Marketing expert Ashley Dudarenok picks five 2023 trends for luxury brands in China, from its ChoZan’s 2023 Mega Report. The first one: focus on your VIC’s, Very Important Clients. this and four more trends from the Jing Daily. Among them: expand the duty-free ecosystem, and adopt global pricing strategies.
Globally, the top 2 percent of luxury customers make up about 40 percent of luxury sales, according to Bain’s luxury goods market study. In China, the concentration of very important clients (VICs) has been on the rise and has further expanded in 2022. The economic slowdown has affected entry-level luxury consumers more than high-net-worth individuals, and the decline in mall traffic has led to fewer new customers entering luxury stores.
Consequently, sales have tilted towards VICs in 2022, with some Chinese luxury brands achieving higher concentrations of VIC sales than the global average. VICs have also played a significant role in online luxury sales, with shoppers who buy more than three times a year accounting for over 50 percent of sales and being the fastest-growing segment, according to Tmall Luxury Pavilion.
These high-net-worth individuals (HNWI) are ready to travel as the pandemic restrictions are lifted. They can be categorized into two profiles: those that shop domestic and those that shop overseas (Peihuo phenomenon). The overseas VICs travel to other countries to purchase luxury goods at the “regular” price and not the “China” price, whereas domestic VICs prefer the local experience of shopping in boutiques regardless of the item’s price.
Brands can get ahead of the overseas VICs by offering additional incentives to their products. As for domestic VICs, brands need to invest in travel retail opportunities, especially in areas like Hainan.
Ashley Dudarenok is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers’ request form.
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