Warc Blog

Luxury strategies mature in China

15 April 2013
BEIJING: Luxury brands in China are switching their focus from opening stores to improving customer service, as the sector's growth rate starts to slow.

"The fast growth, when increases were well into double-digits in China's luxury market, has gone forever," said Zhou Ting, director of the Fortune Character Research Centre, an organisation that studies this category.

She told China Daily that the combination of a retail sector slowdown and the saturation of luxury brand names in some cities meant a reduction in store openings was now likely.

In addition, new laws banning the purchase of luxury goods with public funds have also cooled domestic demand.

The market grew at 7% in 2012, compared to 30% in 2011, according to consultancy Bain & Co. As a result, observers have suggested that quality of service has become increasingly important for many brands.

Lu Xiaoming, the president of Organic Plus, an upmarket food retailer, said the market had matured, and Chinese consumers were now buying items to fit their needs rather than because of the label.

As a result, luxury businesses were having to "bring luxury back to basics, which means providing a unique experience, backed up by high-end quality and service," he added.

Some brands have already stated such an intention. Bernard Arnault, CEO of LVMH, said its development in China will focus on quality, instead of store openings.

One aspect of this approach is focusing on custom-made items, such as bags and shoes, as offered in Louis Vuitton's flagship Maison outlet in Shanghai. It is the brand's only mainland store to do so.

The new Maison Hermès planned for Shanghai will similarly offer custom-made items.

Gucci is also slowing store openings and is "focused on building long-term relationships with customers, on a more personal and in-depth basis, in order to secure their loyalty."

Data sourced from China Daily; additional content by Warc staff

 
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