Bain Company Report: Half Of China'S Luxury Consumption Will Be In The Future.

The latest Bain report released last week made a comprehensive analysis of China's luxury market in 2018.

On the macro level, in 2018, it benefited from the millennial generation and female consumers, and grew by 20% in the second consecutive years since 2017.

This growth may be maintained in 2019, but the growth rate is expected to slow down, indicating that the brand should focus on the development of the Chinese mainland market.

The following are the 4 key points of the 2018 market that we extracted from the report, as well as suggestions for the brand development of the Chinese market in 2019:

1., stimulating domestic luxury consumption is inevitable.

The Chinese government's efforts to promote domestic consumption are emerging - from 2015 to 2018, domestic luxury expenditure increased from 23% of total expenditure to 27%.

This trend is expected to continue due to changing government policies such as reducing import tariffs and tighter control over purchasing agents.

In addition, in response to government initiatives, the brand has narrowed the price gap between local and overseas markets since last year.

Bain predicts that by 2025, the consumption of luxury goods abroad and in China will be flat.

We believe that in order to prevent sales from falling, brands may need to shift their focus to China's domestic market.

Achieving this goal may mean that the brand needs to continue to narrow the price gap, allocate more budgets for the market, and even give more decision-making power to Chinese local teams in marketing.

2. the gap between winners and losers continues to expand.

Macro market changes can quickly distinguish winners from losers. Bain reports that this year's trend is particularly obvious.

They wrote: "whenever there is a brand with a growth rate of over 25% in 2018, the growth rate of two brands is less than 10%".

The winner was the main winner because they quickly adapted to market changes, including innovation in digital channels and influence marketing, and frequent product launches and refreshing images also won the hearts of millennial consumers.

In the increasingly competitive environment, it is probably more difficult for small players in the fashion world to compete.

Because bigger and more mature fashion companies can invest more in marketing products, thus "offset the increased cost of doing business in China".

In the 3.2018 year, the cosmetics industry is a big winner.

Although sales of online luxury goods are increasing, the cosmetics industry is the only industry that keeps the growth of online penetration in 2018.

The report points out that part of the reason is that this is a traditional female category industry, while the growth rate of men oriented watch industry is less than 10%.

We think this may be related to the slowdown in China's economy.

For example, lipstick prices are relatively low, and more millennial women tend to consume rationally, which means they may choose to invest in skin care products rather than other product categories such as luxury handbags.

4. WeChat Awakening

Among all the digital channels, WeChat is a priority tool for brands to contact consumers. The top 40 luxury brands allocated WeChat's digital marketing budget on WeChat.

The tool has become an important point of contact between brands online and offline. The brand relies on its service oriented functions in WeChat, such as customer service, WeChat business and membership management.

We recommend that WeChat's brand stay away from the "one-off" solution, but to create an ecosystem, such as official accounts, payment systems, e-commerce shops, for long-term benefits.