going overseas again.
It’s not just about duty-free shopping in Hainan, Chinese who used to travel all over the world are now exploring their home-turf. From Gansu to Yunnan, Chinese travelers are discovering the abounding natural beauty, historic landmarks, and cultural monuments. Many Chinese brands are riding the travel boom and introducing new concepts such as glamping sites in the desert, walking tours in the mountains, and many more.
The love of the great outdoors has been noticed by luxury brands too: whether fashion, alcohol or jewelry. They are capitalizing on this new space. They are arranging exclusive VIP experiences for clients in remote locations, or world-class fashion shows. Homegrown cashmere powerhouse Erdos hosted its latest fashion show in the desert in Inner Mongolia. Louis Vuitton’s High Jewelry had an event at the luxurious HYLA resort in the middle of Yunnan Province.
Erdos SS22 Fashion Show in Inner Mongolia. Source: Weibo@ERDOS鄂尔多斯微博
Desert Lotus Hotel, Inner Mongolia Province (L) & Desert Star Hotel, Ningxia Province (R). Sources: ArchDaily & infnews
For influencers and celebrities, the new social currency is pictures of off-the-beaten-track and remote destinations or creative interpretations of places that they frequent.
Lesser-known Wensu Tuomuer Canyons in Tianshan Mountains located in Southern Xinjiang is in the spotlight and compared to Grand Canyons in the U.S. Source: Weibo@阿Sam的午夜场 (KOL)
KOLs in Shanghai posing at Costco, pretending they’re in L.A. Source: RED@Blanche
The opportunity for Western brands is to explore business opportunities such as strategically investing in new stores, giving tribute to a Chinese landmark / destination with an event or a product, and filming brand campaigns in unique locations to highlight the sheer beauty of Chinese landscapes.
China Pride
The rise in China Pride can be witnessed in so many different ways. It’s been fueled by many factors, for example, the country’s efficient management of the Pandemic, impressive infrastructure developments, tech innovation, and a sense that the future will be better than the present. There is a strong sense of intergenerational optimism: 60 percent of college students think that their yearly earnings will reach one million within ten years after graduation.
Whether in beauty, wellness, fashion, or tech, there will be Chinese brands giving Western counterparts a run for their money. Homegrown brands are developing at an impressive speed thanks to their innate understanding of the market but also their willingness to take chances in innovative and engaging ways to connect with consumers.
Sources: Weibo@李宁 (L) & @PerfectDiary完美日记 (R)
While it is plausible that Western brands deploy out-of-the-box strategies in their attempt to lure Chinese consumers in such a competitive environment, it is recommended that they exercise caution in a few key areas here.
Authentic content creation and localization are key, crafting the right campaigns with local talents, taking into account local festivals and trends to resonate with an ever more demanding and distracted consumer.
Creative collaborations can also be a game-changer for a brand if done in the right way. Many successful collaborations involve partners who have shared values and goals. These could be unique crossovers of Western luxury brands with Chinese talent: Maison Margiela and Harmay, Canada Goose and Angel Chen, for example.
The Future is Now
In the wake of the pandemic, luxury brands quickly capitalized on live-streaming to connect with their audience in China, from live broadcasting their fashion shows to hosting live discussions. Thanks to this swift transition in China, key international and homegrown luxury labels managed to keep their bottom lines out of the red. A number of brands began taking further steps to make gains by introducing virtual KOLs and NFT for Chinese consumers.
Chinese beauty brand Florasis created its own virtual KOL, who shares the same name as the brand while L’Oréal introduced Mr. Ou virtual KOL based in Paris and interested in sustainability.
The virtual avatar of Florasis. Source: Weibo@花西子Florasis.
RTFKT, considering itself as the first luxury brand in the NFT space, designed a unique, pure gold virtual sneaker to be auctioned off on the Chinese digital marketplace Treasureland. The brand sold its digital creation for $28,000.
RTFKT’s festive ox-themed sneaker for Chinese New Year 2022. Source: RTFKT
Glenfiddich, the world’s most awarded single malt whisky, partnered with UK-born Chinese digital designer Stephanie Fung to develop and launch a limited-edition NFT fashion collection, called Filigree Aesthetic in hopes of courting young, affluent Chinese consumers.
Stephanie Fung’s three-NFT Filigree Aesthetic collection was inspired by the reimagined art pieces. Source: Glenfiddich
In the retail sphere, malls and shops in China are missioned to provide not just a seamless experience from offline to online and vice versa, but also to construct standout architecture to appeal to young consumers, who constantly look for the latest “wow factor” to showcase across social media.
The latest addition to Shanghai’s retail scene, Taikoo Li Qiantan Mall, was built with this concept in mind. The developer worked with luxury brands to bring to life many of their first concept stores in China, for example, Moncler’s Biggest “House of Genius” to Oasi Zegna Garden, from Boucheron Jardin d’Hiver to Starbucks’ Greener Store.
An “Olive” Shaped Society
In 2021, President Xi Jing Ping called on the country’s private organizations and individuals to invest some of their wealth in social programs ushering in a new initiative known as “Common Prosperity”. Tech giants including Pingduoduo, Alibaba, Tencent, have made commitments to invest in smaller companies, employee training, and social and environmental programs
Western luxury brands should start new and/or scale-up existing environmental and social programs in China. Their CSR programs need to be developed and localized for China as there may be unforeseen risks to simply implementing global programs in China.
China luxury observers also anticipate that ‘common prosperity’ may give rise to discreet luxury. High net-worth individuals in China may be more conscious about showing off their wealth and placing a greater value on discretion and privacy to avoid the attention of foreign eyes.
Brands synonymous with minimalist luxury such as Goyard and Hermès, already highly sought-after in China, could see increased demand as the country accelerates to adapt to the new paradigm shift.
Purpose-led brands continue to see a rise in popularity
We all have heard it before: young Chinese consumers – Millennials and Gen-Z – are more open to expressing their worldview and personality through consumption than older generations. Luxury brands that show an unwavering commitment and tangible actions in making an impact are likely to win over the younger demographics. A purpose-led branding and business operation may come with high costs that may not produce an immediate payoff. However, in many cases, brands with a clear, impact-driven message earn strong brand equity amongst young consumers, which would deliver long-lasting benefits.
Icicle, a homegrown luxury brand centered on a “made in earth” philosophy, claimed the top spot of Tmall’s 2020 Single Day sales in the luxury womenswear category. Founded in 1997, the brand grappled to earn its footing during its early years. However, its understated and sophisticated designs caught the eye of China’s fast-evolving luxury consumers. Then in 2015, the company acquired French label Carven and hired European employees to help shape its international expansion. Today, Icicle generates almost US$200 million in sales annually, thanks to its retail footprint of over 250 stores in China, and a luxury flagship in Paris.
Icicle’s SS21 Earth Walker collection. Source: Icicle
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