Westin has over 230 hotels and resorts in 36 countries and districts in the world. It focuses on the market of high-end consumers. All Westin hotels are recognized by local authorities as five-star hotels. Westin prefers to place its hotels (resorts not included) in city centers, providing its customers with the most convenient location if they want to go sightseeing or shopping. Westin’s 160 hotels and resorts are all known for their modern design, exceptional customer service and relaxing atmosphere.

Westin Hotels & resorts provides customers with relaxing accommodations for them to come back to after spending a day enjoying the surrounding locations. Each Westin Hotel is located in areas that offer unique experiences for its customers. Westin has a history of focusing on wellness, and it continues its commitment to its travelers’ well-being and healthy lifestyle.

What is unique about Westin in China

Westin now operates 25 hotels in China Mainland: four in Guangdong, four in Hainan, three in Zhejiang, two in Beijing, two in Fujian, two in Shandong and one in each of Anhui, Jiangsu, Jilin, Hubei, Shanxi, Tianjin, Wuhan, Shanghai. The above hotels are located in Tier 1 or Tier 2 cities. Currently, China is home to the second largest number of Westin hotels worldwide, second only to the United States. In China’s luxury hotel market, Westin ranked eighth in terms of the number of hotels among all international 5-star hotel brands in 2008, while Sheraton had the most number of hotels (70).

Increasing demand in China’s luxury hotel market brings opportunity for Westin China

Since entering China in 1991, Westin has targeted wealthy Chinese customers. In the last 20 years, China’s promising GDP growth and increasingly affluent consumers have led to high demand for luxury goods and services. The growth of high-yielding consumers contributes to the blooming of the domestic high-end travel and China’s luxury hotel market.

According to GlobalData, China was the largest luxury hotel market worldwide in 2018, with year-over-year (YOY) growth of 18.3%. In 2019, China’s luxury hotel market still had a YOY growth rate of 10.2%. It is predicted that China will continue this momentum in the next few years with a growing number of high-net-worth citizens.   

How Westin adds Chinese elements

Westin also pays close attention to the local culture of the city and the country where its hotels lie and holds cultural events to accommodate these differences.

In Wuhan, Westin held a luxury traditional family reunion dinner to celebrate the Spring Festival. The event offered Westin customers dishes from different geographical regions of China. Various types of tea were also available.

In Hefei, the Westin held a “Mooncake Show” in late August. The show was held in preparation for the Mid-Autumn festival where mooncakes are traditionally eaten. The Westin offered each of its customers four different mooncakes at the show to give them a little taste of China.

In Beijing, the Westin offered its customers a variety of crab dishes. Chinese people love to eat crab in Autumn, but crab is not farmed in Northern China. The Westin gives Northern consumers a chance to enjoy a delicacy that they normally cannot enjoy.

Westin in China：leveraging the power of new marketing. Co-branding marketing

Source: Westin China’s Weibo, Co-branding marketing of Westin China × KEEP

Partnering with “KEEP”, an easy-to-use  Chinese fitness app, Westin is able to improve customer experiences and strengthen its brand image. Westin and KEEP cooperate to satisfy business travelers’ sports needs by providing a full range of fitness activities. 

The collaboration covers in-room courses, running-related and fitness center courses. First, for in-room courses, KEEP and Westin jointly open exclusive TV channels provided in Westin Hotel. Based on the space environment of hotel rooms, KEEP customizes a set of sports courses suitable for hotel guests to exercise in the room. Second, Westin China adjusted its “RunWestin” program, generating its characteristic health running map route in the KEEP App. Hotel guests and city runners can easily use the Westin health running map in the App, and the App can record and collect related personal performance data. Third, for fitness center courses, KEEP also provides Westin with a complete solution, including training, yoga and other courses. These are to better serve the personalized fitness needs of travelers. Hotel guests can easily scan the QR code in the hotel gym to get recommended courses and enjoy working out. 

Why the Westin x KEEP co-branded marketing works

Why is this innovative collaboration so successful? Two similarities between two partner brands can explain this.

First, both brands advocate healthy lifestyles and emphasize keeping fit. Westin hotel has focused on fitness since it was created and is committed to bringing customers health and wellness in addition to a comfortable accommodation experience. Westin promises to enable guests to maintain their workout routine during they stay in the hotels. Such a promise aligns with KEEP’s brand image that has always been centered on creating a “free sports ground”. Based on the same idea, two brands can join forces to help travelers stay fit and have a healthy lifestyle.

Second, two brands share a similar customer base. Westin and KEEP team up to explore the material and emotional needs of high-end traveler groups. Through this cooperation, both parties leverage rich experience in different fields to jointly develop deeper customer insights, and achieve a full range of sports needs for the target customers.

Innovative marketing method achieves better results

Different from simple co-branding marketing, in which two brands only jointly hold activities or produce products, the cooperation between Westin and KEEP has more significant meaning and better results. It embodies a common vision of two parties, and tightly integrates brand values, market experience and customer insights.

Partnering with KEEP, Westin creates some brand new elements to its traditional hotel identity. Hotel’s high-tech hardware facilities and services activated by the Internet help Westin shape a more active and rich brand image. Westin will attract more loyal guests by offering them one-stop solutions for sports needs in traveling. 

New marketing strategy: social media marketing

Nowadays, social media has built an instant and tight connection between brands and customers, especially for the hospitality business. More and more Chinese are used to checking peer reviews and comments on popular Chinese social media like Weibo, Xiaohongshu and Tiktok before purchasing products or services. In these cases, social media plays a vital role in deciding travelers’ purchasing choices. Several Westin hotels, which are instagrammable luxury stays, earn their reputation on Chinese social media.

Source: Weibo, Red –KOLs’ posts about Westin China

On Chinese social media platforms, it is easy to find some KOLs (Online Key Opinion Leaders) posts about people’s stay experiences at Westin hotels. Their posts usually show the luxurious decoration, comfortable environment, considerate service and stunning views of the hotels. With more and more KOLs sharing wonderful stay experiences, Westin raises its awareness among Chinese consumers. Currently, Westin hotels in some cities, like the Westin Chongqing Liberation Square, have become “internet-famous” hotels, attracting tons of travelers to stay or just take pictures.

Source: Weibo, Red –Consumers’ posts about Westin China

Many people, especially millennials, are keen to share their high-quality lifestyle experiences on social media. It is trendy for them to post fantastic photos of the hotel and share their feelings when staying in the hotel. These posts can have millions of views, and thus cause a “network effect,” which helps advertisement for the Westin.

Recovering from coronavirus: upscale hotels should take “smart” strategies

The tourism industry and the hotel market have suffered huge losses from the coronavirus outbreak. In order to reduce loss and raise occupancy rates, many hotels made dramatic price-drops during the period of the COVID-19 pandemic. Until now, a lot of hotels have still dropped the price to entice consumers. However, it is not a wise strategy, since starting a race by dropping the prices will hurt profits across the entire industry. All hotels will lose out and it would be hard for the hotel market to recover from the crisis. In addition, price promotion strategies may have a negative impact on brand images of upscale hotels like Westin.

To recover from the COVID-19 pandemic in a relatively short time, hotels could take action more smartly. For example, they should offer more “value-adds” services to attract travelers, like Westin’s co-branding marketing. Also, leveraging popular Chinese social media to have users advertise for brands seems like a wise marketing strategy.

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Meanwhile, Estee Lauder Group launched twelve brands into the Chinese cosmetic market, enabling China to be its No.2 international market. In 2019, Estee Lauder Group’s net sales in the Asian-Pacific region reached 3.6 billion USD. In contrast to the American region’s negative change, the Asian-Pacific area earned a 21 percent increase year-over-year.

Data Source: JUMEILI.CN, Regional Net Sales of Estee Lauder Group

History of Estee Lauder

Mrs. Estee Lauder created Estee Lauder in New York. Now, it is the world’s biggest company for skincare products, cosmetics, and perfume. Its products are available in over 13,000 outlets in over 130 countries around the globe. One of Estee Lauder’s strengths is R&D and product development. Also, it keeps a harmonious relationship with its customers, making it possible for the company to acquire more growth in the future. Mrs. Estee Lauder had always insisted that a woman can always be beautiful and fashionable. Thus she injected her lifestyle and sensitivity to fashion into the brand.

The layout of the Estee Lauder Group in China

Estee Lauder Group launched many well-known brands, promoting its whole layout in the Chinese cosmetics market.

Estee Lauder Group in China desires to provide a wide range of cosmetic products to Chinese customers

When Estee Lauder initially entered China, it focused on high-end product sales. In 2005, however, it launched six new brands into the Chinese market. Estee Lauder assigns its brands to different target customers. It hopes every customer can find suitable products from Estee Lauder Group. M.A.C highlights the personal style, looking more fashionable, while Estee Lauder is a typical high-end brand. Now, all-around brands’ matrix almost covers all categories of cosmetic products and price zone, reducing the risk that customers change their preferences. Notably, Estee Lauder Group launched a brand called Osiao in Hong Kong in mid-October, 2012. This brand is specially designed for the skin of Asian people.

Brand matrix of Estee Lauder Group in China

Now, Estee Lauder Group has many famous brands. Its top brand is LA MER. Then Estee Lauder follows as the first tier brand, and Clinique and Origins follow as the second-tier brands. Smaller brands also include Aramis, Prescriptive, Tommy Hilfiger Toiletrie, Kiton, Darphin, Michael Kors Fragrance, and Bobbi Brown. Currently, only parts of its brands are in the Chinese market. However, Estee Lauder Group never stops its expansion in the Chinese market. On June 16th, 2020, two luxurious fragrance brands from Estee Lauder Group, BY Killian and Editions de Parfums Frederic Malle, initiated in Shanghai International Finance Center.

Source: JUMEILI.CN Original Brands of Estee Lauder Group in China

Source: JUMEILI.CN Acquired Brands of Estee Lauder Group in China

Strategies of Estee Lauder in China

Through decades of development, Estee Lauder has a big market share in the Chinese cosmetic market. Fan Jiayu, the general manager of Estee Lauder China, shared that Estee Lauder paid attention to what they do now and looked forward to the future’s business environment. Estee Lauder China always keeps its awareness of possible crisis to evaluate its position and prepare for potential risks. That allows the brand to strengthen its brand awareness in China and customer stickiness.

Estee Lauder established an R&D center in China to better satisfy Chinese customers’ needs

According to the CEO of Estee Lauder in Asian and Pacific Districts, Fabrice Weber, Estee Lauder contended a keen interest in the Chinese market. He hoped that Estee Lauder could merge into China market instead of being a ‘foreign’ company. In 2005, Estee Lauder set up a team to research Asian skincare needs. In 2010, Nutritious Super Pomegranate series appeared that were designed for Asians to improve dehydrated skin. On June 2^nd, 2011, Estee Lauder announced the establishment of its Asian R&D Center in Shanghai.

Estee Lauder China’s e-commerce sales boomed in 2020

Ecommerce in China has developed rapidly and is quickly becoming the main purchasing method among Chinese. Thus, Estee Lauder took a specialized online strategy to adapt to the Chinese market. E-commerce represents approximately 30% of Estée Lauder’s business in its top markets. In 2014, Estee Lauder became one of the first high-end cosmetic brands that entered on Tmall. Estee Lauder built a professional team with 50 people to focus on Estee Lauder’s Tmall store and independent e-commerce shop. In 2017, the sales revenue of Estee Lauder in China got 40 percent growth. Notably, e-commerce accounted for 50 percent of that increase. Also, Estee Lauder Group opened online stores for its sub-brands, bringing more consumption for the group.

After the COVID-19 outbreak spread through China, Estee Lauder’s March e-commerce sales spiked, with a 135% YoY increase. During this same period, Lancôme’s Tmall sales increased by 110%, and those of Perfect Diary’s by 29%, according to data from WalkTheChat.

Data Source: WalkTheChat Analysis, Evolution of Tmall flagship sales between March 2019 and March 2020

Estee Lauder builds close relationships with celebrities and KOLs

Celebrity endorsement marketing is also behind Estee Lauder’s success in China. Fabrizio Freda, Estee Lauder’s CEO, contended that 75 percent of investments were spent on digital marketing, social media, and KOLs, earning a high efficiency. For example, Yang Mi, a famous Chinese actress, is Estee Lauder’s brand ambassador. Her first cooperation with Estee Lauder in February 2017 earned over one million shares on Weibo and brought over a 500 percent increase in sales. Meanwhile, the cosmetics brand also engaged in  KOL marketing in China. In the 2019 double 11 presales, Chinese actress Li Jiaqi sold over 0.4 million Estee Lauder’s Advanced Night Repair in a short time.

Source: Weibo Estee Lauder, Estee Lauder announced Yang Mi to be its Asian-Pacific region brand ambassador, gaining over one million shares.

The cosmetic market is competitive, so Estee Lauder needs to prepare for potential risks

Estee Lauder received great results in the Chinese market due to its excellent strategies. However, Estee Lauder in China also meets tremendous challenges from both thriving domestic brands and well-known international brands. Particularly, L’Oréal Group, has an identical layout in the brand matrix that involves different levels of brands. Especially, one of its cosmetic brands, Lancôme, is the main competitor of Estee Lauder. One of their eye creams uses similar technology and has similar functions, triggering aggressive competition between them. Yet, although Estee Lauder won significant market shares in China, it still faces crucial competition. Therefore, Estee Lauder needs to maintain vigilance in case of potential risks.

Data Source: qianzhan, China’s cosmetic market share 2018 (foreign brands only)

COVID-19 impact on Estee Lauder Group in China

COVID-19 had a great impact on the cosmetic market. Travel retail channels could not function well due to decline in China’s inbound and outbound tourism.

In March 2020 Estée Lauder reported a 11% decrease in net sales from the same period last year. As a result, the company has implemented a host of measures to reduce spending in advertising, administration, and human resources, as well as furloughing part of its vast retail staff and cutting salaries of top management.

The short-term impact on Estee Lauder online business in China is roughly the same as that of physical channels, but e-commerce can play a leading role in business recovery in the future.

Authors: April Peng & Valeriia Mikhailova

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Founded in 1946 by French designer Christian Dior, Dior is one of most famous fashion luxury brands in the world. Since its founding at Avenue Montaigne in Paris, Dior has always been synonymous with magnificence and elegance. The first womenswear collection by Christian Dior in 1947 caused a global sensation while leading the “New look” revolution. Until now, whether in fashion, cosmetics or other, Christian Dior has always been at the top of the fashion luxury industry. As China makes up 40% of the global luxury market, Dior also considers China as a major market. At the same time, Dior in China approaches Chinese luxury customers from both product side and creative side.

Source: Dior.com – The new look of Christian Dior

The fragrance, makeup and skincare products are under Parfums Christian Dior division has more than 300 points of sales at the moment in China.

Parfums Christian Dior

From year 1973 on, Dior has had its own R&D center. Over 200 specialists, biologists, pharmacologists and researchers cooperate with over 20 R&D centers in the world’s top universities and science institutes to develop the best products. Dior has always put tactile impression of products as an important factor. All its products bring a perfect combination of technology and joy.

The beauty division (Parfums Christian Dior division) of Christian Dior maintained strong growth, driven by the success of its classic perfume, makeup and high-end skincare lines. Perfume such as J ‘Adore, Miss Dior and Sauvage are big success in the market. Cosmetics, including Rouge Dior and Ultra Lipstick collection lead a trend among customers. Also, the high-end skincare products are growing well, especially in the Asian market. Dior is the #2 luxury brand in China’s perfume market.

Dior Pink City: Dior in China plays with pop-up stores

Source: Sohu.com – Dior Pink City is coming to Shanghai. A beautiful Pop-Up store in a fashion-savvy Chinese city.

After launching the Dior Pink City pop-up store in Macau, the pop-up store came to Shanghai in July 2019. As the first station in Mainland China, Dior made five themed rooms in the pink city, including Dior pink flower shop, Dior pink library, Dior pink urban spa, Dior pink music hall and Dior pink café.

In the Dior Pink City pop-up store, consumers had the chance to experience personalized fragrance trial services, get bouquets of elegant flowers, and relax and get massages in the spa area, experience High-end skincare Dior Prestige, print exclusive photos and finally get small surprises crafted by Dior.

Dior in China entered E-commerce on Tmall

Tmall, owned by Alibaba group, now offers more than 3,000 beauty brands and the proportion of well-known brands the platform to launch their online stores. The big name brands which have official stores on Tmall rose from 555 in 2015 to 84% in 2018. According to Alibaba, Over 3 million women buy at least five tubes of lipstick on Tmall each year. Additionally, affected by the COVID-19 epidemic, COVID-19 pandemic, luxury and fashion brands are paying more attention to Chinese e-commerce platforms.  Just after launching the brand-new Bobby handbag collection, Dior in China had new, strategic moves.

On June 2020, Dior launched its own official Tmall store, right before the Chinese online shopping carnival 6.18. However, only products of skincare, cosmetics and perfumes were available on the Tmall store. So far, Dior has already gained 335k fans within one month.

Dior collaborated with Liu Yuxin

Source: qianlong.com -celebrity live broadcast on Ju Huasuan came to next level

During the Covid-19 quarantine, the Chinese TV show ‘Youth with you II’ has been extremely popular among Chinese, especially among young Chinese consumers. The TV show aimed to select 9 girls to form a girl music band. Liu Yuxin won the first prize for her impressive performance and high popularity. Dior announced collaboration with Liu Yuxin on skincare collection ‘Capture Totale’. The live broadcast on Ju Huasuan (a group buying website) with Jing Tian (Chinese actress, also official ambassador of Capture Totale) helped Dior in China received more than 3k orders and over 2.5 million RMB revenue.

THE9, the girl music group that Liu Yuxin belongs to, was invited to collaborate with Dior for its Bobby bag.

Source: twoeggz.com – Dior invited the new group THE9 to promote BOBBY

Christian Dior Couture

Besides maintaining the brand’s unique style and elegant brand image, Dior fashion division (Christian Dior Couture division) also has launched its official account on popular Chinese social media platforms.

Dior has introduced limited edition Lady Dior bag for Chinese valentine’s day

Luxury brands, such as Burberry, started to use WeChat Mini programs to plug into digital China. For Chinese Valentine’s Day in 2016 (Qixi Festival), Dior launched a WeChat mini program for selling its limited edition Lady Dior China valentine bag. For this bag, Chinese luxury customers choose the decorative embroidery pattern on the strap. The bag was sold out within a few hours on the first day of the WeChat Mini program marketing campaign.

Dior in China made a great effort on doing local Chinese social media campaign and marketing campaign to reach a wider range of customers.

Source: luxexpose.com – Lady Dior Small China Valentine Bag Sold Out Within Few Hours Via WeChat

Dior became the first luxury brand to enter Tiktok and Bilibili

In the past few years, Dior launched its official accounts on popular Chinese social media, such as Weibo, Wechat and Red. On August 2018, Dior launched its official account on Tiktok (known as Douyin in China), making it the first luxury brand to use the platform. So far, Dior has more than 491.1k fans and 3.6m likes with 628 posted videos.

For luxury brands, Bilibili represents a chance to capture young Chinese customers, Gen Z consumers in China and familiarize them with their products and brand ethos. Generation Z accounts for 81% of the platform’s user base according to QuestMobile. The advantages are clear: although they may not have significant buying power now, this generation is expected to account for 55% of total luxury spending by 2025. Dior launched official account on Bilibili on June 2020 with totally more than 7k fans, 22 videos and 132k plays within a month. At the same time, Dior is also the first luxury brand to use Bilibili.

Dior will launch an exhibition in Shanghai

Chanel’s Mademoiselle Privé exhibition in Shanghai in 2019 attracted a large number of Chinese visitors. Dior launched its Miss Dior exhibition after, and invited many of Chinese celebrities. This year, Dior will launch its exhibition in Shanghai ‘Christian Dior Designer of dreams’. Different from Chanel, the exhibition of Dior will showcase more than 70 years of the brand’s artistic creation to Chinese luxury consumers from an unprecedented Chinese perspective.

Source: Dior official WeChat account – The exhibition “Christian Dior, Designer of Dreams”

The exhibition will last about three months. Together with 8 well-known Chinese artists, this exhibition will open a new chapter in the history of Dior in China. A host of masterpieces, including 275 couture gowns, manuscripts and works by artists, are ready in the museum. Next the brand is inviting Chinese luxury consumers to explore Dior’s elegant world and spirit of the pursuit of dreams.

At the same time, the opening ceremony of the exhibition will be broadcast simultaneously on several Chinese social media, including Dior’s official Weibo account, official WeChat mini program and official Tmall flagship store. Additionally, Tencent video and Huawei video will also broadcast the activity.

Author: Qing Zheng

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China is a traditional fishing country that accounts for two-thirds of worldwide aquaculture. With the growing middle class and the rise of disposable income, the Chinese purchase a progressively more diverse basket of seafood products and the premium seafood market in China is expanding.

Demand for luxury seafood products has increased significantly in China over the past few years. For example, in 2015, China accounted for approximately 20% of the luxury seafood consumption globally. With polluted and overfished waters at home, China is importing a lot of premium seafood. Wealthier Chinese consumers who can afford to avoid scandal-plagued chicken and pork have in some cases switched to seafood. 

Chinese consumers are looking more and more to foreign countries for premium seafood products. For instance, according to the Norwegian Seafood Council, the value of Norwegian salmon exports to China reached $54.8 million in the first half of 2018. This was a rise of 544% year-on-year.

[Data Source: Global Times, ‘Norwegian salmon exports to China’]

Luxury seafood products on the Chinese tables are becoming more easily accessible

The list of premium seafood on the table is becoming longer with the increase of luxury seafood imports to China. According to Eva Kam, Project Manager at Daxue, all the high-end seafood was from Hong Kong before but China has now its own providers in foreign countries. Luxury seafood appreciated by Chinese consumers include lobster, crab, salmon, oysters, sea cucumbers and many others. The luxury seafood consumers are not only rich people but also the emerging middle class in China. The rising incomes and the growing middle class contribute to an attractive outlook to the premium seafood market in China.

Imported premium seafood is more welcomed in China

Most seafood advertisements use the words fresh and live (鲜活), France（法国), imported with original packaging （原装进口, Ready to eat （即食). They highlight foreign origin of seafood, as Chinese people tend to trust it more.

Source: 5tu.cn, Advertisement of seafood, both using word “fresh”

The pollution of China’s own waters create demand for imported seafood, especially for the higher-value species like crabs, lobster and salmon. Chinese consumers have also become more food safety-conscious. This underlines the importance of clear and precise information about seafood products.  For example, Canada and Denmark are famous for its caridean shrimp (pandalus borealis), Russia and Chile for king crabs, France for oysters and Norway and Australia for salmon.

Data Source: Under Current News, China’s fresh salmon imports by country

The perception of Norwegian salmon is positive in China

Norway is one of the primary countries of origin for seafood by Chinese consumers. Over the past few years, awareness about Norway as a seafood producer has grown from 7% in 2012 to 22% in 2018. In the same period, awareness of Japan as a seafood nation fell from 52% to 28%. Salmon is probably the most famous Norwegian product in China.  About 44% of Chinese consumers prefer Norway as a country of origin for salmon, an increase of 25% compared with a few years ago.

Australian seafood is gaining momentum

Australian seafood enjoys an extremely strong reputation in China. In particular, Australian rock lobster and abalone are held with a high regard.  Such perceptions express local media and WeChat discussions that promote the quality of Australian seafood. In Ningbo and Qingdao in 2017, for example, local media reported with excitement about the first direct sales of Australian rock lobster. Specific promotional events help to highlight Australian seafood, for example: an Australian lobster tasting event in Chongqing; Lobster fest in Shanghai; and the Australian Lobster Festival in Yongcheng, Henan.

Exports to China from Australia reached $658 million in 2017–18, making China the most valuable export destination that year for Australian fisheries products. The increase in export value was driven by an increase in the value of Rock Lobsters, Salmonids and Abalone species.

Data Source: Australian Bureau of Statistics, Australian seafood exports to China

Australia’s coronavirus-battered exports of premium seafood are recovering as China gradually moved out of lockdown. China’s demand for premium seafood is gradually on the rise again, though it remains sporadic and prices are much lower compared to pre COVID-19 levels.
Barry Dun, CEO of Australian Reef Fish Trading Co (ARF), told the company’s exports to China had recovered to 15 to 25 percent of the pre-outbreak volume.

Foreign oyster brands are popular in China

The perceptions of French oyster brands are very positive in China. For example, oysters of Gillardeau (吉拉多) brand have the reputation of “Rolls-Royce in oysters”, having strong salty tang of the sea. Another French brand Belon promotes their oysters as “rare”, “expensive” and “king of oysters”. Other popular French oyster brands include Fine de Claire (芬迪克莱尔), Ostra Regal (皇御) and Fleurdeseaux (水中花). All of them highlight the exclusiveness of their products.

Most restaurants selling premium seafood are western-oriented

Analyzing restaurants that sell oysters in Shanghai and Beijing, we can see that mostly they sell imported oysters, and most often as a side dish. Only some places exclusively sell oysters as a key element of the restaurant. The price varies from 30 to 150 yuan per dish. The key feature of the restaurants selling oysters is that most of them are western-oriented. For example, popular Beijing restaurant Maison FLO awarded as Michelin Plate, sells oysters as a side dish for 118 yuan.  Most restaurants sell cooked oysters rather than raw.

Source: Dianping, Western-oriented restaurants with oysters in Shanghai

Some examples of restaurants in China serving oysters:

• The Plump oyster       
  • Gillardeau: 89 RMB
  • French L’emeraude Oyster: 69RMB
  • Providing cost-effective combo of oysters
• OTTIMO
  • Gillardeau: 78RMB
  • Special oyster cooked by three ways: 78RMB
  • Famous for oysters and wine
• Oysteria
  • Fresh oyster:10RMB for each
  • Cost-effective combo of oysters

Premium seafood restaurants use VIP membership to attract customers

Seafood restaurants in China actively promote on social media with discounts and offers. For example, some restaurants offer VIP membership for those who order for more than 500 yuan. Also, customers who order for more than 300 yuan get free beer and soft drinks.

Some restaurant in Dalian came up with the advertising campaign on Valentines’ Day in 2018 offering discounts to people coming with their significant other. They could have a discount up to 65%. Through this well-planned marketing campaign, the restaurant created double the sales volume and attracted 5,000 customers.

Social media contribute to the growing premium seafood consumption

Seafood promotion in China increasingly relies on social media platforms such as Dianping (大众点评) or WeChat (微信). Thanks to the boom of e-commerce in China, consumers can buy their favorite premium seafood on electronic commerce platforms such as Tmall and JD, which are both reputable and reliable operating systems. For example, Canadian lobsters are available on Tmall.com as well as fresh Australian lobsters and oysters too. Chinese consumers can also buy raw oysters on WeChat.

[Australian fresh lobster on Chinese E-Commerce Platform Tmall]

Taobao and Tmall as e-commerce channels for the premium seafood products in China

During the severe epidemic period, the sales volume of seafood online declined by 55.8%. Once the epidemic was alleviated in March, the sales volume bounce back with a great growth of 136%. However, the sales volume of seafood dramatically dropped by 62% since the Xifadi incident. Two breakouts of coronavirus in seafood markets exerted negative impact on seafood industry, since people associate seafood as a channel of transmission, even though there was no evidence to prove it.

Data Source: Taosj.com, The sales of seafood in Taobao and Tmall Apr-June 2020

The price range of seafood is from 10-150RMB, most of price centers at 50-150 RMB, meaning online sellers mainly target middle and working-class consumers. Those online consumers prefer domestic brands to foreign brands.

Crawfish is the most popular seafood on Taobao & Tmall. In terms of oysters, mainland ones are the best sellers in Taobao. The sales volume of mainland oysters are 95 times that of French oysters. The sales of oysters on Taobao and Tmall in April 2020 was 27 million (27,588,327) RMB, the volume of sales was 465,441 items. In May there was a slight decline, the sales of oysters in Taobao and Tmall in May were 16 million (16,253,835) RMB.

Hema supports seafood farmers

Since the beginning of the year, the entire seafood and aquatic industry has been affected, and the recovery is still slow. Recently, a new round of outbreaks has caused consumers to worry about imported seafood, and it has affected the entire aquatic product category, and sales have declined significantly.

Hema app launched activities related to agricultural assistance. Oysters and crabs farmers have suffered heavy losses. During the New Year, they suffered a 70%-80% decline in sales from previous years. In June, only 40% of the previous year’s sales recovered. “Save Domestic Seafood” on the Hema app has about a dozen types of seafood sold at a reduced price. For example, the price for gentian grouper has been reduced from the original 59.9/piece to the current 39.9/piece. The price for abalone dropped from 11.9 yuan/piece to 6.9 yuan/piece. 

Food bloggers and KOLs promote premium seafood consumption in China

Many Chinese food bloggers pay attention to premium seafood in their blogs. For example, popular Chinese blogger Mi Zijun (密子君), who has 6.15 million followers on Weibo. She went to the famous Xu Ji Seafood restaurant in Changsha and ordered 60 pounds of seafood including shrimps, hairy crabs, oysters and ate it in one hour. She shared her experience with followers and advised to visit this restaurant. 

Source: Eat More, Chinese blogger Mi Zijun tries seafood

There are several food KOLs in China each with their own approach. What they all have in common is they like to take photos of food or restaurants. For example, 羽萱的妈妈 had some posts about some seafood, such as shrimps and crabs.

Source: Weibo, Dragon Social, Example of post of blogger 羽萱的妈妈 on weibo

Douyin (TikTok)

Many people use Douyin to share their seafood experience. So-called “mukbangs”, which is a Korean term to describe those who eat a large amount of food during live-streams, are especially popular.

Answering the question on Zhihu “Why are videos about seafood are so popular on TikTok?”, one user claimed that there are a lot of ways to eat seafood (raw, cooked), so bloggers can gain the attention of audience. Besides, many people eager to try it, but not many have a chance, so they watch videos about it instead.

For example, girl from a small town in Jiangsu province named Zhang Xiuling (张秀玲) became a celebrity with 440,000 followers on Douyin. Jiansu is not only a place for seafood, but also a large seafood distribution center. Over the years, wholesalers have transported the seafood to all parts of the country through trucks. In recent years, young people in the town have started selling seafood online using Douyin for promotion.

Source: Sohu, Douyin, Blogger Zhang Xiuling promotes seafood on TikTok

Weibo and WeChat offer new ways of promotion for the premium seafood market in China

Very premium seafood such as sea cucumbers sell very well on Taobao.  However, Taobao’s algorithms make it so high-selling shops can get more orders, additionally, the promotion cost of Taobao is very high. Therefore, many premium seafood producers are developing some new sales ideas, such as promotion through WeChat. In addition, WeChat can also allow old customers to attract their circle of friends.

Source: Zhuanlan.zhihu, Sea cucumber advertisement on Weibo

Besides, at present, there are many manufacturers of sea cucumbers, crabs and other seafoods promoting through Weibo. The advertisement adopts the sales method through WeChat and offers delivery. The purpose of the advertisement is to attract more users in WeChat. During the process of the advertisement, it has received a total of 718 reposts, 1,327 comments and more than 5,000 likes. 

Premium seafood is a seasonal product in China

Chinese primarily consume seafood at banquets, events and other social functions. The close associations between luxury seafood and banqueting is partly because of the increased importance of Cantonese cuisine. The strong influence of Cantonese cuisine affects the types of seafood served and the ways they are prepared. Some of the important dishes at these banquets typically include: lobster, geoduck, crabs, abalone, shark fin, sea cucumbers, and reef fish.

Imported premium seafood is increasingly taking a place at the Chinese New Year dinner table.  Not only are Chinese families spending more on seafood at Chinese New Year, but the variety of imported and premium categories such as lobster and king crab is also increasing. In the past two years, large-scale imports of shrimp, as well as high-end lobster, king crab and salmon have witnessed “explosive growth” during the Chinese New Year.  For example, prices for king crab rise by as much as 30 percent before the Chinese New Year.

Baidu index: search frequency for “lobster” peaks during Chinese New Year

Lobster market in China

China’s lobster industry is booming

A new generation of Chinese consumers attaches great importance to health, and they have higher requirements for lobsters. Therefore, the lobster market in China tries to ensure the quality of lobster and sends them to the consumers faster. New refrigeration logistics help to transport lobster to reduce damage and maintain high quality lobster during long-distance transportation. In addition, established tracking systems have created an open and transparent market environment. It helps customers follow the production process from farm to table.

From a national perspective, the main lobster producing areas are the Yangtze River Delta region as well as Hubei, Anhui, Hunan, and Jiangxi provinces.

[Data Source: Baijiahao, ‘Share of lobster production in China’]

According to statistics, yearly lobster consumption in China in 2018 reached 1.3 million tons, an increase of 22.56% from the previous year. 80% of retailers sell lobster through dine-in channels (including supper stalls). 20% of retailers sell lobster through Internet channels.

[Data Source: Aquatic Products Association, Guanyan World Data Center, ‘Lobster market in China’]

Big cities have larger lobster consumption

At present, the consumption of lobster in China has appeared all over the country. In recent years, the consumption of lobster has developed from large cities to the south and northwest China. This progression is due to the development of e-commerce in conjuncton with lobster cooked food products. Currently the lobster market in China in the northwest, south, and northeast regions continues to grow. However, cities such as Beijing, Hangzhou, Shanghai and Changsha still have the highest levels of consumption.

Baidu index: searching frequency for “lobster” in Chiense cities

China is the fastest growing market for Boston lobster

The premium seafood market in China is one of the most important for the American lobster industry. In 2016, total US lobster exports to China had reached around 8 million kilograms, valued at $136 million, accounting for 14% of total US lobster exports. In 2018 import of lobster from the US to China reached 1,232 metric tons. However, in 2019 this value was down 91% year-on-year over the period, due to Chinese tariffs.

[Data Source: UCN, ITC, Chinese customs, ‘China’s imports of American lobster’]

The Chinese New Year is the busiest season for the American lobster industry, as demand is growing. China’s monthly lobster imports peak before Chinese New Year. In January 2019, China imported 2.3 metric tons of live or fresh lobster. In February 2018, during the end of the festival, the figure was 2.4 metric tons. This is a rise from January 2017, with 1.9 metric tons.

Increasing consumption of premium seafood in China

Crab market in China

According to statistics, the output of crab reached about 800,000 tons in 2018 in the premium seafood market in China. The industrial scale was 64.8 billion yuan in 2016. It was about 77.8 billion yuan in 2017, with an annual growth rate of about 20%. In 2019 China’s crab market reached 100 billion yuan.

[Data Source: Baijiahao, ‘Market scale of crab industry in China’]

The top ten crab production areas in China are Jiangsu, Anhui, Hubei, Shanghai, Jiangxi, Henan and Taiwan. The total output of Jiangsu accounts for about 44% of the country. Hubei accounts for 22%, Anhui accounts for 13%, and other regions account for 21%. 

Due to the entry of e-commerce giants, the industry scale of crabs is increasing year by year. For example, JD.com adopts the “airline + refrigerated truck” transportation matrix. It adds air routes, airport express lanes and truck transportation routes to ensure that the delivery time of crabs is not more than 48 hours. SF Express sends them directly from multiple lake areas. It opened more than 22,000 shipping directions, ensuring the supply of crabs and safe delivery.

Data Source: Baidu Index, Search frequency for “crabs” 2017-2020, search frequency for crabs peaks during hairy crab season in the fall

Data Source: Baidu Index, Search frequency for “crabs” in 2020, Chinese new year is also a primary occasion for crab consumption.

According to Baidu index, the demand for crabs in 2020 was quite low, comparing to 2017-2019. The reason could be the coronavirus outbreak in China. In 2020 the demand was higher during Chinese New Year, as people tend to eat premium seafood during that time.

Sea cucumber in the premium seafood market in China

Sea cucumber is a premium product with large popularity in China. Asia is the largest consumer market of sea cucumber in the world, with a market share of more than 70%, followed by North America.

The Chinese sea cucumber industry shows an overall stable trend. Farm-gate prices have continued on an upward trend in the past two years. Production volumes and stocked amounts have also increased significantly. The growth in consumption of sea cucumbers increased from 3.8 million tons in 2014 to 4.1 million tons in 2018. By 2025 the consumption of sea cucumbers in China will be around 5.9 million tons.

Data Source: Baidu Index, Search frequency for “sea cucumber” 2017-2020

Data Source: Baidu Index, Search frequency for “sea cucumber” in 2020

Due to coronavirus outbreak in China, the demand for sea cucumber in 2020 was lower comparing to 2017-2019. During 2020 the demand was quite stable, except increasing during Chinese New Year period.

Caviar industry in China

With the development of China’s economy and improvement of living standards, the caviar industry has also developed rapidly. By the end of 2014, there were 63 sturgeon farming units in China, including 40 raw sturgeon farming units. From 2006 to 2012, China’s production of artificially cultured caviar increased from 0.7 tons to 28.8 tons, with a compound annual growth rate of more than 85%.

In 2018, world caviar output reached 271 tons, while China’s caviar output was around 100 tons. China plans to rely on artificially cultured sturgeon to become the main exporter of caviar in the world.

Data Source: Baidu Index, Search frequency for “caviar” 2017-2020

Data Source: Baidu Index, Search frequency for “caviar” in 2020

The demand for caviar was stable during 2017-2019, however due to COVID-19 outbreak, in 2020 it saw a decline. 

Oysters industry in China

Chinese consumers are more and more demanding about the quality of oysters they buy. Therefore, they are willing to pay a high price for high-quality oysters. Chinese consumers tend to choose imported premium seafood products. Imported oysters come from Japan, the US and Australia.

Eating raw oysters is a relatively new concept in China. Data from the China Fishery Statistical Yearbook 2019 shows that China’s oyster aquaculture production reached 5.1 million tons in 2018, a year-on-year increase of 5.3%. In 2017 it was 4.8 million tons.

[Data Source: China Fisheries Yearbook 2019, ‘China’s oyster production’]

The main producing areas of Chinese oysters are in Fujian and Guangdong provinces. Fujian has a long history of oyster farming and has so far become China’s largest oyster farming area. In 2018, Fujian oyster aquaculture production reached 1.8 million tons, ranking first in the country. Guangdong oyster production was 1.1 million tons, taking second place.

Despite the outbreak of coronavirus in 2020, demand is gradually returning to the 2019 level. During the peak of COVID-19 outbreak in China (February-March 2020), the demand for oysters decreased significantly. But since mid-March, it showed stable dynamic. Analyzing Baidu index from April-June 2020, we can see that the demand for oysters was stable during April-May. However, there was a slight decrease in June due to discovery of COVID-19 on the chopping board of a seller of imported salmon at Beijing’s main wholesale seafood market.

Data Source: Baidu Index, Search frequency for “oysters” 2017-2020

Data Source: Baidu Index, Search frequency for “oysters” in 2020

Data Source: Baidu Index, Search frequency for “oysters” April-June 2020

COVID-19 impact on the premium seafood market in China

Fall in prices for lobsters

Lobster prices have plummeted to the lowest levels in four years after the spread of coronavirus halted charter flights to Asia. It happened at a time when sales usually boom for Chinese New Year celebrations. That is why the lobster industry was particularly affected. Prices for a whole lobster weighing 1.5 pounds have tumbled 17% since January 20, falling to $8.10. This is the lowest price since 2016. Demand for live Canadian lobster has dwindled to 5% of normal volumes in mainland China.

After the coronavirus outbreak in China restaurants started canceling reservations and people stayed home. When it comes to premium seafood exports, the most affected countries were the US, Canada and Australia, as they are the main exporters of lobsters to China. For example, the US company Lobster Co saw an inventory loss of 40% of its value as shore prices dipped from $7.45 to $4.38. They had to sell 50,000 pounds at a loss. In Australia fishers and wholesalers began trying to offload the premium product in local retail markets.

Salmon industry saw the decrease in sales from COVID-19

The discovery of COVID-19 on the chopping board of a seller of imported salmon at Beijing’s main wholesale seafood market is set to disrupt demand for product in the Chinese market. Carrefour in China and Wumart were among the supermarkets to stop selling the product.

It may be possible for salmon to be contaminated by virus-contaminated water during processing, transportation or packaging. Despite this, the outbreak in the seafood market will inevitably impact demand, with consumers fearful of any possibility of transmission.

Chile, Norway and the Faroes are the main suppliers, with rapid growth in the market in recent years playing a key role in producers’ strategies. Norway held 45 percent market share of fresh salmon to China from January to April 2020. The Norwegian Seafood Council claimed last week of June exports fell to 240 tones – a decline of 34 percent.

“As the probe into the cause of the latest outbreak is underway, salmon business around the world will be affected,” Cui He, president of the China Aquatic Products Processing and Marketing Alliance (CAPPMA), told the Global Times Sunday.

The premium seafood market in China after COVID-19

According to the statistics, import of seafood in China in the first quarter of 2020 fell by 27% from the fourth quarter of 2019.

    
[Data source: Statista, ‘China’s import of seafood’]

By the first quarter of 2020, consumption was almost stagnant. Besides, the import and transportation of Chinese seafood was blocked. Although China’s premium seafood imports slowed in 2020, consumption has a potential to grow.  The coronavirus epidemic in China will have a serious economic impact on the Chinese and global premium seafood market and supply chain. It will also have an impact on both supply and demand of seafood in Asian countries.  However, the Chinese market has recovered earlier than other countries around the world. There is hope that once the supply chain of seafood regains balance, the industry will function normally.

After the epidemic is over, experts expect that the public will experience retaliatory consumption. Gradually the demand for seafood is returning to normal. For example, the frequency of searching “lobster” on Baidu increased after the epidemic situation got better.

Baidu index: search frequency for “lobster” increased after COVID-19 outbreak

Key takeaways for China’s luxury seafood market

• The premium seafood market in China has great potential due to rising living standards in the country.
• Although premium seafood is particularly popular during the Chinese New Year, it may soon become a regular meal in middle-class Chinese families.
• The coronavirus outbreak had a huge impact on the premium seafood market in China. It interrupted the supply chain and reduced consumption. However, the trend shows that China is returning to normal life and demand for premium seafood will soon be restored.

See our report on China’s seafood market:

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This article The premium seafood market in China is the first one to appear on Daxue Consulting - Market Research China.

Click to jump to sections of the guide on clothes distribution in China

• Fashion market overview
• E-commerce
  • Taobao and Tmall
  • JD.com
  • Pinduoduo
  • Brand owned channels
  • Social commerce
• Offline stores
• COVID-19 impact

China’s fashion market growth is not slowing anytime soon

The fashion industry in China has performed well over the past five years. Industry revenue grew at an annualized 5% over the five years through 2019, to total $324 million. Forecast shows that the performance of clothes industry in China will increase to $359 million in 2021.

Data Source: Statista, Revenue in the clothes market in China

Clothing occupies 1/3 of all online shops. The three most popular e-commerce websites for clothes distribution in China are Taobao, Tmall and JD. Forecasts show that 52% of total revenue will come from online sales in 2020.

Data Source: Statista, Sales channels in the clothes market in China

Though offline channels attract less traffic than online, they play a more important role in the purchase stage, accounting for 60 percent of all transactions. Offline conversion is almost 4.5 times as high as online. Chinese consumers buy 43 percent of unbranded clothes online. However, they tend to buy branded clothes in physical retail stores. When it comes to branded clothes distribution in China, offline channels account for 80 percent of sales.

E-commerce market is an essential channel for clothes retail

Taobao and Tmall – the key e-commerce players for clothes distribution in China

There are three major types of clothes brands sold in Taobao: designer brands, commercial brands, and fast fashion brands. In recent years, international apparel brands have accelerated their expansion into the Chinese market. In general, Taobao targets the fast-fashion category of middle-income consumers seeking diversified fashion. For example, Zara is also developing rapidly in the Chinese e-commerce industry.

From the perspective of key brands, in December 2018, the online sales growth of most listed apparel companies continued to decline year-on-year mainly due to the fierce online competition.

Luxury clothing distribution on Tmall and Taobao

Luxury fashion has trouble differentiating from counterfeits on Taobao

There are no official stores of luxury brands on Taobao platform, as it focuses on fast-fashion. Besides, luxury brands worry about counterfeiters, which are hard to regulate on Taobao. In 2015 Gucci, Yves Saint Laurent and other brands filed a suit accusing Alibaba of being a conduit for counterfeiters. Starting in 2016 sellers of luxury products have to upload an invoice or authorization letter from the luxury brands, for examination by Taobao.

Tmall is an ideal alternative for luxury brands

51% of 45 top global fashion brands now have official flagships on Tmall. It’s a big uptick from previous years. Luxury brands that now sell on Tmall include Valentino, Versace, Isabel Marant, Coach, Bottega Veneta, Givenchy, and Burberry. At the end of September 2019, online fashion retailer Net-a-Porter and its men’s site, Mr. Porter, opened a shop on Tmall too. They are offering more than 130 luxury and designer labels. However, luxury’s mega-brands, such as Louis Vuitton and Gucci, haven’t come around to Tmall just yet. But for independent brands and so-called affordable-luxury labels such as Coach and Michael Kors, the reach Tmall provides is particularly beneficial.

Data Source: Quartz, Share of brands Luxury China Index selling on Tmall

Fast fashion distribution on Tmall and Taobao

E-commerce accounted for 20% of Uniqlo’s sales in China accounted in the first half of 2020, an increase of 30% over the same period last year. The brand expects e-commerce to account for more than 30% of sales in the fiscal year of August 2021.

The growing middle class in China are mostly seasoned shoppers who have a long-standing relationship with online retailers like Taobao. If we look at top selling clothes brands on Taobao, Uniqlo occupied the top position in the brand store category. In 2019 on 12.12 they got around 5 million yuan revenue in one day.

Up to now, Tmall has attracted 90% of the world’s fast fashion brands. Taking Uniqlo as an example, the financial report released in 2018 showed that thanks to the strong growth of the Chinese e-commerce market, the performance exceeded expectations. Co-operation with Tmall brought Uniqlo space for lane change and overtaking. In 2019 during 11.11 festival after 16 minutes, the turnover was around 5 hundred million RMB. Uniqlo became the leading Tmall apparel brand.

Data Source: Zhiyi Technology, Top ten brand stores on Taobao

Does Tmall and Taobao have more domestic or foreign brands?

Domestic brands are key on Taobao

Despite that foreign brands started actively participating in selling on Taobao, domestic brands still play a key role. In 2019 among top 5 best-selling brands on Taobao during 12.12. festival four brands were Chinese. For example, Semir brand established in 1996, has become a leading brand in China’s casual clothing industry. It made around 600,000-yuan revenue during the 12.12 festival.

Unlike Taobao, Tmall’s top brands in terms of sales are mostly foreign brands. Good performance shows Handu Group. In April 2019, the number of followers of the HSTYLE Tmall Flagship Store exceeded 20 million.

Foreign brands turn to Tmall

Foreign brands like Levi’s, GAP and Uniqlo actively distribute through Taobao and Tmall. Adidas also established an online store on Taobao and Tmall. Adidas claimed while most of its sales still come from offline stores, the company’s online sales in the country has seen rapid growth.

Tmall has become the core position of global brands in the Chinese market. According to Tmall data, the number of global brands that have entered Tmall has exceeded 50,000. Such foreign brands as Uniqlo, ZARA and Monki participated in Spring/Summer Tmall Fashion show, bringing nearly one million new products to the Chinese clothes market.

Data Source: Yunguan data, China’s top clothes brands on Tmall

Clothing distribution on JD.com

The data shows that JD.com clothes industry went online in 2011. It became the second largest occupant of clothes categories in China’s B2C market in 2014. It has now become one of JD.com’s fastest-growing categories. JD.com’s key brand layout has attracted many well-known international and domestic brands to settle in.

Luxury fashion: JD can help with brand awareness, but not all brands use it

Louis Vuitton Group has no official store on JD platform. However, other luxury brands in China actively cooperate with this e-commerce giant. In 2017 JD.com and Farfetch announced a strategic partnership that created the premier platform for luxury e-commerce across China. Farfetch has well-established operations in China and is already the partner of choice for 200 luxury brands. JD will help drive further brand awareness, traffic and sales for Farfetch in the market. Such brands as Armani, Swarovski and Zenith have their official stores on JD platform.

Fast fashion is not a focus of JD

As JD.com initially specialized in tech, there are not so many fast-fashion brands on the platform. The key players are Vero Moda and Only. From the brand lineup, JD.com bags, watches and jewelry account for a higher proportion, while Tmall focuses on clothing and beauty.

Domestic vs. foreign brands on JD

According to JD’s clothing brand ranking, domestic brands prevail in different categories of clothing. Taking the category of “women’s dresses” as an example, we can see that the top 5 products are Chinese brands.

Source: JD.com, Top 5 products in “women’s dress” category

Pinduoduo – discounted clothing with group buying

Founded in 2015, the Chinese e-commerce platform Pinduoduo offers a wide range of products from daily groceries to home appliances. Counting 536.3 million active buyers and 7 billion products sold in the first half of 2019, the platform is essential for retailers and brands.  When looking at a product, users have two price options, a standard price to buy directly and a discounted price. Discounted prices are unlocked when users form ‘teams’ of at least two buyers.

Luxury fashion slowly join Pinduoduo

For most brands, Pinduoduo is not going to be as good of a fit as a platform like Tmall or JD.com. This is particularly true for premium or luxury brands, which after years of resistance have turned in droves to Tmall’s Luxury Pavilion but are as resistant to discounting and promotions in China as they are elsewhere. However, in 2018 such luxury brands as Armani and Givenchy joined the platform. It can give other luxury brands in China an impulse to cooperate with Pinduoduo.

Brand owned channels

Brand.com is key for luxury

With higher platform fees and increasing user acquisition costs, only 10-20% brands are making profits on Tmall. Thus, building brand-owned ecommerce channels may be more worthy of investment. Besides, the issue of fake goods sold on public marketplace is a common concern of Chinese ecommerce consumers. Brand-independent ecommerce platforms in China can ensure brands full control on the whole retail process. 

Louis Vuitton in China – like Gucci and Hermes – has ventured online but on its own terms. In 2017 it launched a standalone e-commerce site. The site will let customers buy Louis Vuitton leather goods, shoes, accessories, watches, jewelry, luggage and perfume. Vuitton is fiercely protective of its distribution as a means of controlling prices and supply.

Many fast-fashion brands using their own website for clothes distribution. For example, UNIQLO has its own web-based store in China. Customers can also receive the latest information including the weekly mail magazine and the latest UNIQLO campaigns.  Customers will be able to choose from approximately 500 different items of UNIQLO mainstay products.

Using own website is more common for foreign than domestic brands

Most of global foreign websites such as Zara, Uniqlo, H&M, Nike, etc. have their brand-owned websites in China. For example, Zara in China launched an online store back in 2012. The website offers online shoppers the same full range of merchandise for women, men and kids as the one found in physical stores.

As Chinese companies are aware of rising costs of e-commerce in China, they actively distribute clothes using brand-owned websites. For example, Chinese company Peacebird launched a variety of sales models during Spring Festival, such as discounts and live broadcasts on its online shopping platform. It invited fans to “cloud shop”.

Social commerce in clothes distribution in China

Xiaohongshu- the fastest growing social media platform for shopping review

Xiaohongshu is a startup that’s part e-commerce portal and part social media platform. It also has its own e-commerce mall to which the posts on its site can link. The company is backed by Alibaba and Tencent, and has 220 million users. The top 10 content are the categories of “clothes”, “hairstyle”, “skincare”.

With the rising of Xiaohongshu many domestic brands started using it to achieve sales breakthroughs. For example, in June 2020 the domestic women’s clothing brand Zhizhi and the Orange Desire held a brand day event in Xiaohongshu. 12 different fashion bloggers shared live broadcast, promoting clothes of these brands. After this event, both brands saw rapid growth in sales.

Using hashtag “fitting room” on Xiaohongshu, most of results will show popular fashion bloggers taking photos of themselves trying on clothing in a store changing room. Zara, H&M, Uniqlo and COS are the most mentioned brands with fitting room hashtags. The article will give a description of the items, what the KOL did or didn’t like about them (such as material and fit), the prices, and which items the Chinese KOL suggests buying.

Source: Media Production, A typical ZARA fitting room try-on post

Luxury fashion use Xiaohongshu for brand awareness

Luxury brands like Dior and Chanel actively use Xiaohongshu to increase awareness. The number of mentions of luxury labels such as Hugo Boss and Max Mara by users has increased quickly on the platform. In 2017, users mentioned Chanel 2.24 million times, with Dior following after at 2.14 million mentions. Meanwhile, Hugo Boss recorded a 271 percent jump in mentions, with Bally and Max Mara both achieving growth of 133 percent.

Xiaohongshu shows fast growth in Fast-fashion

In 2019 the search volume of brand specific information on Double 11’s Eve brand has skyrocketed. In recent years, Uniqlo, a clothing brand that repeatedly created sales campaigns during the Double Eleven period, has also increased its search volume by 148% during this period.

Clothes brands embrace WeChat e-commerce

WeChat is a key channel for Luxury fashion

Since Louis Vuitton became the first luxury brand to open a WeChat public account in November 2012, other luxury brands have also rushed to open service numbers.

For example, on Chinese Valentine’s Day 2016, Dior launched an online customization campaign for its Lady Dior handbag. Users could choose the accessories for a small Lady Dior bag and directly purchase it using WeChat’s payment system or Alipay. 

Data Source: LadyMax, Top luxury brands in WeChat by number of followers

Uniqlo set the pace of WeChat for Fast fashion

UNIQLO was the first brand to test the WeChat mini-program store in China. At the same time, it introduced smart shopping guides Xiaoyou and Xiaoyou Zongsha to provide consumers with a better-quality experience and make its omni-channel closed loop more complete, thereby targeting more consumers. Uniqlo has taken the lead in WeChat, a traffic pool with 1 billion users, and has introduced offline self-promotion and LED digitization in all e-commerce channels and physical stores.

Domestic brands

Domestic brands use WeChat to increase awareness and communicate with customers. According to statistics, such brands as Eichitoo and Li Ning have the best results in WeChat promotion of their clothes.

Data Source: Sino-Fashion, Top domestic clothes brands in WeChat

Foreign brands

Nike, Adidas, Tiffany&Co, H&M and many other foreign brands launched WeChat accounts in China in order to expand clothes distribution. Users are staying on WeChat more frequently and longer, but for domestic brands, it is easier to attract traffic, gain customers, and convert sales on WeChat. For foreign brands, wanting to enter the Chinese market towards it requires a lot of capital investment and months of account opening.

Offline stores still make 60% of the total transaction volume

Despite the enthusiasm of Chinese consumers for online shopping, most still prefer purchasing luxury products at bricks-and-mortar stores. These enable them to see, touch, feel and try out products. Besides, it helps to enjoy high-end customer experiences such as refreshments, invitations to private lounges, and other customized services.

Particularly in the luxury sector, offline stores are still an important marketing and sales channel, where consumers are engaged in a highly experiential way through activities and events that reflect the brand image of the retailer. According to a report by Tencent, in 2017, 95% of luxury purchases were made offline versus merely 5% of luxury purchases done online. Taking Louis Vuitton as an example, China has the third place in the ranking of countries with the biggest number of LV physical stores. It shows the importance of physical clothes distribution in the Chinese luxury sector.

Data Source: Louis Vuitton, Number of Louis Vuitton stores per country

However, between 2015 and 2017, 138 new leading luxury brand stores were open in China, yet 144 stores were closed, therefore the aggregated number of the leading 20 luxury brand retail stores fell slightly down to 1,119 in 2017, compared to 1,125 shops in 2015. It can reflect the growing importance of the e-commerce in China, as more and more consumers choose to shop online.

Fast fashion brands continue to open offline stores

Companies with ambitious expansion plans include European company C&A Mode, which has more than 40 stores and plans to have 150. The Japanese brand Uniqlo, one of the first entrants into the scene of the fast fashion industry in China, plans to open 100 new fashion stores in China and already holds 2.4% of all apparel and retail footwear values.

Foreign fashion brands focus on offline ‘flagship stores’ in China

A number of players have expanded local store networks and launched their first/ largest global flagship store in the country. For example, in June 2019, Spanish fast fashion brand Mango signed a cooperation agreement with Hangzhou Jingzhe Clothing Co., Ltd. to accelerate its development in Asia, especially in the China market. Under this cooperation agreement, the brand will further develop both online and offline channels – it plans to open 16 physical stores in China.

Brand stores in China dominate in terms of clothes distribution in China

At the moment, in Asia – and in China in particular –mono-brands dominate the market. More precisely, 95% of the market in China is mono-brand retail stores. Adidas alone has 11,281 stores in China. The only exception in Asia is Japan, which already has a mature market. Nevertheless, the multi-brand trend is constantly evolving.

Multi-brand stores are rising in China

Department stores in China are still an important channel for clothing sales. According to the statistics, in 2005, the monthly sales of clothing in the top 100 shopping malls were 4.9 billion yuan. 44% of the total amount, with an average sale of 100 million yuan, indicating that despite the rapid development of the apparel wholesale markets in various regions, large department stores is still the main channel for clothes distribution.

COVID-19 impact on clothes distribution in China

Data Source: McKinsey, Traffic fell during COVID-19 outbreak in China

COVID-19 outbreak in China influenced the clothes industry in China. Discretionary categories, such as food service outlets, apparel stores, and department stores were hit hard during the crisis and their recovery has been slow. Absolute traffic levels fell dramatically in all categories. Some 80 percent of apparel stores have reopened, but footfall in discretionary categories is still 40-50 percent below pre-COVID-19 levels. To engage with these dynamics, hard-hit categories such as apparel have ramped up their digital activities. In February, when coronavirus struck China hard, Taobao saw the number of livestream sessions on its app double. It is a sign to the e-commerce platform that brands are relying more on livestreaming to get customers.

Distribute through brand-owned channels – our Brand Independence in China report

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This article The complete guide to Clothes Distribution in China is the first one to appear on Daxue Consulting - Market Research China.

China surpassed the US as the world’s biggest fashion market in 2019, according to McKinsey. The fashion industry in China has been flourishing and evolving over the past decade. Currently it is continuing to expand at an exponential rate. With the rapid urbanization and the increasing spending power of the population, markets for both high-tier and low-tier clothing are rapidly growing.

The fluctuation of Overseas Brands in Chinese Markets

Because of the improving living conditions of the middle-class in China, Chinese consumers have become highly brand conscious. In 2010, China’s fashion market was a $17.7 billion market where Louis Vuitton, Chanel, and Gucci remain the most desired luxury brands.

However, in recent years, traditional luxury brands are losing favor among Chinese consumers. Instead, the so-called “light luxury” brands have begun to gain favor. In 2014, luxury consumption in the mainland market by Chinese consumers dropped to 11% percent year-on-year to $25 billion. The government’s anti-graft campaign has formed a more economical and rational climate among the people. Yet, luxury purchases made by Chinese consumers in the global market remain powerful. Chinese people bought 76% of luxury products outside the country in places like duty free shops. Asides from luxury goods, fast fashion companies such as Zara and Uniqlo have maintained a good momentum and are still popular among the young population in China.

Mass fashion and luxury goods are the most promising areas

In terms of market segmentation, the fashion industry in China is most likely to achieve good development in the mass fashion and luxury goods.  The mass fashion is mainly driven by competitors who stand out from the mid-market and have strong value propositions. Rapidly growing Chinese economy and the prosperity of the global tourism industry drove the growth of the luxury market.

Of the top 20 global fashion companies, 18 have presence in China, which includes all the fast fashion and luxury brands. The only two players which do not have a China presence are the off-price stores, T.J. Maxx and Ross Stores, which rely on the business model of bulk purchasing name-band and luxury products and sell them at a high discount.

Data Source: McKinsey Global Fashion Index, ‘Top 20 players 2017’

Data Source: Statista, official websites of brands, Number of apparel stores in China by brand

As we can see, mass market and such sportswear and activewear brands as Adidas and Nike lead in terms of number of stores in China. These brands have bigger target group in China, unlike the luxury brands (like Gucci and Hermes).

The top foreign off-price stores have not entered China

The challenges that off-price stores like TJ Maxx or Ross Stores would face in China are that as of 2020 Chinese luxury consumption habits are status-drive. Hence, luxury brands can get away at selling at a very high price in China. Additionally, Chinese can buy cheap products online, and have access to counterfeit luxury products for cheaper than discounted authentic luxury goods.

TJX, which operates TJMaxx, Marshalls, and Homegoods, makes 76% of its revenue in the United States, according to the company’s 2018 annual report. The remaining percentage is made primarily in Europe and Canada. As for Ross, it operates its more than 1,700 stores – Ross and dd’s DISCOUNTS – in the United States and the U.S. territory of Guam. These retailers buy unsold or excess inventory from brands and other retailers, meaning most of their supply chains start and end in the U.S.

However, a Chinese equivalent to TJ Maxx is being nurtured locally. Dadacang is quietly blooming in domestic third, fourth and fifth tier cities. This retail form covers clothing, beauty, home and other categories, which can simultaneously carry offline experience and online warehousing functions. Unlike TJ Maxx and Ross “Dadacang” has formed an online/offline model, which is easy to incentive distributors to participate.

On a similar note, the second-hand clothing market in China is growing a bit behind Japan and the west, but is starting to make-waves.

Domestic sales maintained rapid growth

In 2019, despite the impact of Sino-US trade frictions, fashion industry in China has generally maintained a steady development trend. The industry chain, value chain and ecology of the fashion industry have gradually improved.

According to data from the National Bureau of Statistics, in 2018, fashion clothes industry completed a total of 23 billion pieces. Since 2018, China’s domestic fashion clothes market has maintained steady and rapid growth. According to estimates by the China Apparel Association, total fashion clothes sales in China reached 3.08 trillion yuan in 2018, an increase of 7.32% year-on-year. In 2018 exports of fashion clothes and accessories reached US$157 billion, an increase of 0.3% year-on-year.

Data Source: China Customs, ‘Changes in the growth rate of China’s fashion clothing and accessories exports’

The developing E-retail Markets in fashion Industry in China

Chinese e-commerce is dominated by a few domestic giants, including Alibaba, Tencent (in Chinese: 腾讯) and Baidu. Fashion is one of China’s biggest e-commerce category. Most of the apparel purchased online proceeds on Taobao. With the cheaper price and diverse designs, shopping online has become the first choice for most of the population. The development of e-commerce in the fashion industry has prompted the domino effect of instant celebrities on the social media. The fashion style they led has greatly influenced young people, resulting in some of them creating their own brand and starting to sell clothes on Taobao.

Thanks to the rise of e-retail, domestic designs can finally gain a foothold in the fashion markets. Alibaba as of lately launched a new platform called “Tmall Global” (in Chinese天猫). It is a channel covering the purchase of overseas products. As the e-retail markets have been growing and developing rapidly in China, the fashion industry will become more promising.

The penetration rate of the e-commerce fashion industry is high in China

China’s e-commerce industry has developed early and fast, and after many years has become one of the important retail channels. Statistics show that the domestic e-commerce retail scale has increased from 1.4 trillion yuan in 2013 to 5.5 trillion yuan in 2017. It had a year-on-year growth rate of 31%. Forecast shows that the scale of e-commerce retail will reach 10.1 trillion yuan by 2020.

The clothing category is unique from other categories. Compared to electronic products, it has a high degree of personalization. In 2011, the domestic fashion clothes e-commerce market scale was 203.5 billion yuan. In 2016, the market scale increased to 934.3 billion yuan. The year-on-year growth rate was 25%, and the 2011-2016 CAGR was 36%. The penetration rate of clothing e-commerce has also increased from 14% in 2011 to 37% in 2016.

Low price is the key factor driving e-commerce fashion in China

The penetration rate of e-commerce consumption in first-tier cities is significantly higher than that in low-tier cities. Due to the high degree of informatization, high-tier cities have a variety of accessible material supplies.

The advantage of e-commerce is that the price is relatively low. According to JD.com’s data, by 2016, the proportion of highly sensitive and extremely sensitive to price consumers in the e-commerce reached 40%. The price is still the priority in the e-commerce consumption.

Data Source: chyxx.com, Public data collation, ‘E-commerce fashion industry consumption is highly price sensitive’

Prospects of the fashion industry in China

More environmentally responsible brands

Currently in China more and more consumers are demanding ethical practices and responsible retailing. In fact, the country has a key position in shaping the new green trends in the global fashion market. The global fashion industry is growing, and a great deal of that growth comes from fashion market in China.

Examples of sustainable fashion brands in China

NEEMIC is a high fashion brand based in Beijing, seeking to address both ethical and environmental consciousness within their label. Their clothing is made from organic materials, eliminating all artificial products from agricultural production of fibers.

Fake Natoo is differentiating itself from competitors with its production techniques. Fake Natoo creates the clothing using discarded clothes or donated textiles, making this a truly sustainable line.

Shokay is a social enterprise that creates clothing using yak down through a partnership with Tibetan herders. Furthermore, they are actively contributing to the development of communities in western Tibet.

Data Source: Shokay, eco-friendly fashion brand in China

These companies stand out as excellent examples for green development in the industry. However, their ability to overcome rising costs in materials, labor, and transportation, while tackling more active regulation and shifting consumer sentiment, remains to be seen in the long run.

Fashion market in China is trying to target millennials

Chinese fashion companies have yet to figure out how to appeal to millennials as labor costs increase the pressure to adjust their brand strategy. The Chinese millennials are more about individualism unlike their predecessors. The new individualist consumer was the inspiration for the China’s biggest fashion fair in Shanghai in 2019.

“The transformation that our industry and overall economy is facing is as steep as a cliff,” said Zhao Weiguo, professor at the fashion department of Zhejiang Sci-Tech University. “This means that there is a wide gap between past and future and everyone faces the question of how to leap over it.”

While China’s technology sector has produced international heavyweights such as Huawei or Alibaba, an equivalent fashion brand hasn’t emerged yet. In China it’s key to understand the rapidly changing and diverse demands of consumers born after 1980. They have more and more influence by their western counterparts. The purchasing power of these groups, which currently consists of roughly 410 million people, will only grow. Working with the internet age and the millennials, Chinese fashion companies have a huge potential to uncover.

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• 0:15 Guest introduction and Spa Solutions’ history
• 6:12 Why does 19% of revenue comes from Spa retail sales?
• 7:16 Personalization and protocol – the two factors for running a successful spa
• 9:53 Why is the quality of the spa service in Asia better than in the West?
• 13:06 How is the coronavirus outbreak impacting the spa industry short term and long term?
• 18:43 The spa market segmentation – a brief analysis
• 20:50 What equipment could raise the efficiency of spa businesses?
• 23:58 Other examples of the spa business segmentation
• 27:36 The hotel spa pricing system
• 30:06 The spa market in China – big chain spas vs stand-alone spas
• 32:43 How are the independent spa chains impact the spa Chinese market?
• 38:30 How does a spa service business structure look like?
• 40:48 Are there other streams of revenue for spas expect treatment and retail?
• 43:06 The top spa businesses in terms of capital
• 44:04 A few key features a spa needs to have to survive in China
• 49:43 Does it make more sense to view the spa business as a retail business rather than a treatment business?
• 51:35 About the geographical segmentation of the spa business
• 56:25 Getting spa sales improved by 70% – a Spa Solutions quick fix
• 58:49 Spa products retail prices – higher or similar to getting them from another specialized store
• 1:00:21 About problems that need to be addressed in the spa industry
• 1:02:07 Is formal training by cosmetic brands required for spas in order for them to sell their cosmetic products?
• 1:05:28 What training does Spa Solutions offer big brands in terms of integration with spa services?
• 1:07:14 How does technology help the spa industry?
• 1:09:31 How does a profile of a typical premium hotel spa or medical spa look like?
• 1:12:16 Are spas adapting their offers based on the different weather climates existing in different geographical areas in China?
• 1:15:35 Outro

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Until June 2018, there were 466 business jets in greater China. Then among these aircrafts, there were 163 private jets owned by 113 Chinese billionaires, which increased by 34 private jets from the year before. However, the business jet market size in China could have 1,900 aircrafts on the basis of Chinese enterpreneurs’ purchase power. Hence, the 1,500 aircrifts difference means China’s private jet market is full of opportunities.

Chinese billionaires’ wealth shrunk during the time of the US-China trade war

During the US-China trade war, Chinese wealthy elites tightened their belts, which depressed China’s private jet market.

The Billionaire Report of 2019 shows that after years of steady growth, the net wealth of Chinese billionaires declined by 12.3% in 2018. The number of billionaires in China fell by 48 to 325. The impact of the US-China trade war is a key reason for the decline. 5 years ago, China’s wealthy had more than doubled their net worth.Since then, millionaires in China became more economically conservative.

Prices of business jets are likely to come down, as potential buyers are now finding that they can no longer afford such high expenses. In addition to purchase fees for private jets, owners also need to pay for their maintenance and operation yearly. Generally, the yearly additional expenses for a private jet takes one fifth of its purchasing price, amounting to 33 million RMB for yearly maintenance costs, 20 million RMB for yearly operation costs and a large expense for crew salaries.

The number of billionaires in China

China’s top 10 billionaires and their private jets

Gulfstream is the most popular aircraft producer. Among wealthiest six Chinese entrepreneurs, give chose Gulfstream 550. In China’s private jet market, Gulfstream G550 is Chinese wealthy favorate private jet model. There are 77 gulfstream jets in China, including 39 G550. In addition, there are 36 Bombardier series and most people bought bombardier challenger 605 (12). Other popular private jet producers include Dassault (23), Airbus (10), Embraer (9), Boeing (5) and Cessna (3).

Geographically, Beijing, with its robust economy, has the largest number of business jets, with a total of 34 and it accounts for 21%. Then there are 29 in Yangtze cities including 9 in Shanghai. The third city with most business jets is Hong Kong (25).

What will happen to the private jet market in China post-Covid-19?

Under the impact of COVID-19 in China, domestic and foreign airlines suspended their flights. Under this circumstance, more flexible and safer private jet has become the first or even the only option for many people, creating the busiest quarter in the history of China’s business aviation. Many wealthy Chinese students who were stuck abroad during COVID-19 chose private jets to come back to China and the price of private jet charter rose dramatically. For instance, the price of chartering a private jet with 14 seats rocketed by 30% from 1.35 million RMB to 1.74 million RMB in March. Some student paid an astonishing 180,000 RMB for a ticket home.

It is a good news for China’s private jet market as the propagation of COVID-19 promoted the demand of private jet and people has become more familiar with it. On April 9th, a new Gulfstream G650 landed in Liaoning, as the first private jet delivered to China after the outbreak of COVID-19. Although the number of certain buyer of private jet in China is not very much, potential customers increases in terms of purchase consultation. Therefore, the vice president of OHFLYER, Haiyang Wang, said that the demand of private jet in China will definitely be higher than before COVID-19.

The private jet charter market and air taxi market are soaring in China

The private jet charter market will promote China’s general aviation development

The charter of private jets is a great choice for Chinese passengers because of its convenience and status symbol. Like luxury watches, social status is an important purchasing impetus for Chinese consumers. We can see a soar in China’s demand for charted private jets as countries become more wealthy and companies adopt more economic travel polices for their trips.

JetSolution, an aviation group based in Hong Kong, is profiting from plane charter service. The company recently bought Embraer Legacy 600 (carrying 13 passengers) to execute flights. The plane features a luxurious interior with large leather chairs and sofa beds and can fly up to seven hours without refueling. Besides, passengers can choose from a selection of fine wines and top-class cuisine.

On another hand, Airports in China are beginning to catch up with the trend. More than 300 airports now accept private jets, with the number expected to increase to about 500 by 2020. This is good news, since the construction and improvement of airports and infrastructures will promote the development of China’s aviation industry.

The “air taxi” will be best mode of transportation in the future

In addition to the charter of private jets, “the air taxi” will be an excellent choice for people to travel in the future in China. The drones market in China has soared in recent years. In 2016, the Ehang 184, invented by China, was unveiled in Las Vegas. The invention of the flying machine marks another breakthrough for robots in the field of urban transportation. The latest drone of Ehang, the Ehang 216, is powered by 16 electric rotors and can fly along a pre-planned route at over 80 mph. The aircraft weighs about 600 pounds and can carry another 500 to 600 pounds of cargo or passengers

Ehang is one of dozens of companies convinced that “flying cars” will become a viable mode of urban transportation in the future. And recently, Ehang received approval from Chinese regulators to launch a commercial air mobility service in Guangzhou. AI in China’s transportation industry is developing dramatically and “the air taxi” could eventually become the best choice for passengers in the near future due to congestion caused by explosive growth of urbanization in China.

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The evolution of China’s luxury market

The 1990s, the beginning of Chinese luxury consumers

China has a long tradition of luxury craftmanship, such as painting or porcelain. An example of this is the art of painted landscapes called 山水 (shanshui,) which became popular during the Song dynasty. Since the Communist Era (1949), the economic elite went through difficult years due to opposition to the changes in ideology. However, Deng Xiaopping started liberalizing the economy in 1978 and in the 1990s, China therefore became one of the best place for foreign companies to relocate, causing a new economic elite to prosper. These wealthy communists have new needs, causing luxury demand to start to increase in the country. Up until now, the amount of Chinese luxury consumers continues to grow. Mr. Abtan, of the BCG, is convinced that the Chinese luxury market will continue to grow due to the “tsunami of the new middle class”.

The westernization of Chinese luxury consumption

The 1990s put China on the agenda of western luxury companies. They understood the potential of the Chinese luxury market. Many Western luxury brands opened their first Chinese store throughout the nineties, for instance Hermès in 1997, Cartier in 1992 and Chanel in 1999. Moreover, it is also during this decade that the private art market started to grow in China. The auction house “Duo Yunwan” was the first of the country in 1992 and some galleries also appeared around this time. The new economic elite had some demands which needed to be fulfilled but many luxury purchases were still made during trips in Europe. Thirty years later, there are many luxury shops and even flagship stores that symbolize the brand DNA.

Source: Behance – HERMES SHANGHAI By LEVI VAN VELUW

Millenials, the new cornerstone of luxury brands

Today, Millenials are the main Chinese luxury consumers. According to McKinsey insights, 43% of Chinese luxury consumers were born in the 1980s. This generation is accustomed to using social media platforms every day. Douyin or WeChat allows them to share content online. Also, the “generation Z”, born after the millennials is taking increasing parts. McKinsey shows that 28% of Chinese luxury buyers are born during the 1990s. They are used to going online to seek products and then to purchase the products in bricks and mortar stores. This is called ROPO: research online, purchase offline.  These new generations force luxury brands to shift themselves because of the importance of social media platforms.

The modern Chinese luxury market

Market segmentation

According to BCG, the Chinese luxury market grew by over 5% per year during the 2010s. It is currently the second biggest behind the US and is likely to become first in 2025.  In 2018, it exceeded 110 billion dollars, 33% of the global market. Ready to wear products, handbags and jewelry are the most popular luxury goods.

Source: BCG 2019 reports – Chinese luxury market distribution in 2018

According to Agility & Research 2016 reports, the top 10 favorite luxury brands in China are: Chanel is first, followed by Dior and Hermès in the top 3. Louis Vuitton, Burberry, Versace, Giorgio Armani, Prada, Gucci and Montblanc make up the rest of the top ten. These brands hold a strong brand image. Not a single Chinese luxury brand is ranked.

Source: Agility & Research 2016 reports – Top 10 luxury brands in China

European luxury brands come first

The prestigious reputation of European luxury brands stimulates a strong demand in among the status-oriented Chinese consumers. Companies with an important brand image, thanks to their history or famous stars wearing it, will be more popular in the country. Chinese luxury consumers wearing popular luxury brands will increase their social status. Still, some Chinese luxury brands try to become prestigious. For instance, Shang Xia was created in 2008 by Jiang Qiong Er and was bought by Hermès in 2010. The luxury brand is independent and focuses on the Chinese traditional style in its product. So far, Chinese buyers are not that interested in the brand because it is not well-known worldwide, but it takes time to create a solid brand image.

Recent shifts in the Chinese luxury market

Digitalization

This is the new cornerstone of every luxury brand in China. According to Bain Consulting, luxury companies doubled their digital marketing budget from 35% in 2015 to 70% in 2018. Chinese Millenials are the main luxury customers. Due to their use of smartphones, they shape how brands should address them. Now, Luxury brands work with key opinion leaders (“KOL”) as advertisers. These influencers have influence and can make a brand gain notoriety.  For instance, Cartier worked with the movie star Lu Han in 2016. They wanted to highlight men’s jewelry with the artist. KOLs are so popular that they can shift luxury trends in China. Moreover, luxury companies now present their new products online. During April 2020, Cartier showed its new watches on the online event: watches and wonders. Digitalization recently revolutionized the luxury industry and it can be an asset during unexpected crisis.

The challenge of selling alongside counterfeits

80% of counterfeit products come from China. According to European Union Intellectual Property Office, the luxury industry loses 60 billion euros annually. The impact is more than financial; brand image is also impacted. Also, it dwindles Chinese luxury trust in buying goods outside of official stores; online purchases are affected by this. In addition,  it wipes out the possibility of a second-hand market for luxury goods. Some brands like Louis Vuitton are investing massively to tackle fake products. The company invested around 40 million euros. Attacking counterfeits is an investment to protect brand image.

COVID-19 is jeopardizing the luxury golden decade

The virus affected luxury companies regarding both demand and supply. First, shops were closed so Chinese luxury consumers could not buy luxury goods. There is a phenomenon of revenge purchase were people buy after the quarantine like in Guangzhou but it is difficult to estimate if it is going to be enough. Second, supply was affected because companies were not able to produce goods. The European factories were shut down. Still, European luxury brands remain solid in China. Their brand image continues to provide a good protection during unexpected events. As Alexis Karklins-Marchay, partner at Ernst & Young, noted: “In the eyes of Chinese luxury consumers, Prada, Chanel or Hermès are much more desirable, they are brands that don’t lose their character,”.

China has a long tradition of luxury. The 1990s however is the beginning of the luxury in contemporary China. Since this decade, the Chinese luxury market has grown rapidly every year. The country is vital for some companies like Longines, which conducts more than 80% of its activities there. Digitalization forces luxury companies to rethink their strategies. Even if the coronavirus momentarily damages the luxury industry, the brand image of European luxury brands is strong enough to recover and to bypass it. Nevertheless, it is never a viable strategy to focus only on one country’s market.

Author: Enzio Cacciotto

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How COVID-19 is jeopardizing the Chinese luxury demand

Stores, missing parts of the luxury experience

Luxury companies closed their Chinese stores during the outbreak. Hence, it was nearly impossible to fulfill offline Chinese luxury demand. Buying online is not really an alternative to solve the situation because Chinese luxury consumers are not used to buy online according to the ROPO model. Bruno Pavlovsky, president of Chanel’s fashion activities stated: “You have to be able to touch the creations, it’s part of the experience.”. Even if consumers do a lot of research online to find luxury products, they ultimately purchase in offline stores. It is an experience to be in a magnificent flagship store to buy a product with the help of assistants. Also, it creates a desired prestigious image to exit shops with a luxury item in hand. COVID-19 forced luxury stores to close which impeded the fulfillment of Chinese luxury demand.

Will revenge purchase be enough?

On Saturday April 11^th 2020, the flagship store of Hermès in Guangzhou reopened. Within the day, the shop made 2.8 million USD of profit. Then, buyers post on social media their purchase. This phenomenon is call “revenge purchase” where purchasing provides happiness to consumers after a long period of quarantine.

Even if this example highlights a more positive situation for the  Chinese luxury market after COVID-19, it is difficult to measure the impact of revenge purchase. Will it be enough to make up for lost profit? According to the consulting group Ruderfinnasia, Chinese luxury consumers will spend less on automobiles, watches, handbags and electronics in 2020. More than just a short period of closing for shops, COVID-19 might change the entire luxury consumption in the long term. Luxury brands should readjust their forecasts for 2020, even more if China is a vital area for them.

[Source: wwd.com – some revenge purchases quickly posted on social media]

The increasing weakness of Western luxury companies

The entire luxury industry has shut down

One of the main factors which impede the Chinese luxury market is having to shut down factories in Europe. Hermès had to close its factories to protect its employees. Coronavirus is impeding companies. Moreover, the virus affects subcontractors of the companies. For instance, China is producing sapphire crystal for the Swiss luxury watch industry. The entire production line is jeopardized. Even on the supply chain, trade exchanges had been slightly decreasing since February. The entire luxury offer is affected and is no longer able to fulfill the Chinese luxury demand.

Cancellation of useful marketing strategies

Luxury brands are hosting different events to improve their brand image or to present a new collection. For instance, Longines is the main sponsor of the horse grand prix “Longines masters” had been postponed. Prada and Chanel had also to cancel their fashion show. The coronavirus impacts the communication of luxury brand in China. They cannot anymore host events which increase their brand image or highlights their new collections. Still, the increasing digitalization in China gives alternatives in the Chinese luxury market after COVID-19.

Coronavirus brings more online opportunities

The rise of Chinese luxury brands

In April 2019, Chinese industry is recovering, whereas European production is still shut down. It might be the right moment for Chinese luxury brands to rise. Since they produce directly in the country, they can fulfill the Chinese luxury demand quickly. Icicle, a Chinese brand producing clothes created in 1997, has environmental compliance is one of their key-values. Another example, the brand Herborist which specializes in skincare. Created in the beginning of the 20^th century, the brand recently made a shift in its brand image to appear more modern. We are brought to a new are of the Chinese luxury market after COVID-19, where the top brands are domestic.

Digitalization, dodging the deficiencies of reality

Even if luxury brands had to cancel some marketing strategies, digitalization allows them to continue mass communication upon customers. According to Bain consulting, digitalization is the new keystone of luxury brands. Companies doubled their digital marketing budget from 35% in 2015 to 70% in 2018. They work more and more with influencers (key opinion leaders) on social media. For instance, Cartier worked with Chinese movie star Lu Han in 2016. The brand launched a communication campaign to increase the masculine jewelry. Influencers have a real influence upon Chinese luxury consumers. They work online which is an asset during the coronavirus, everyone even at home can watch their contents.

Moreover, luxury companies still continue to present their products with digital events. In April 2020, the event watch and wonders took place online. Luxury watch brands were able to present new products. Cartier launches a new version of its famous tank watch.

Even if the Coronavirus forced brands to cancel some events, the digitalization allows luxury companies to communicate with their consumers and continue their marketing strategies on the Chinese luxury market.

[Source: Watches and wonders website – Brands new products on the main page]

Thus, despite the decreased demand, some opportunities appeared on the Chinese luxury market both for digital events and for Chinese luxury brands. European luxury brand will face a difficult year and revenge purchase will not be enough to recover. Still, they remain highly popular in China and hold a strong brand image which appeal consumers in the country.

Author: Enzio Cacciotto

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