Prolonged harsh and sometimes extreme COVID-19 restrictions and lockdowns have brought major uncertainty to the luxury market in China, consumers and brands alike are looking for ways to forge stronger connections through online channels.
Throughout Chinese shopping festivals such as the “Qixi Festival” (Chinese Valentine’s Day), gifting has emerged as one of the best ways for luxury brands to gain insights into consumer behaviors and trending categories as well as to better understand how consumers want to interact in a digital world. By capitalizing upon gifting and digital platforms, luxury brands can continue staying top of mind for consumers and gain more certain growth for their business and consumer base.
According to the recent Tmall Luxury Strategic Consumer Profiles White Paper, co-published by Alibaba’s Tmall Luxury Pavilion and Roland Berger, online luxury shopping is gradually becoming mainstream, with increases across the board in shoes, clothing, luxury goods and fashion accessories. Online retail sales of luxury goods account for approximately 13 percent of total luxury shopping. In 2021, the number of consumers on Tmall Luxury Pavilion grew 153 percent from 2019, and the gross merchandise volume on the platform rose by 309 percent.
“In the digital era, both platforms and brands need to fully understand consumers from a comprehensive and three-dimensional lens rather than a one-dimensional perspective. There are a myriad of individual differences, including personal consumption habits, lifestyles and value propositions to understand in order to effectively communicate and resonate with consumers,” notes Janet Wang, Alibaba’s Vice President of B2C Retail Business Group and General Manager of Tmall Luxury Pavilion.
“Through the pandemic, it’s clear that consumers value emotional connections. By pioneering new digital interactions, Tmall Luxury Pavilion has been enriching the consumer experience and offering more product technologies and service capabilities such as gifting to fulfill these emotional connections.”
The White Paper also captures consumer categories on Tmall Luxury Pavilion into six major groups: chic elites, elegant & family-oriented, active youth, trendsetters, trend followers and digital pioneers. The chic elites and elegant & family-oriented groups represent the heaviest-spending consumer groups.
Trendsetters make up the fastest-growing group of core luxury consumers while trend followers and digital-savvy youth are emerging groups with high spending potential. This year, key consumption trends include home comforts as well as outdoor sports. Camping, skateboarding, paddle boarding, frisbees and cycling are being increasingly embraced by urban dwellers and the younger population.
Gift exchange has long been a part of Chinese culture. In the digital era, this practice has transcended into online gifting as an important way for consumers to build a stronger emotional connection as they continue their overall consumption upgrade. This makes quality and experience-based luxury goods the preferred choice for gifting. As the “gifting economy” grows, it will become an important new driver for luxury consumption.
According to data from Tmall Luxury Pavilion, Gen Z has become the fastest-growing group of gifters. Among the six strategic consumer groups, active youth and young digital pioneers accounted for 50 percent and 72 percent of Qixi Festival gifting transactions, respectively. In 2022, the total number of gifts purchased by consumers born after 1995 outstripped that of those born after 1985 for the first time.
Men also made up a growing proportion of Qixi Festival gifting transactions – with higher spending per customer. The proportion of men making gift purchases rose from 57 percent in 2021 to 70 percent in 2022. Bags and jewelry remained core categories for gifting. Transactions in women’s clothing/women’s boutiques, home furniture, sports and other trend categories increased, with home furniture rising by more than three digits year-over-year.
Transactions from second and third-tier cities such as Suzhou, Nanjing, Nantong, Zhengzhou, Taizhou, Wenzhou, and Qingdao also grew faster, with a higher penetration of luxury shopping spreading in lower-tier markets. It will be important for luxury brands to continue upgrading product and service offerings in accordance with these new insights into consumer demand and gifting behavior in order to “win” in China’s competitive luxury market.
For instance, Cartier launched a limited-edition of its Les Berlingots de Cartier necklace with Chinese-style pink chalcedony and red jasper stone for the Qixi Festival. Inspired by traditional Chinese clothing elements, Vacheron Constantin debuted its Égérie women’s watch collection for the Chinese market, with a unique code number for each piece.
Kering’s Queelin debuted the Yu Yi lock necklace in 18K rose gold with diamonds and pink opals. LVMH’s Fred released 30 Force 10 bracelets in rose gold with diamonds and rubies exclusively in China. Chopard debuted its HappySport 33mm watches exclusively on Tmall.
This year, sales of hard luxury watches priced at over 100,000 yuan have grown significantly. More women are choosing value-retaining hard luxury watches for gifting. The average spend of women aged 30 and above who bought Swiss watches as gifts continued to increase year-over-year.
Since gifting-based luxury consumption is focused on emotional connection, luxury brands need to digitally build out experiences to help break the boundaries between online and offline, ignite consumers’ imaginations, and transform their physical connections with products into emotional ones. This will be an important way for luxury brands to communicate with consumers in the post-pandemic era.
Many consumers have a daily habit of “searching on Taobao.” They look for their desired products by searching luxury brands, category keywords, and even “big-name gifts.” With full insights into this demand, Tmall Luxury Pavilion can offer luxury consumers better experiences. By searching “luxury for the Qixi Festival,” consumers can get rich recommendations of Qixi Festival products that Vacheron Constantin, Cartier, Gucci and other brands are offering.
At this Qixi Festival, more than 90 brands joined to launch over 40,000 products that supported bespoke gifting services on the Tmall Luxury Pavilion, five times the number of products offered during another Valentine’s Day-themed shopping festival on May 20. These customized services included free engraving, gift packaging, and audio gift cards. The audio gift cards offered by more than 60 brands were especially popular as consumers sought to connect with each other amidst the Covid-related social distancing.
Wang noted that customized services were especially popular during Qixi Festival. “We hope that our innovative touchpoints can enable brands to get more potential target consumers and allow them to enjoy more convenient experiences. During the Qixi Festival, dozens of brands such as Cartier, Rimowa and Jil Sander saw that more than half of the transactions involved customized services.
For Bulgari, customized services were ordered in more than 70 percent of their transactions. Digital-savvy youth demonstrated an especially strong demand for customized services. Among all the customized orders, 70 percent were ordered by those born in the 1990s.”
Rimowa suitcases, Montblanc PIX collection ballpoint pens, Bulgari DIVAS DREAM necklaces, and Van Cleef & Arpels Alhambra malachite necklaces with four-leaf lucky patterns became the most popular customized products during the Qixi Festival. In addition to traditional gifting products such as bags, jewelry, watches, and home furniture, men’s and women’s shoes like Alexander McQueen and Stuart Weitzman also gained in popularity.
For gift receivers, the most important part of the ritual is the element of surprise and “unboxing.” During the Qixi Festival, Tmall Luxury Pavilion deployed its naked-eye 3D technology to launch an immersive venue on “My Taobao,” where consumers can experience virtual unboxing and view product details. Ten luxury brands including Cartier, Bulgari, Valentino, IWC and Burberry joined this program to create a more immersive shopping experience.
After-sales services begin when the purchase is completed. More and more brands have moved their after-sales services to Tmall. Simply by clicking on the after-sales services, consumers can enjoy doorstep pick-up and follow-up services from Van Cleef & Arpels, Gucci, Chopard and other brands.
The changes and uncertainties in 2022 make it imperative for luxury brands to build a strong interpersonal and consumer-brand bond. Tmall Luxury Pavilion, which is the go-to digital channel for high-net-worth consumers, is no longer a mere sales channel for luxury brands, but also an important avenue to build these relationships with consumers.
Tmall Luxury Pavilion is the first Chinese e-commerce platform that hosts stores from the five luxury giants, LVMH, Kering Group, Chanel, Hermès and Richemont Group, and has more than 200 world-class luxury brands. The platform builds out rich digital experiences with unparalleled insights into new consumer trends and innovations in brand marketing.
Despite the more and more frequent challenges posed by COVID-19 lockdowns, there is stability in disposable incomes which has helped provide a strong long-term outlook for the luxury consumer market. But only by unlocking innovative and vivid new digital experiences can luxury brands continue to build a lasting relationship with Chinese consumers and continue to grow their businesses.
Cartier ‘Les Berlingots de Cartier’ necklace pink for China
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