Understanding Fashion and Luxury in China

Thomas Brownlees

Thomas Brownlees

CEO and Founder,
440 Industries

Introduction

China is a fast-paced growing economy which has pushed many fashion and luxury brands to enter this market to seize a unique market opportunity. However, the divergences between western and Chinese consumer behaviour have created a cultural threshold to establishing a brand’s influence over this market. In this post, we are going to discuss what companies should be doing to manage the risks associated with establishing a presence in China.

Here’s a breakdown of the post content:

1. Market Entry Challenges in China

China has been able to become an engine of growth for many fashion firms, as it’s population is increasingly growing in both pro-capita income and sophistication.  The companies wishing to enter this market, however, need to understand the Chinese practice of luxury consumption, while at the same time build a brand.

Entering the Chinese market is a challenge in itself as firms are required to:

  • Identify the right, top tier cities where to enter and establish a presence.

  • Studying and segmenting the market to understand how to reach the most profitable customers.

  • Understanding cultural nuances which allow firms to package its products by adapting to different standards.

An example of the last bullet point can be seen in the remarkable differences between Beijing, and Shanghai. In Beijing, a stronger attachment to heritage and tradition can be emphasized through exhibitions and cultural events, while in Shanghai, a more glamorous approach can be pursued through fashion shows and media exposure.

2. Luxury and consumer behaviour

The drive to purchase luxury products is often associated with the desire to conform and the pursuit of status. This is common to most countries, but in China, the status component of luxury purchase is associated with in-your-face eye-catching items.

In this context, therefore, the status component pushes consumers to use luxury as a marker for social categories.

At the same time, China is growing its taste for sophistication, and consumers will need to be informed and educated about the more behind-the-scenes elements of luxury.  This poses a marketing challenge, as customers may be confused about the ‘noise’ created in fashion communication, and consider streetwear brands like Adidas as a fully-fledged luxury brand.

This poses a particular challenge for Italian luxury brands, as the Made in Italy country of origin effect draws its values and quality from the fashion pipeline as opposed to loud marketing campaigns.

3. Brand development in China a 5-stage approach

Location is undeniably one of the most important elements in the pursuit of exposure. Retail distribution for luxury brands needs to be both extensive and impressive to generate a perception of exclusivity. A thorough retail network is especially important in China, in consideration of the – relatively – small distribution of fashion magazines. In this sense, flagship stores are a valuable approach as an entry method, as a larger store is able to draw deep into the brand’s heritage and history.

  • Step 1. Build awareness through the location. Location is undeniably one of the most important elements in the pursuit of exposure. Retail distribution for luxury brands needs to be both extensive and impressive to generate a perception of exclusivity. A thorough retail network is especially important in China, in consideration of the – relatively – small distribution of fashion magazines. In this sense, flagship stores are a valuable approach as an entry method, as a larger store is able to draw deep into the brand’s heritage and history.

  • Step 2. Leverage culture and lifestyle. In order to build a lasting positive image in the mind of consumers, brands need to strike an association with culture and lifestyle. In this context, many companies create memorable events and fashion shows associated with a brand’s heritage.

  • Step 3. Leverage brand experience through retailing. An effective approach to developing the brand derives from creating a direct brand experience connected with the consumption process. Creating unique retail experiences requires to process a variety of elements relative to retail development, and can be a very challenging task.

  • Step 4. Control shop portfolio development. On an operational level, firms need to approach an omnichannel strategy. Efficient and effective shop portfolio across distribution chains is an important part of satisfying customer demand. This, in many instances, can entail for extending product lines in a variety of directions.

  • Step 5. Profile your clients. Despite China being a very populous country, only a small percentage of customers can afford luxury items. Companies need to profile their customers so that they may be able to offer them satisfactory post purchase experiences. Treating your customers as VIPs can provide companies with the opportunity of interacting several times with their customers and create a stronger sense of brand loyalty. In order to pursue this approach firms need to adopt customer relationship management software and try to fully take advantage of the 20% of the customers capable of generating 80% of the profit.  

4. Conclusions

By looking at this first glimpse into the Chinese market, we can conclude that developing a brand in China is an expensive endeavour. Firms will need to invest in boutiques, advertising, talent while creating a culture of sophistication around luxury goods.

Most of all establishing a brand in China is a long-term goal, where consistency and perseverance are important values to bear in mind.  

Sources and Further Research

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Understanding Fashion and Luxury in China China is no longer an emerging economy and continues to offer unique challenges to luxury firms due to their unique culture and history.
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Thomas Brownlees

Thomas Brownlees

I am an Anglo-Italian business lecturer and consultant based in Florence, Italy. In 2017 I started 440 Industries, an education and training company focused on fashion, music, and technology. Our mission is to help students, entrepreneurs and managers in overcoming the challenges of starting, developing and scaling their business in the creative industries. When there's a will, there's a way!

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