Strategic marketing issues: Price key to online luxury in China

WARC, 28 February 2014

HONG KONG: Cheaper prices are seen as the primary reason for shopping online for luxury products by Chinese consumers who are spending more time engaged in this activity although brands have been slow to follow, a new report has said.

China's Connected Consumers, from consulting firm KPMG, surveyed 10,200 consumers across China who had bought premium or luxury items during the previous 12 months, and found the digital consumer tended to be more price sensitive, with three quarters looking for better deals or less expensive items.

Convenience was another important factor, cited by 55%, while 51% said online purchasing gave them more reassurance about the country of origin.

Almost one third (32%) welcomed the wider range of products and brands they could access online, while 28% said they were looking for unique items. KPMG noted that this was especially true of those respondents based outside the main cities where the brands may not have traditionally targeted.

And these were enthusiastic consumers – 70% of respondents said they used their desktop every day, and 60% their smartphones, in order to purchase items or search for information on luxury products.

Nick Debnam, Chairman, Asia Pacific Region, Consumer Markets, KPMG China, noted luxury brands had hesitated to embrace online strategies "because so much of the brand is about the experience of going into a traditional bricks-and-mortar shop, to learn about the brand and its heritage".

And there continues to be optimism about the future of physical stores in the luxury sector. Italian fashion supplier and wholesaler Firmati & Griffati is partnering with developer Shanghai Zonfa Commercial Management to open a shopping complex and distribution centre for affordable luxury brands on the outskirts of Shanghai.

The South China Morning Post said the Outletmart, opening later this year, would have 15,000 square metres of shopping space and was "an attempt to redefine the mainland luxury market".

Zonfa CEO Richard Ding said the luxury market was about design and creativity and not the spending habits of corrupt officials. He pointed out that most luxury buyers were to be found in the growing affluent middle class.

And Duke Zeng, head of retail, North China, at property services firm DTZ, said that the impact of online shopping had been restricted to mass-market products, adding "it won't bring a sea change to the whole retail industry".

Data sourced from KPMG, South China Morning Post; additional content by Warc staff

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