2019, Global Luxury Consumption China Has A Very High Contribution Rate, A New World Of Luxury Brands.

As the main engine of growth in the global luxury industry, the luxury market in mainland China continued its strong performance in 2019 over the past few years. In addition, China's luxury consumers have also led to the growth of luxury goods in other Asian countries.

Recently, Bain and the Italy luxury goods industry association FondazioneAltagamma jointly released the 2019 Global Luxury Industry Research Report (autumn version) (hereinafter referred to as the "report"), showing that the overall sales of China's luxury goods market increased by 26% in 2019. Chinese consumers have contributed 90% to the sustained growth of the global luxury goods market.

As the main engine of growth in the global luxury industry, the luxury market in mainland China continued its strong performance in the past few years in 2019, with a total sales volume of 30 billion euros. It accounts for 35% of the world's total consumption of personal luxury goods.

According to the report, the favorable policies of the Chinese government, coupled with the narrowing of domestic and foreign spreads, further stimulated the growth of local consumption in China's luxury market.

It is noteworthy that data show that footwear and jewelry are the two fastest growing categories in the growth of personal luxury goods in 2019, with a 9% increase, followed by 7% leather products and 3% cosmetic products. Watches overall performance is weak, down 2%.

The report also mentions that consumers' demands for luxury brands are changing rapidly: young consumers want to establish continuous communication with brands, forcing brands to innovate in business models and value proposition.

　　 Global market keeps growing

The report points out that the luxury industry is still growing in an environment of global geopolitical uncertainty and increased economic recession. In 2019, the global luxury market overall sales (including luxury and luxury experience) increased by 4% (at constant exchange rate, the same below), reaching 1 trillion and 300 billion euros. Among them, as the core part of the personal luxury market also increased by 4%, reaching 281 billion euros.

Bain global partners Bruno (Bruno Lannes) said: "the global luxury market has maintained a moderate growth this year, in line with the trend of" new normal "proposed by Bain. The main driving force for growth is from Asia, especially Chinese consumers. Nowadays, luxury consumers are increasingly taking the initiative to constantly rewrite industry rules. Brands need to find a new business model to meet the needs of consumers in terms of purchase, use and communication.

The report pointed out that as the main engine of growth in the global luxury industry, the luxury market in mainland China continued its strong performance in 2019 over the past few years.

In addition, China's luxury consumers have also led to the growth of luxury goods in other Asian countries. Japan's luxury goods market grew by 4%, sales reached 24 billion euros, and other Asian luxury goods markets grew by 6% and sales reached 42 billion euros.

In the US, on the one hand, the rising confidence of local consumers has strongly stimulated the local luxury goods market. On the other hand, the decrease in the number of visitors to the United States has partly offset the increase. Despite the slow growth in the United States, the overall luxury market is still 84 billion euros, which remains a core market for personal luxury goods.

In addition, the report data also showed that in 2019, the European luxury market growth slowed down, only a small increase of 1%, the market size of 88 billion euros. Among them, the luxury market in Spain and the United Kingdom grew strongly. The slowdown in domestic economic growth in Germany and the social turmoil in France earlier this year had a certain impact on the luxury market in both countries.

In other parts of the world, sales of luxury goods fell by 5%, to 12 billion euros. In addition to Dubai's slow recovery period, the rest of the Middle East is stagnant because of declining consumer confidence and geopolitical uncertainty.

In 2019, the proportion of global online channels continued to expand, now accounting for 12% of the overall luxury market. The impact of digital channels on consumers is increasing day by day, not only online, but also online. Physical channels will be further subverted by digital channels. Bain expects the number of luxury stores in the world to reach its highest level in 2020.

　　 The Chinese get the luxury.

Referring to the data from UnionPay luxury transaction data, it is found that China has contributed more than half of the world's luxury consumption by 2012 to 2019. Chinese luxury goods consumption at home and abroad reached 770 billion yuan (US $115 billion), accounting for about 1/3 of global luxury consumption. If the family is calculated as a unit, the average household expenditure on luxuries is RMB 80 thousand yuan for luxuries.

By 2025, the total consumption of luxury goods inside and outside China will be nearly doubled to 1 trillion and 200 billion yuan, and China will contribute 40% of the world's luxury consumption.

According to the public figures, the number of outbound tourists will reach 160 million times a year by 2020, and the related expenditure will increase by 6.1% in the next few years.

Why is China's luxury consumption growth so strong? In recent years, the number of middle and upper income families has increased dramatically.

From 2019 to 2025, the annual compound growth rate of this group will reach 28%, which means that the household disposable monthly income from 17450 yuan to 26180 yuan (equivalent to 2600 US dollars to 3900 dollars) will reach 350 million of the population. The scale of the richer people (household disposable monthly income of more than 26180 yuan) will be 3 times that of 2025, reaching 65 million in 2025.

Nearly 70% of the group choose to buy luxury goods abroad. First, outbound tourism is becoming more and more common. Two, China's import tax system and brand pricing strategy have led to a marked difference in price.

However, with the reduction of the import tax rate of luxury goods in China, some luxury brands have lowered the price of Chinese stores in recent years. However, luxury brands should still enhance the service quality of stores, so that when the price differentials are acceptable, consumer reflow will be more effectively promoted.

For the major luxury brands, although some of the luxury brands' earnings were not satisfactory, the global luxury Luxe Empire LVMH and Richemont were strong in 2019. This is a good illustration of the fact that luxury goods are a "winner take all" market in China. In fact, it also reflects the salient features of the fashion market in China and even in the world.

As pointed out in the 2019 global fashion format report, the top 20% of the strong people firmly grasped most of the profits of the fashion industry and formed a market dominated by a few super winners. Under the jungle rule of "winner takes all", branding must strive to become a leader in the industry, otherwise there will be a risk of outgoing.

　　 So who is supporting China's luxury consumption?

From the report, we can see that the younger generation represented by "80 generation" and "90 generation" account for 43% and 28% of the total number of luxury goods buyers, respectively, contributing 56% and 23% of the total consumption of luxury goods in China respectively. In terms of per capita expenditure, the "post-80" luxury consumers spend 41 thousand yuan on annual purchases of luxury goods, and the "post-90s" luxury consumers are 25 thousand yuan per year.

Obviously, the younger generation has already built up half of China's luxury market. Their desire for luxury and the enthusiasm they release reflect their choice of lifestyle and recognition of their self value to a certain extent. Luxury goods have become the social capital of the younger generation, that is, luxury goods can help them improve their identities and voice rights online and offline. Luxury has become a currency that can be circulated in social media.

　　 What does China's younger generation of luxury consumers need?

So we have the next question: what does the younger generation of Chinese luxury consumers need?

Luxury goods seem to have some magic power. It is a social capital that not only demonstrates individuality, but also helps to integrate into certain social circles and enhance identity. Young white-collar workers believe that luxury is a kind of capital that makes us feel confident in the workplace, which can reflect their taste and respect. The younger the consumer, the stronger the mentality.

Buying luxury goods has become a way of life for them to share experiences and convey values in their online or offline circles. Regardless of the age of luxury consumers, brand is still the symbol of personal taste and the most important reason for buying.

According to the survey, 68% of the "post-90s" admitted that they first considered brand when they bought luxury goods, and this proportion was up to 94% after "65" and "70". This shows that younger consumers do not blindly pursue brands. We can see that the younger generation will also focus on design, fabric and production technology.

　　 New world of luxury brands

According to the survey of Ying ho business review, the young generation of China has not been able to access luxury goods for a long time, so there is a lack of understanding of the cultural heritage that brands have always attached importance to. Only 13% of the "post-80" and "post-90s" luxury buyers said they grew up in a familiarity with luxury families. Half of the "post-90s" and 31% of the "post-80s" luxury consumers began buying the first luxury in life in the past year.

Luxury goods are new to many "after 65" and "70 after" products. Nearly half of them have started buying designer brands in the past three years. 90% of the "post-90s" and more than 2/3 of the "post-80s" consumers also began to reach luxury goods in the past three years. The emerging Chinese luxury consumers lack awareness of the brand's inheritance for hundreds of years, and more are influenced by the modern brand story. This leaves enough room for the brand.

　　 Where is the way of luxury brands in China?

Needless to say, the first priority of luxury brands in China is to please their new darling, the younger generation of China. Whether they can understand them deeply, keep pace with them and enter their social circles decide whether the brand will survive or die for the next ten years.

Digitalization is the key for brands to please China's "post-80s" and "post-90s". Because this generation lives in a digitalized world, they are the digital aborigines who are always online. They want to get customized digital experience to demonstrate their unique personality. Opportunities and challenges coexist, and motivation and pressure are at the same time. Facing the trillions of China's luxury goods market, the top priority of the brand is to build itself into the social capital of the younger generation.

　　 Revelation of luxury brands

Chinese consumers have contributed 90% to the sustained growth of the global luxury goods market. Another data: the millennial generation and the Z generation contributed nearly 100 percent of market growth in 2019, and in 2035, the millennial generation is expected to occupy half of the global luxury market. This shows that the luxury market is in urgent need of the hearts of young people, especially young consumers in China. At the same time, the wider distribution and the expansion of online channels are also imminent.

Branding should adopt a strategy of "always online", such as speeding up the release of new products, complemented by viral transmission, and with a catchy nickname and creative promotional activities.

As mentioned earlier, as Chinese young luxury consumers pay more attention to the brand itself, rather than the culture they carry, the brand should be good at using different elements to tell stories. A brand can also organize various events, especially activities related to art and fashion, so as to create an atmosphere of respect and create opportunities to interact with consumers as much as possible.

Second, marketing everywhere, experienced brands will design marketing strategies based on the preferences of Chinese young consumers in each consumer media contact, fully authorize their digital marketing team, encourage teams to make quick and decisive decisions, and actively test the new media that young consumers are keen on.

The brand can be combined with KOL in the form of "combined boxing". The level is from high to low, to create a complete Pyramid hierarchy. From the global ambassador, it starts to spread all the way to the KOL which is only released for single product and activities, and then touches on the various subgroups by domestic bloggers and net red. Brand should also invest wisely, train well-trained shop assistants, and maintain a one to one relationship with customers.

Third, "Chinese consumers first", in addition, luxury brands can "Chinese consumers first" principle leading group strategy. For example, when formulating marketing plans, we should pay attention to the linkage between marketing and sales channels, and the linkage between domestic channels and tourism shopping.

To win the younger generation of consumers is to win half of China's luxury market.