AFTER A THREE-YEAR DECELERATION, DOMESTIC CHINA LUXURY MARKET STARTED TO REBOUND IN 2016 AND ACHIEVED 20% GROWTH IN 2017

According to Bain & Company's 2017 China Luxury Report, Millennials led the way in defining new luxury trends and accelerating luxury spending last year

Shanghai – Jan. 17, 2018 –After three years of deceleration, Chinese spending on personal luxury goods started to bounce back in Q3 2016 and showed strong growth in 2017, with the domestic market outgrowing overseas purchases and reaching 20% growth. Category rebalancing continues with female categories, such as cosmetics, women's wear, and jewelry, surpassing other categories` growth.

Government policies to encourage domestic consumption and control Daigous, combined with leading brands` strategies to monitor price differences with overseas markets have been a major factor, as announced in the Bain & Company 2015 China luxury report.

In addition, in its 2017 China Luxury Report released today, Bain & Company found that new consumers – particularly Millennials (aged at 20-34) – were major contributors to luxury market growth last year.  The survey of 1,170 Chinese consumers show that they start to purchase luxury at an earlier age and buy more frequently; They are digitally savvy, highly knowledgeable about luxury categories and prefer “fashion”, “street casual”, “new” and “in-season” products. They look to express their unique personality through distinctive looks, which also include make-up.

“Chinese Millennials helped accelerate luxury spending here, particularly in the last year,” said Bruno Lannes, partner in Bain's Greater China office author of the report.  “In response, we`re seeing luxury brands repositioning themselves to better reach this influential demographic group, particularly through digital media that we know play an influential role in shaping younger consumers` opinions about luxury and fashion.”

Bain found that luxury sales from online channels continued to grow fast, but still remains low. More luxury brands have launched their `brand.com` website (or are planning a 2018 launch). In addition, most brands continue to adjust their footprint and consolidate into bigger stores, mostly in multi-purpose shopping malls, focused on `retailtainment`. With joint effort from shopping malls and luxury brands, luxury consumer experience has been largely improved.

Among online channels, Chinese consumers perceive brands official websites as most appealing, with approximately 70 percent of survey respondents reporting that they purchase directly from a brand site instead of a WeChat store, luxury verticals or aggregators.  This preference is driven by several factors, such as exclusivity and after-sales service, but more than 60 percent of consumers said they chose to shop on a brand's site because they have guaranteed product authenticity.

The big winning categories have been the fashion and lifestyle categories, and in its report, Bain identifies four key success factors of winning lifestyle and fashion brands:

1) Push for constant “newness” and distinct designs to reshape fashion.

2) Leverage major social platforms for different value propositions, investing heavily in digital marketing.  For example, Bain found that all of the top 40 luxury brands have launched an official WeChat account.

3) Improve store experience and customer service with both shopping malls and brands making efforts to drive traffic and enhance conversion rates.

4) Leverage the `fast fashion` model, launching new collections more often, refreshing shop windows frequently and speeding up the supply chain.

“Many luxury brands recognize that Chinese consumers are more and more setting the trends in luxury. To start with, they represent 32% of the global luxury consumption; In addition, we also see an emerging qualitative editorial authority in China on luxury, through KOL and media. And China is ahead of all other markets when it comes to digital marketing and digital consumer engagement” added Lannes.

“We expect the strong momentum of the domestic market to continue, fueled by Millennials and strong complementarity between offline & online to drive traffic into stores. However growth is likely to slow down a bit this year given the high growth rates achieved in 2017” concluded Lannes.