Chinese whispers

The luxury leather goods market in China is changing.

Set to be worth $6.4bn in 2020, the outlook for luxury brands which can adapt to changing consumer behaviour, looks positive. For those that don’t adapt, the picture will be different.

Over the past few years, international brands such as Louis Vuitton, Prada, Chanel and Gucci, who have experienced waning sales in their domestic markets, have excelled in China, driven by the demand for recognisable logos and designs. However, tastes and buying behaviour has begun to mature. Chinese consumers are now more discerning with their spending, and are increasingly demanding more from their interactions with brands. Furthermore, following years of strong growth, many consumers have accumulated extensive handbag collections, meaning brands must work even harder to give them a reason to make further purchases.

What are luxury leather goods brands doing to ensure they remain relevant?

The ruling powers in China continue to crackdown on corruption and frown on displays of wealth. This has led to luxury consumers becoming increasingly sophisticated in their tastes. Preferences are shifting away from items with highly visible branding, towards more exclusive, less visible labelling. Fakes have also become more abundant.

In response, some brands have started to change designs or even launch lower profile products to reduce logo fatigue. Brand collaborations, such as Louis Vuitton’s recent collaboration with streetwear brand, Supreme, create one-off collections, with the limited nature of products creating appeal and brands benefitting from positive associations.

Brands can also provide a unique experience through personalisation. Customised products are increasingly in demand and support the desire for showing off, whilst being exclusive and individual. Gucci recently offered a DIY service allowing customers to add patches, monograms and embroidery to handbags.

More brands are targeting their marketing and distribution in China, despite continuing regional differences making it hard in a heterogeneous market. This often includes using local celebrities and influencers as brand ambassadors, utilising product placements (as seen with Furla in TV drama ‘Ode to Joy’) or marketing through key channels such as WeChat.

The online channel continues to grow, supported by an increased confidence in the reduction of fakes and the demand from outside the larger, first-tier cities. Loewe used Tmall.com to exclusively launch its limited-edition Hearts Barcelona range for Chinese Valentine’s Day, with many other brands opening official ‘storefronts’ on Alibaba.com.

China remains a strategically important and massive market. Those brands that take time to understand the consumer and adapt their approach will reap the benefits.

Caroline Pollard