Chinese consumers are reshaping the luxury business. Traditional ways of developing the luxury business are no longer effective. Chinese luxury consumers, who have increasingly become the core of the market over the past 15 years, have drastically influenced the retail industry.
First and foremost, the strategy of fast retail network expansion is no longer functional for luxury brands globally. The growth paradigm based on space no longer works. The industry as a whole is now facing a significantly lower retail space growth opportunity.
In fact, China has led the wave of luxury store closings around the world over the past several years. Over-expansion by brands in China is one reason. Another is that Chinese consumers are purchasing goods on e-commerce. Turning a blind eye to this trend can be counter-productive. China’s middle-class luxury shoppers are highly budget-wise and price-sensitive.
The constant thirst for new products and designs that is demanded by Chinese luxury shoppers has accelerated the innovation cycle of luxury brands. Innovation is an imperative for luxury brands if they hope to stay in line and up to par with Chinese consumers’ evolving tastes. Newness and affordability are crucial. New products and new ideas are indispensable to make consumers part with their money.