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2012 Predictions: Luxury e-Commerce Will Be China’s Domain

By L2 | 31 January 2012

Young, rich, digitally-native, and increasingly fixated on luxury. This is the new and future prestige buyer profile, and to nobody’s surprise, it’s found almost exclusively in the far eastern economic boomcountry of China.

 

From fashion and beauty to jewelry and automobiles, Chinese with money are bucking the country’s long-held tradition of saving (60 percent of households there do so, compared with just 35 percent in the U.S.) in favor of buying. This is especially true when the purchases in question project status, wealth, and a Westernized taste.

 

Recognizing the billions in revenue potential, many luxury brands have expanded into China by way of new retail stores. This would be a relatively effective business strategy if, like New York City, Paris and London, citizens regularly left home and flocked to major cities for work, shopping or vacation stays. In China, though last year marked the first time in the country’s history that more people lived in urban centers than in rural towns, there are many more millionaires and billionaires who want the new Chanel fur winter boot who won’t make it to Beijing, Shanghai, Hangzhou and Guangzhou—the only four cities with Chanel boutiques—before they’re out of season.

 

Enter e-commerce.

 

We believe that the prestige brands that will win this market will be those that invest in robust e-commerce sites, outfitted with Chinese language capability and easy to navigate shipping options. Not only will people living in smaller cities and towns (where 75 percent of China’s future wealth creation is expected to take place) be able to buy their big-ticket items, but even more big-city luxury connoisseurs will take advantage—and more often. When unburdened by store hours and bad Beijing traffic, shoppers are likely to be happier, more impulsive and ultimately, spendier.

 

Recent data from the Boston Consulting Group, which looked at online sales as a percentage of overall retail sales in the Skincare and Cosmetics industry, underscores e-commerce’s tremendous opportunity in the region. In 2005, online sales of domestic Chinese skincare and cosmetics brands accounted for just 2 percent of overall sales. In 2010, after implementing aggressive and innovative e-commerce strategies, this number jumped to 11 percent, a growth spike that outpaced even the most mature markets in the U.S. and the U.K.

 

(Image via Forbes)


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