The luxury industry in China is on the rise. Hu Yuwan, a project manager at Daxue Consulting, explains: “In 2013, luxury lost popularity due to the anti-corruption policy. Especially, in the north of China consumption strongly decreased. Now, however, since the Chinese middle-class with increasing per capita income is rising, and also due to a changing lifestyle, as well as more open-minded and educated Chinese regarding brand preferences, luxury demand is increasing again”. Chinese shoppers bought about a third of the world’s luxury goods. However, while only a small percentage of sales are made in China (7 per cent), overseas purchases recently are experiencing a decrease and sales in the mainland are increasing. Another rising trend can be seen in the fashion industry in China. By 2020, total fashion sales in China are expected to triple its current amount, rising to more than 1.3 trillion RMB ($200 billion USD) from 398 billion RMB ($60 billion USD) in 2010, according to statistics from Daxue Consulting. The fact that Chinese consumers have become highly brand conscious and that the possession of luxury products is a status symbol contributes to the growth in the luxury fashion segment. Hu Yuwan clarifies: “While traditional luxury brands are losing favor among Chinese consumers, the new generation increasingly appreciates designer niche brands and quality goods instead. Depending on the segment you define your product to be, it implies not only new market opportunities for brands in the luxury fashion sector but also intense competition among the brands.”
Daxue Consulting’s client, already operating in the fashion industry in China, has recognized a high demand for its high-class luxury fashion clothes. The company sought to penetrate the luxury market by establishing a new brand and new products within the premium segment. Therefore, the client approached Daxue Consulting to analyze the opportunities and risks in the sector to gain a better understanding of the market for an excellent brand development.
Daxue Consulting prepared a tailor-made project to support the company in designing the brand’s penetration strategy towards the luxury fashion sector. The consulting team conducted the following steps of research as to meet the client’s goals:
As a first step, Daxue Consulting executed an extensive Desk Research using relevant information sources and analytics to identify and analyze the existing market players in the industry as well as Chinese consumers’ demand towards luxury clothes. The research included key competitors’ strength and weaknesses, their market share and positioning in China considering relevant aspects such as design or price, as well as analyzing websites, promotion, and e-commerce trends. Moreover, Daxue included Desk Research outside China to ensure having an overall picture of the luxury clothes market and depicting size, growth, differences or new designs, as well as potential new competitors entering China.
As a second step, Daxue designed and planned mystery visits to perform in high-end shopping malls in China. The consultants, therefore, recruited suitable shoppers for the client’s project and used the Store Checker App to assess different aspects, such as the products’ styles, materials, prices, as well as their positioning, or sales performance and trends throughout conversations with the sales persons. Daxue Consulting uniquely designed this app for large-scale store checks and mystery shopping projects. It allows for efficient, affordable and reliable data collection thanks to its vast network of app users, as well as geo-localization.
The objective of the third step was to cross-check obtained knowledge and to gain additionally detailed consumer insights as well as an understanding of preferred touchpoints and distribution channels in the industry by complementing the desk research. Therefore, Daxue Consulting conducted in-depth interviews with end-consumers, as well as professionals in the luxury fashion segment. The consulting team could, therefore, detect general industry trends, perspectives of KOLs, and consumer habits and behavior such as reasons for buying, as well as information about their lifestyle or profession.
Daxue Consulting also conducted Social Listening on the client’s and the key competitor’s brand. The team aimed to understand the brand identity and differences among the brands, why the consumers like or don’t like them. Daxue’s team investigated how the client needs to position its brand for a successful market entry by identifying competitors’ reputation and attempted to discover significant upcoming trends on the market. The fourth stage let the team identify strength and weaknesses from the viewpoint of a customer and additionally, for instance, gaps in the luxury fashion that Chinese consumers anticipated.
Finally, Daxue Consulting processed the data, cross-analyzing it during the different research steps to be able to provide the final report and suggestions for the client. The report comprised detailed information about the luxury fashion market, its trends, consumer and competitor insights. Based on the findings, the research team gave recommendations to the client, including the brand’s ideal value definition as well as a potential strategy route to be able to establish their new brand in China successfully.