The luxury market in China is poised to become the largest in the world. According to McKinsey, China will contribute to 41% of global luxury consumption by 2025. Although there are numerous well-renowned foreign brands, Chinese luxury brands like DUANMU and Shangxia, have been gaining momentum over the past few years. If foreign brands do not want to be outpaced, they should not overlook the slow, yet strategic practices local brands may approach.
To better understand the future of Chinese luxury, we formulated five hypotheses for the emergence of local luxury players.
1. Chinese luxury brands will come from products that are exclusively Chinese
Instead of competing head-to-head with foreign brands in segments dominated by Western names, local companies can leverage their deeper understanding of the Chinese culture to cater to Chinese consumers. Indeed, although Chinese first-time consumers are more inclined to purchasing foreign brands due to their longer history and higher prestige, ni the long run, local luxury brands may gain more recognition by focusing on products deeply rooted in Chinese culture and habits, thereby avoiding direct competition with foreign brands. In fact, in industries such as baijiu, tea, porcelain, and silk the quality and prestige of Chinese brands is not questioned.
Even in sectors which are not quintessentially Chinese, domestic brands are drawing from local culture to rise. That is the case of furniture design brand PUSU whose furniture incorporates ancient Chinese literati lifestyle into modern environments. By drawing from Taoism principles and Ming dynasty interior design, PUSU provides a minimalist approach with Chinese characteristics. In addition, this designer furnishing brand makes extensive use of Chinese traditional crafts such as the mortise and tenon joint techniques to manufacture its products.
2. Chinese luxury brands will leverage Traditional Chinese Medicine (TCM) in cosmetics and fragrances
Chinese luxury brands in the cosmetics and fragrances industries are incorporating TCM into their products. Increasingly more consumers prefer TCM cosmetics because they are influenced by ancient Chinese beauty practices; they are considered as natural and safe; and they are perceived as more skin-friendly.
Among the local consumers, the post-90s generation is likely to be the main driver of the TCM-based cosmetic sales. Indeed, less than 30% of Chinese individuals aged between 15 and 64 years old accounted for 60% of cosmetics purchases on Chinese e-commerce platform Tmall. Moreover, 67% of post-90s Chinese consumers tend to have greater concern for green attributes than older generations.
Local high-end cosmetics brands such as MAYSU (美素) are already taking advantage of the opportunity and producing TCM-based skincare products. MAYSU features various product lines with TCM, such as those containing ginseng seeds and extract or plum flower embryos from the Yellow Mountain, and many others.
MAYSU invested in cutting-edge technology and years of studies into its MAYSU ginseng regeneration products, which are one of its most popular series among their consumers. High effectiveness is one of the determinants of purchase in the Chinese beauty market. And MAYSU continuously strives to improve it without sacrificing the “Chinese” characteristics.
Although more and more local brands are incorporating TCM into their products, there is still room for new players to start incorporating TCM to cater to Chinese young consumers.
3. Chinese luxury brands will leverage Chinese traditional craftsmanship to stand out
The rising Guochao (国潮) trend and the government support to promote the “craftmanship spirit” brings about promising opportunities. Consumers also value brands employing traditional craftsmanship techniques to interpret modern designs.
Chow Tai Fook (周大福) is a long-established luxury brand that has already adopted traditional craftsmanship into its business. It combines modern aesthetics and designs with century-old gold working techniques to ensure gold jewelry pieces could be passed down through generations. Moreover, Chow Tai Fook collaborated with art museums and the Shaanxi Institute for Preservation of Cultural Heritage in order to reconstruct ancient gold craftmanship techniques.
Its jewelry products incorporate the Chinese culture and cater to both its female and male consumers. For instance, the Hong Kong jewelry house vaunts a series of transfer beads engraved with the four greats gods of ancient times, which are the Green Dragon, the god of the East and a symbol of honor, authority, good fortune; Suzaku, the god of the South, a symbol of good luck and prosperity; the White Tiger, the god of the West and a symbol of wealth; and Xuanwu, the god of the North and a symbol of health and longevity.
4. The lack of a robust craftsmanship ecosystem hinders the emergence of Chinese luxury brands
Without a sound craftmanship framework in China, local luxury brands struggle to start or expand their craftsmanship ecosystem. Nevertheless, Chinese luxury brands look willing to invest time and resources in incubating their own ecosystem if necessary. Luxury handbag brand DUANMU and luxury fashion brand Shangxia (上下) are good examples of local brands engaged in carefully building their own network of craftsmen from scratch.
In order to produce its handbags, Duanmu Liangjin (端木良锦), revived a craft dating back to the Tang Dynasty. In fact, its founder Qi Tian, who was a collector of antiques and majored in architecture, could not find a suitable workshop for his wooden bag designs and craftsmen were reluctant to work with him and adapt their craftmanship. Therefore, he had to teach himself how to develop the ancient fine wood inlay technique he needed.
Backed by the French maison Hermès, Shangxia (上下) needs to continue building its own craftsmanship network in order to secure its future growth. Indeed, it took it three years to scout for and collaborate with Chinese artisans still possessing traditional craftmanship skills. And its network composed of only 50 artisans across China, Nepal, and Vietnam, has taken over 7 years to be built. Although scaling up quickly is not part of the brand’s objective since it wants to ensure the quality and exclusivity of its items, a low supply of artisanal craftsmen could become a significant issue in the future.
5. The emergence of Chinese luxury brands will go hand in hand with the implementation of state policies in terms of heritage protection
Since the formulation of the Plan on Revitalizing China’s Traditional Crafts by the ministries of Culture, Industry and Information Technology, and Finance in 2017, greater attention has been put into protecting heritage and traditional craftsmanship. This will in turn promote the appreciation of Chinese craftsmanship, conserve traditional crafts, and facilitate the emergence of Chinese luxury brands. Creating a clear set of certifications setting formal standards regulating the production of high-end local products such as tea, baijiu and porcelain would help building a sounder ground for luxury brands to rise. Indeed, for the time being some industries are plenty of local luxury products but lack of luxury brands.
Key takeaways of the future of Chinese luxury brands:
- Although foreign brands are dominating many sectors in the luxury market in China, local brands are using their knowledge of Chinese culture and traditions to appeal to their consumers.
- Chinese luxury brands are most likely to come from products that derive from Chinese traditions and customs to avoid direct competition with local brands. PUSU incorporates Taoism and Ming-dynasty elements to produce its minimalist furniture.
- In the cosmetic and fragrance industries, Chinese luxury brands may add TCM features to their products as consumers are increasingly preferring them. However, the presence of only a few players leaves opportunities for foreign brands to do so as well.
- Chinese luxury brands are likely to leverage Chinese traditional craftsmanship to either grow or dominate the luxury market in China. A prominent, long-known luxury brand Chow Tai Fook has already done so. And other may follow suit. A lacking craftsmanship ecosystem is likely to hinder the growth of Chinese luxury brands. Although local brands struggle to start or expand the ecosystem, there are brands like DUANMU and Shanghai who are actively and carefully building it.
- Chinese government is also pushing for conserving and promoting local craftsmanship mainly as a tool of industrial upgrading.