With the resumption of outbound travel by Chinese consumers, the luxury industry is left wondering how the Chinese and international markets will evolve. In 2019, two-thirds of Chinese luxury expenditure was spent outside of China, and how this proportion shifts today will have a direct impact on brands' future strategy. Furthermore, following the pandemic, Chinese consumers' confidence has been volatile due to macroeconomic factors, which will have a bearing on the overall Chinese luxury landscape.
This topic was also addressed at this year’s Luxury Society Keynote in a panel discussion moderated by Casey Hall, China Consumer Correspondent at Reuters, featuring experts from Buy Quickly, KPMG China, and DLG (Digital Luxury Group).
“There are some brands that are doing better after the reopening,” said Vuthy Penn, Special Advisor of Buy Quickly on how brands should respond to the evolutions in the Chinese luxury market after the reopening. “There is no secret to success other than ‘trust.’ A lot of headquarters in the last three years – as we know – have not been able to travel to China, so a lot of trust has to be placed on local decision-makers. There are certain brands that had the trust of the headquarters and were able to optimise on the reopening.”
Willi Sun, Head of Advisory, Consumer & Retail at KPMG China, delved into the potential outflow of local luxury spending and how brands should capitalise on travel retail. “From a brand perspective, they have been talking a lot about and also putting in investment and effort on travel retail as the market opens up. People are starting to travel again, predominantly within Asia – we saw an upsurge in Korea, Japan, and Hong Kong,” he said.
Another key topic is customer retention, specifically how brands can capture Chinese customers who spend in different markets and activate them in the future. According to Jacques Roizen, Managing Director, Consulting at DLG (Digital Luxury Group), the implementation of the Personal Information Protection Law will have a significant impact on how brands build their data architecture.
“And [what is] attached to PIPL was the possibility of making a cross-border data transfer application. Right now, we don’t know if these applications are going to be possible,” he opines. “Luxury brands today are forced to have two profiles for their consumers in China and outside of China in two different servers. Luxury brands in China have to significantly mature in their CRM operations and adjust further once we have more clarity on what we can do with data transfer applications.”
To learn more about the market outlook and the strategies brands should adopt following the reopening, please watch the full video below.