In 2023, the Chinese luxury market witnessed a notable rebound, propelled by its core luxury consumers who proved less susceptible to the economic slowdown reflected in the country’s GDP. Despite a marginal decline in consumer confidence, spending by Chinese luxury shoppers demonstrated robust growth, registering a remarkable 12% year-on-year increase.
The domestic luxury market size experienced a noteworthy surge, escalating from RMB 401 billion to 449 billion in 2023. This significant recovery is predominantly propelled by core luxury shoppers, whose demand shows less elasticity, thus positioning them as key contributors to the burgeoning personal luxury market expansion. Because of this, luxury brands in the Chinese market are changing their marketing strategies to attract Very Important Customers (VICs) in Mainland China.
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VICs: the driving force behind China’s luxury market amid economic turbulence
According to Bain, the top 2 percent of luxury customers drive 40 percent of global luxury market sales. Amidst China’s economic slowdown, the influential role of High Net Worth Individuals (HNWIs) in fueling luxury consumption is set to surge. 56 percent of the HNWIs plan to increase their spending on personal luxury goods in the next three years post-Covid.
Additionally, Chinese consumers, who have a net worth exceeding RMB 10 million, constitute a significant portion of luxury spending, comprising 42 percent of the total market share. Because of this, brands pivoting their attention from entry-level consumers towards VICs are strategically positioned to excel in this dynamic economic environment.
Given that VICs contribute substantially to luxury goods consumption in China, comprising predominantly of high-net-worth individuals (HNWIs) with a penchant for lavish spending, targeting this demographic presents an opportunity for luxury brands to seize considerable market share and fuel sales growth. In competitive marketing, luxury brands in China are figuring out how best they can entice and retain these Chinese luxury consumers.
Source: Daxue Consulting & VO2 Asia Pacific luxury report, VICs propel luxury amid China’s economic chill
Luxury brands’ strategies to captivate VICs
Luxury brands employ a diverse array of tactics aimed at captivating, nurturing, and indulging their Very Important Consumers. These strategies are intricately designed to cultivate a deep sense of exclusivity, privilege, and an unparalleled level of customer service, thereby forging a distinctive bond between the VICs and the brand.
From personalized concierge services to exclusive events and early access, each initiative is carefully curated to enhance the VICs’ sense of belonging and appreciation within the brand’s ecosystem. Through these tailored experiences, luxury brands endeavor to solidify their VICs’ loyalty while setting themselves apart in a highly competitive market landscape.
1. Exclusive/early access
Granting early access to new launches and limited editions, including exclusive products reserved solely for VICs, is a hallmark strategy employed by luxury brands to cultivate a sense of prestige and exclusivity among their most valued clientele. This practice goes beyond mere product availability, serving as a testament to the brand’s commitment to prioritizing its VICs. By offering VIPs exclusive access to highly anticipated releases and limited-edition collections before they are made available to the general public, luxury brands create a sense of anticipation and excitement that resonates deeply with their most loyal customers.
This early access not only solidifies the VICs’ esteemed status within the brand’s exclusive community but also cultivates a perception of belonging to an elite circle with access to insider privileges. Such privileged access serves as a compelling incentive for VICs to uphold their loyalty and sustain engagement with the brand in the long term.
For instance, Gucci offers its VICs the chance to design personalized products, like imprinting meaningful capital letters on the front of jackets, creating a sense of uniqueness and exclusivity for consumers. Furthermore, at Louis Vuitton, achieving VIP status entails spending over RMB 400,000, while becoming a VIC requires expenditure exceeding RMB 1 million. As a VIC at Louis Vuitton, clients enjoy perpetual early access to newly released products.
Source: Daxue Consulting & VO2 Asia Pacific luxury report, Gucci’s customized jacket service (left); Xiaohongshu, translated by Daxue Consulting, the exclusive access of LV’s VICs (right)
2. Gifting
Gifting is also a classic way for luxury brands to deepen their connection with customers, both for VIP and VICs. Providing gifts for birthdays, festivals, and special occasions is a thoughtful gesture employed by brands to enhance their overall brand experience. By acknowledging and commemorating these significant milestones in customers’ lives, brands demonstrate a level of care and appreciation that goes beyond mere business. These gifts serve as tokens of gratitude, fostering a sense of loyalty and emotional attachment among customers. Whether it’s a personalized gift tailored to individual preferences or a seasonal offering to celebrate festive occasions, these gestures leave a lasting impression, encouraging repeat purchases and advocacy among customers.
Each brand competes vigorously to create these gifts for Chinese customers, aiming to captivate the attention of their clients. Some of these gifts stem from their flagship products, while others include standalone items like cups and notebooks. However, each gift is meticulously crafted with an emphasis on exquisite design and beauty.
To delve into specifics, Chanel offers a silver star-shaped coin bag for its most valued consumers, while Dior presents a luxurious silk scarf as a Christmas gift for VICs. Feedback on social media indicates that consumers are highly satisfied with these gifts, which aligns perfectly with the desired outcome for luxury brands. The provision of gifts not only delights customers but also serves as a strategic tool to encourage continued loyalty and spending within the shops, especially when it comes to niche brands.
Source: Xiaohongshu, the VIC gifts provided by luxury brands
3. Private events and shows
Private events and shows offer VIP customers exclusive access to a world of luxury, elevating their experience beyond traditional retail transactions. These meticulously curated gatherings provide a unique opportunity for customers to immerse themselves in the brand’s culture and ethos, fostering a sense of belonging and exclusivity. Events, like fashion shows and behind-the-scenes tours, give insiders a peek into the brand’s captivating world.
Source: Xiaohongshu, private events for VICs provided by luxury brands
Invitations to such events are highly coveted and serve as a tangible demonstration of the customer’s VIP status. These events can foster connections and appreciation between the brand and its top customers.
4. VIP Lounge
The VIP Lounge is an exclusive haven reserved for esteemed clients, offering a host of privileges and personalized services to enhance their luxury shopping experience. Alongside invitations to exclusive events, such as fashion shows or behind-the-scenes tours, VIPs are treated to a range of unique amenities. This may include access to private lounges where they can unwind in luxurious surroundings, enjoy bespoke experiences tailored to their preferences, and indulge in special treats like afternoon tea or gourmet snacks.
Source: Xiaohongshu, VIC lounges
The benefits of targeting VICs in China’s luxury market
Firstly, targeting VICs can increase income, as VICs typically have higher purchasing power, thus increasing the sales and revenue of luxury brands. Secondly, cultivating strong relationships with VICs can turn them into loyal brand advocates. This leads to repeat purchases and word-of-mouth promotion within their social circles, enhancing the brand’s reputation and prestige.
Furthermore, many luxury brands in China are focusing on selling fewer but more valuable goods, relying on the 5% of luxury consumers. This can also promote continuous innovation since various brands need to maintain high-quality services and continuously innovate products to target these important clients. Interacting with VICs also helps in future strategic customization and product development, laying the foundation for long-term growth and sustainable development in the competitive Chinese luxury market.
Nurturing loyalty and engagement among VICs
- The strategic focus on VICs underscores their significant contribution to the luxury market’s growth and expansion in China.
- VICs desire unforgettable experiences, which can be facilitated through exclusive events like invite-only gatherings, intimate dinners, private parties, and exclusive tours.
- VICs seek emotional connections with brands beyond mere luxury goods. Strategic campaigns that integrate the brand’s narrative create a deep emotional bond, making VICs feel like an integral part of the brand’s story.
- The essence of exclusivity is pivotal in enticing VICs. Brands must maintain an aura of exclusivity by offering unique experiences and products that cannot be found elsewhere.
- By adjusting marketing strategies to target China’s VICs, luxury brands can leverage the continuously growing luxury market in China, cater to the evolving preferences of Chinese consumers, and maintain a competitive edge in the industry.
We are experts in the Chinese luxury market and consumption habits
Targeting Very Important Customers (VICs) becomes inevitable due to their significant impact on market growth. At Daxue Consulting, we understand that VICs crave not just products, but memorable experiences and emotional connections with brands. We specialize in crafting strategies that create these connections through exclusive events, bespoke experiences, and storytelling that integrates VICs into the brand’s narrative.
By maintaining an aura of exclusivity and offering unique products and experiences, we help luxury brands establish a competitive edge, catering to the sophisticated preferences of China’s VICs and capitalizing on the expanding luxury market. Reach out to explore how we can elevate your brand’s strategy to attract this crucial customer segment.
