How JD.com Is Luring Luxury Brands Back


Key Takeaways:

  • Even though the Double Eleven shopping festival and 618 shopping day ignite Chinese shopping frenzies, luxury brands have suffered from them due to being stuck in an “either-or” platform dilemma.

  • For brands that want to take advantage of China’s digital selling channels, Tmall or JD.com were always their best choices, thanks to built-in infrastructures that offer benefits ranging from internal ad priorities to homepage promotions.

  • JD.com hopes to become a more luxury-focused venue, with a new page that redirects consumers to brands’ official WeChat Mini Programs.

At the start of September, China issued rules to prevent monopolistic behavior from internet firms, which many consider a move for fairer e-commerce competition. In fact, companies breaking these market laws will be strictly controlled and supervised.

As such, there will no longer be the problem of “either Tmall or JD” that has hindered luxury brand expansion in China. This change is a significant step for brands that want to choose platforms for future sales and campaigns in China discreetly, and multi-platform strategies are now becoming more popular.

With these new rules, China vowed to strengthen its anti-monopoly measures and regulate the e-commerce market by stating that internet giants cannot break social practices relating to anti-monopoly, Double Eleven, group purchasing, and the platform economy. China’s newly proposed amendment retains an existing maximum penalty of $309,500 (2 million yuan) for less serious infringements.

For a long time, Chinese e-commerce giants Alibaba and JD.com have had a love-hate relationship while competing for the title of China’s most dominant e-tailer. Alibaba’s Tmall platform was built as a virtual outlet for exclusive luxury purchasing experiences. Meanwhile, JD.com has grown into a full-fledged retailing website after beginning with digital product sales.

Even though the Double Eleven shopping festival and 618 shopping day ignite Chinese shopping frenzies, luxury brands have suffered from them due to being stuck in an “either-or” platform dilemma. With the competition between Tmall and JD.com intensifying, both companies implemented monopolistic policies to suppress each other, such as exclusive cooperation and irregularly low pricing.

For brands that want to take advantage of China’s digital selling channels, Tmall or JD.com were their best choices. Luxury brands, which receive built-in infrastructures from both platforms, can get countless benefits ranging from internal ad priorities to homepage promotions.

Following the new policy, JD.com has inked a partnership with Louis Vuitton, one of the top international luxury Maisons. Although Tmall is famous for being a good friend to luxury brands, this deal is the brand’s first with a Chinese third-party e-commerce platform. BVLGARI and Berluti also deepened their partnership with JD.com this quarter.

On the JD website, consumers can now search for Louis Vuitton products through the tailormade brand page, despite having little experience in exclusive luxury cooperation. The platform hopes to become a more luxury-featured venue. And now, customers can play around with the page and get redirected to Louis Vuitton’s official WeChat Mini Program, which is also full of purchasing links and alluring ads.

“You can see the change in JD.com,” said Joe Liu, a senior fashion marketing consultant in Beijing. “It is heading toward a more comprehensive, young, and trendy website. After Farfetch ended its partnership with JD.com, the latter kept seeking new partners. And the collaboration with LVMH is a highlight.” He added that Tmall is still a strong competitor in merchandising, international influence, and its unique capacities to navigate the market.

Regarding beauty brands, Guerlain and Givenchy (both owned by LVMH) have launched their official flagship stores on JD.com. Meanwhile, brands with huge fan bases in China, such as Estée Lauder, CLINIQUE, and Kiehl’s, chose to rejoin JD.com.

“Tmall and JD.com have been engaged in a war of luxury brands for several years,” added Liu. “But both platforms have advantages, and the race against each other pushes them to face more challenges. For JD.com, it has to shake off the tag ‘electronics retailer’ among its users. While Tmall needs to retain consumer trust and build relations with luxury houses. Last year, more luxury brands like Prada, Gucci, and Cartier opened their flagship stores on Tmall.”





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Glenfiddich Attracts Young Chinese HNWIs With NFTs


What Happened: According to a press release, Glenfiddich, the world’s most awarded single malt whisky, has partnered with digital designer Stephanie Fung to develop and launch a limited-edition NFT fashion collection. Named The Filigree Aesthetic, the NFTs will be auctioned off via the NFT trading platform and creative hub Foundation, with 100 percent of the proceeds going to an organization that helps and promotes young digital artists.

The groundbreaking collection was inspired by the art of The Grande Composition artist group (Mzukisi Mbane from South Africa, Malwina Konopacka from Poland, and David Aiu Servan-Schreiber from the UK). These artists redefined the Grande Couronne filigree by using unique mediums and materials.

“Digital wearables will be the next big thing within NFTs, and people will be able to utilize them within AR, VR, or metaverses,” said Fung. “There’s a lot you can do with digital that you can’t achieve via real-life garments, such as animated graphics, making materials glow, or defy gravity.”

The Filigree Aesthetic collection includes three NFTs, each inspired by the reimagined art pieces from three global artists.

The Filigree Aesthetic can be viewed on the youth culture hub, HighSnobiety.

The Jing Take: Digital fashion is taking the world by storm. On Friday, September 10, Yahoo launched an NFT collection in partnership with Rebecca Minkoff. Meanwhile, Karl Lagerfeld has announced the launch of a capsule NFT collection made of digital figurines.

Launching NFT arts and fashion collections have become a successful digital marketing strategy for various high-profile brands. Moreover, it has become a way to display and promote the creativity of up-and-coming digital artists and influence new consumer segments that can’t be reached through traditional marketing campaigns.

Luxury and premium labels understand that aligning with a young and emerging artist creates a positive brand association that might boost engagement and hooks audiences emotionally.

In this case, Glenfiddich partnered with an artist who conveys the modern character of China and the cultivation of Chinese creativity perfectly. Through cultural immersion, the single malt whisky brand expects to provoke a response from one of the most affluent yet loneliest generations in Asia as they use multiple devices to interact with brands. We expect this marketing strategy to increase the brand’s equity, boost consumer loyalty, and elicit a strong emotional response.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.





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Miu Miu Unveils Its “Mountain Club” Pop Up in China


The Social Edition is our weekly series which deep dives into luxury initiatives in China’s social media landscape. Every week, we highlight brand campaigns distributed on Chinese digital platforms — WeChat, Weibo, Tmall, Douyin, and beyond.

Our coverage spotlights global luxury brands, global beauty brands, and local Chinese brands. The latter gives insight into some of China’s most successful campaigns, which often come from local players, and are outside of the beauty and fashion space.

In this week’s roundup, we look at three campaigns, including Miu Miu’s “Mountain Club” event in Shanghai, Louis Vuitton’s China-special social initiatives in celebration of its founder’s 200th birthday, and Diptyque’s retrospective exhibition in Shanghai.

Miu Miu Unveils Its “Mountain Club” Popup in China

BRAND Miu Miu
CATEGORY Luxury
PLATFORMS Weibo, WeChat, Little Red Book
MEDIUM Image, Short-video, Offline Pop-up
FEATURED TALENTS Lexie Liu (8.1M Weibo Followers) | Zhang Yuqi (13.3M) | Zhou Yutong (13M) | Qian Xin (12.8M) | Qiu Tian (2.7M) | Xiaowen Ju (3.2M) | Estelle Chen (736K) | Cici Xiang (2.5M)

OVERVIEW 
On September 6, Miu Miu hosted the Miu Miu Mountain Club party at No. 1 Waitanyuan in Shanghai to celebrate the official launch of the Miu Miu Fall/Winter 2021 collection. The house recreated Cortina d’Ampezzo in the Dolomites Alps, the setting of its Fall/Winter 2021 show, by meticulously decorating the building from the inside out. Meanwhile, a pop-up store landed at Shenzhen MixC on September 4, and another one is unveiled at Shanghai IFC from September 9 to 19.

NETIZEN REACTION
The campaign launch has hit China’s social platforms, thanks to extensive endorsements from celebrities and fashion KOLs. In particular, the campaign hashtag #MiuMiuMountainClub has recorded over 27 million views on Weibo. Netizens showed strong interest in the girlish winter looks from the collection, with many saying they “cannot wait to gear up for the upcoming snow season.”

VERDICT
On the heels of its sister brand Prada’s foray into the snow sports arena, Miu Miu kicks off the campaign with offline and online activities that engage sports aficionados and others. More importantly, the house is solidifying its luster by underlining a Miu Miu community. From Chinese models Xiaowen Ju and Cici Xiang to Qiu Tian, these faces allow the brand to consolidate its unique brand DNA in China and retain its loyal customers.

Louis Vuitton Teams With Chinese Stars to Celebrate 200th Year

BRAND Louis Vuitton
CATEGORY Luxury
PLATFORMS Weibo, WeChat, Little Red Book
MEDIUM Short-video
FEATURED TALENTS Liu Yifei (68M Weibo Followers) | Justin Huang (24.7M) | Ouyang Nana (20M) | AnnyFan (5.8M) | Dilraba (76.5M) | Xu Jiaqi (12.5M) | Gong Jun (18.5M) | Austin Li (20.3M) and more talents will be announced

OVERVIEW 
2021 marks the 200th birthday of Louis Vuitton’s founder. And to celebrate this meaningful year, the house has been launching a special initiative in collaboration with Chinese creative talents on social platforms, including Weibo, Douyin, and WeChat. In the campaign, the featured faces — ranging from brand ambassadors, artists, and media veterans to fashion KOLs — tell the founder’s journey and the house legacy via a series of short videos.

NETIZEN REACTION
So far, the videos that have received the highest viewership star brand ambassador Gong Jun, Chinese singer Xu Jiaqi, and Justin Huang. Since the launch of the anniversary celebration campaign, the hashtag #Louis200 has garnered 77.7 million views. With the ongoing short-video series, the social traffic of the campaign is expected to reach a new high after the release of the brand’s mobile game “Louis: The Game.”

VERDICT
Storytelling has always been the foundation of luxury brand communications with customers. As one of the most established legacy houses, Louis Vuitton is a veteran of contextualizing the brand heritage into today’s socio-cultural environments. By partnering with talents from various creative industries, the house underlines its relevance to the contemporary cultural scene while engaging broader audiences, so they learn more about the brand’s history across two centuries.

Diptyque Celebrates Its 60th Anniversary Through the Lens of Art

BRAND Diptyque
CATEGORY Luxury Perfume
PLATFORMS Weibo, WeChat, Little Red Book
MEDIUM Pop-up Exhibition

OVERVIEW 
On September 9, the French luxury perfume maison Diptyque opened a pop-up retrospective exhibition “Le Grand Tour” at Fuxing Art Center, Shanghai, in celebration of the 60th anniversary of the house. The brand invited five renowned artists, namely Joël Andrianomearisoa, Johan Creten, Zoë Paul, Hiroshi Sugimoto and Rabih Kayrouz, to discuss art and perfume. The exhibition will be open to the public from September 11 to October 7, presenting an interactive journey featuring visual and olfactory experiences. A special collection, including five destination-inspired perfumed creations, was launched on Tmall on August 26.

NETIZEN REACTION
The campaign hashtag #Diptyque60thAnniversary has racked up nearly 14 million views as of the opening of the exhibition. Thanks to the reviews of the limited-edition “Le Grand Tour” collection posted by fragrance KOLs on Weibo and Little Red Book, many perfume enthusiasts have shown high expectation for the campaign, which also created interest for the offline pop-up exhibition.

VERDICT
China’s fragrance market is undergoing a rapid shift towards niche brands, as explained in Jing Daily’s latest report How Niche Fragrances Are Winning Over Young Chinese Consumers. This surging demand hints at a huge market opportunity for lesser-known players in the sector, which, to date, rely on product reviews on social platforms to play a crucial role in a fragrance consumers’ journey. However, higher-end fragrance brands are not only about how they smell, but more often act as a symbol of one’s lifestyle.





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Luxury Rollercoaster: What Comes Up Must Come Down? Not So Sure


Key Takeaways:

  • Luxury should remain a very local business for the next year but lack of travel hasn’t been the negative trigger that many feared.

  • Nervousness around the outlook for the US and mainland China could end up being misplaced.

  • In the meantime, margins may continue to rebound dramatically as complacency is out and discipline is in.

The back-to-school period is always a good time to reflect on what’s ahead after having benefited from hopefully a thoughtful summer break. As I reflect on the past 18 months, it is quite clear that very few luxury managers could have imagined sales growth would be so strong for the sector. And as headlines hit — a rebound in COVID-19 cases in the US and parts of China, continued travel restrictions, tough bases of comparison, “common prosperity” discussions in mainland China — there seem to be clouds accumulating on the horizon. Here are a few of the recurring questions that are troubling luxury managers these days:

Travel constraints an issue?

Travel seems to have picked up domestically in the US and as well in China and in Europe, there has been a clear acceleration in intra-regional travel. The key traveler for luxury though — the long-haul Chinese mainlander going to Europe or parts of Asia — has evaporated and is unlikely to reappear meaningfully anytime soon given current regulations. Is that an issue? Not really. The notion that luxury demand was very much correlated to long haul Chinese outbound travel has been disproven since the Spring of 2020, and while Chinese and other nationalities stayed at home, sales for most brands rapidly picked up to reach above 2019 levels. Sure, that means European and Hongkongese stores were somewhat quiet, but look at the continued success of Hainan, the domestic duty-free hub of China, and store activity in Tier 1 and Tier 2 cities as well as online purchases — that’s been heaving. We’re facing another year of locavore luxury consumers but buying at home doesn’t equate to buying less.

US and mainland China under pressure?

Usually, something that is hard to explain cannot endure. And when luxury execs try to explain why the US market has been so buoyant, they struggle. Many arrive at the conclusion that success in the US could only be ephemeral. Equity markets, “staycationing” impacts, stimulus packages, repatriation of growth, property markets. All of that has contributed. If you want to see the brighter side of the US luxury market, you could look at the capacity that consumers who were newly recruited during the crisis could come back and may influence others to step up. More importantly, you could make the case that, finally, the American consumer psyche is not incompatible with the concept itself of luxury. Societal change could be more long lasting than volatile markets. 

Conversely, in mainland China, the notion of “common prosperity” has spooked many luxury participants as, by essence, luxury demand is generated by bubbles or at least some form of wealth discrepancy. Here, the positive take would be to see that the end game of “common prosperity” is not to limit means of wealthy individuals but more to accelerate access of a greater number to the middle class.

From COVID-19 to courage

After years of complacency, over-spending and lack of discipline, the luxury sector has had great incentives to rethink its business models during the past 18 months. Corporate staff have been reassigned. Sales associates have been retrained. Rents have been renegotiated and some leases terminated. Data has been reexamined and leveraged greatly. Cynicism around sustainability issues has been reined in. As a consequence of the many actions taken, margins have rebounded very strongly in the sector. If it were just down to a COVID-19 knee jerk reaction, those margins might not prove to be sustainable. But if it is down to managers becoming way more professional and efficient, then it might be a different story. As Churchill would have said: “Success is not final; failure is not fatal: it is the courage to continue that counts.” Carry on.

Erwan Rambourg has been a top-ranked analyst covering the luxury and sporting goods sectors. After eight years as a Marketing Manager in the luxury industry, notably for LVMH and Richemont, he is now a Managing Director and Global Head of Consumer & Retail equity research. He is also the author of Future Luxe: What’s Ahead for the Business of Luxury (2020) and The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun (2014). 





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Bulgari Says Goodbye, Kris Wu, Hello, Yang Yang


What Happened: Seems like luxury can’t resist a pretty face — or the millions of followers attached to it. After cutting ties with long-time ambassador Kris Wu in July over alleged rape allegations, Bulgari has now appointed Chinese actor Yang Yang as its new spokesperson. The 30-year-old, who already represents Dunhill and Hogan, starred in one of the most popular Chinese dramas of the year, You Are My Glory, which has accumulated over 2.5 billion views since it was released in late July. The LVMH-owned jeweler is riding this high as well, with the announcement post receiving over 20,000 comments on Weibo.

The Jing Take: In light of China’s recent crackdown on celebrities, choosing the right ambassador has become a daunting task. Over the past few months, authorities have taken measures to curb the influence of the rich and famous, from removing popularity rankings and regulating fan merchandise sales to recently banning “effeminate men and other abnormal esthetics” on TV. 

As such, Bulgari should keep a close eye on its newest appointment. Although Yang Yang does not fall under this vague (and derogatory) label of “effeminate” — often depicted as the strong, brooding male lead in action and sports dramas — he commands a passionate fanbase that could stir trouble. In fact, when the final six episodes of You Are My Glory dropped on Tencent Video, netizens ended up crashing the site and caused the glitch to soar to the top of Weibo’s hot searches with almost 20 million mentions.

Yang Yang plays an aerospace engineer in the Chinese drama You Are My Glory. Photo: You Are My Glory’s Weibo

Yet despite these hurdles, not partnering with any local celebrity isn’t really an option. For one, Yang Yang’s reach of 56 million users on Weibo far surpasses Bulgari’s modest following of 2 million. Moreover, it’s not like the brand’s rivals are laying down their arms: Cartier has Jackson Wang driving engagement for its Pasha De Cartier campaign while LVMH stablemate Tiffany & Co. continues to harness Jackson Yee for views. 

Perhaps then, the best way forward is to diversify endorsements, something the jeweler has already been doing since the Kris Wu controversy. In August, Bulgari recruited an array of talents for its Dare to Dream campaign, including “little fresh meat” idol Fan Chengcheng, actress Zhao Lusi, female comedian Lamu Yangzi, and K-pop dancer Lisa from Blackpink. By doing so, the house not only reaches various fan communities but, more importantly, reduces its reliance on a single face. Because if the tide turns and another career ends up on the chopping block, at least Bulgari will have no shortage of KOLs waiting in the wings. 

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.





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How CHOCHENG Transformed Into a Modern Global Brand


Pre-pandemic, fashion marched on as it always had. There were new collections, mainly by legacy brands, shown at inviting venues in New York, London, Paris, and Milan, to a select group of celebrities, editors, buyers, and lately, influencers. Then the world dissolved as COVID-19 raged, and with it, not only the way fashion was produced and purchased, but also how it was shown. Everything went digital — the beginning of a new era, perhaps — as the fashion industry struggled on how to best reach a new world of global consumers trapped, if not indoors, in the confines of their own country.

Today, however, as the world emerges post-lockdown, the fashion industry, now changed in so many ways, is again gearing up for another season of fashion weeks. New York Fashion Week leads the way, bringing back in-person runway shows, as well as a host of digital presentations and other exclusive experiences.

CHOCHENG, a luxury womenswear designer label launched in 2010 by designer Cho Cho Cheng, will be there, showing its Spring-Summer 2022 collection via a digital presentation from China on September 9. CHOCHENG is best known for its rich color palette and exquisite, hand-sewn tailoring, a technique Cheng picked up from his time on Savile Row. He’s also known for being the first Asian designer to open a flagship store on NYC’s famed Fifth Avenue.

Here, Jing Daily asks Cho Cho Cheng five quick questions before his show hits the runway — digitally, of course.

Jing Daily: How has the switch from in-person to digital been for you? 

Cho Cho Cheng: “I have been producing digital fashion films since the very beginning of my career, so I feel as if I am going back to my roots by switching to the digital show format. I like the metamorphosis aspect of fashion, and it works better with digital fashion shows. I truly enjoy the whole movie-making process. I give each collection a scripted story, and I am involved with directing, filming, and editing. The filming becomes part of the creative process, and the models truly enjoy acting their parts as well.”

What was your inspiration?

“For SS22, I was approached by friends about using an old Chinatown theatre that had remained closed since the beginning of the pandemic. It has vintage vanity tables backstage, which reminded me of the great Mei Lanfang [a famous Chinese opera singer] visiting New York in 1930 to perform the Peking Opera on Broadway. That inspired me to create a collection based on his famous opera, “The Drunken Concubine.” The collection is filled with color, inspired by Peking Opera, Pop Art, old Broadway, and cocktails.”

CHOCHENG showcases its Spring/Summer 2022 Digital Runway Show in New York. Photo: Courtesy of CHOCHENG

What are you hoping to impart? 

“I believe providing an accessible and entertaining digital fashion show can cheer people up a bit. Some of the garments will be available online at the same time the show launches, so it will be a great convenience to my loyal customers who have been supporting me from the beginning. Some of them actually called and requested we reopen the 5th Avenue store when the city was still in lockdown. It shows shopping really has some healing properties. Whether they are shopping out of necessity or vanity, I am glad I am contributing to their little moments of happiness.”

Why go digital? 

“I design and manufacture in the UK and Italy, my brand and flagship shop are based in New York, and I have been participating in New York Fashion Week ever since I started. I simply cannot stop traveling at this point in my career. It has been a huge challenge, but it is manageable with the help of new technologies and inventions. My tight schedule has made it impossible to stay in New York for fashion week to meet the press and customers, but it is not a good idea to have big gatherings at this time anyway. I have also decided to suspend my plan to open a store in Paris, which I hope will happen in the near future.”

What is CHOCHENG’s signature?

“I am one of the very few designers who has created a signature tailoring cut. We call it the house style in Savile Row terms. It is rather old-fashioned to care about a house style nowadays. It took me years to create one, and it increases production costs. No manufacturer wants to work with my one-of-a-kind patterns, so I have to do all my tailoring in-house, but I can manage it as a vertically integrated operation. I feel it is important because having a house style has made me more independent and durable as a designer — qualities that may well have contributed to my surviving as a global fashion designer.”





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China’s “Common Prosperity” Drive Sends Luxury Stocks Tumbling


Index Moves is our monthly analysis of the biggest climbs and drops on The Jing Daily KraneShares China Global Luxury Index, which tracks the global market performance of the luxury sector. The Index relies on the Jing Daily Global Luxury Score and Jing Daily Brand Awareness in China Score in addition to fluctuations in market cap and stock closing price. Below, we highlight luxury brand moves for the month ending August 31, 2021.


On August 17, Chinese President  Xi Jinping shook the country’s rich out of their complacency when he told the Communist Party leadership that the government needs to redistribute wealth in the interest of “common prosperity.”

Three days later, the Jing Daily KraneShares China Global Luxury Index hit a new low of 324.43 as investors drove the share prices of the world’s largest luxury companies downwards, wiping nearly 10 percent, or €62 billion ($73 billion), from the cumulative value of LVMH, Hermès, Kering, Richemont, and Burberry. 

Some investors even started betting against luxury firms. On August 20, the same day the Jing Daily KraneShares Index hit its low, short positions in Hermès stood at 0.9 percent, up from 0.7 percent at the beginning of the month, according to IHS Markit data. 

The worry for luxury brands and investors alike is that Xi’s comments, though not yet translated into policy, will trim the wealth of China’s richest, and in turn, curtail their ability to spend on luxury goods. With some brands, such as Burberry, now dependent on China for over half of global revenue, any policy change can have dramatic effects.  

Fresh in many investors’ minds is Xi’s 2013 anti-corruption drive, which targeted bribery and gift-giving among government officials. According to a paper published by the Kellogg School of Management, that campaign contributed to a 55 percent decline in luxury imports worth $194 million. Swiss watches and high-end alcohol were two product categories that were most affected by the policies. 

But back in 2013, luxury brands could at least count on wealthy Chinese travelers to continue spending overseas. That purchasing power has been far less readily available in 2021, as strict travel restrictions have persisted, and an increased appetite for shopping locally is likely to remain even after Chinese citizens are able to resume international travel. “We’ve now reached the peak spending of Chinese people out of China,” says Adam Knight, co-founder of Tong, a market intelligence company specializing in China. 

Brands with a strong presence in China will therefore do better. Take Burberry, which dropped out of the Jing Daily KraneShares Index in May following the Xinjiang cotton boycott. In August, however, Burberry returned to the index, ending the month in fourth place. 

“It would have been easy for Burberry to spook,” says Knight. “Yet they held their nerve and doubled down on the winning formula that has delivered great success over the last couple of years.” 

That “winning formula” includes a large digital presence through online activations, including gamification and NFTs, and culturally-driven campaigns such as partnerships with local Chinese artists to create installation pieces featuring its new Olympia bag. Together with a strong retail presence (97 of Burberry’s 214 stores are in China), Burberry’s weighting on the Jing Daily KraneShares Index has increased.

Many believe luxury spending will be largely unaffected by Xi’s “common prosperity” message. “Spending on luxury brands is now established in the culture of the Chinese middle class, so that won’t be affected by any wealth redistribution policies,” says Rafael Steinmetz Leffa, executive director of wealth management firm GWM. Xi’s message, he believes, is more about encouraging philanthropic spending among the wealthy, noting that luxury spending among his clients remains unchanged.

Furthermore, Xi has in fact encouraged domestic luxury consumption over the years. “The government has expended a lot of time and energy to repatriate luxury spending, whether in the form of cross-border e-commerce incentives or the setting up of duty-free shopping zones,” says Knight. “To clamp down now would simply push luxury spending back overseas as travel begins to open up again in 2022. I am also personally doubtful that the government will take any truly meaningful action to curtail high-end consumption in China itself.”

By the end of the month, the Jing Daily KraneShares Index had almost recuperated its mid-August losses, showing that at least some investor confidence was returning to luxury brands as September commenced. 





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Why China’s Youth Pay For Luxury With Credit


Key Takeaways:

  • Personal finance accounted for 32 percent of retail sales in China in 2019, compared to only 15 percent in 2014.

  • Brands have recognized that consumer credit can help increase traffic, conversions, and loyalty.

  • Luxury is generally not associated with consumers using credit, so there is a risk that credit offerings could devalue a brand’s perceived value in many consumers’ eyes.

China’s luxury market continues to deliver positive returns and outperform market analyst expectations. At the lower end of the luxury spectrum, Apple revenues for Greater China in Q3 2021 increased by 58.2 percent over the same period in 2020, rising to $14.76 billion. At the upper end of luxury, China remains the largest single market for Porsche, with 48,654 vehicles delivered during the first half-year of 2021 — an increase of 23 percent over the previous year. Rising incomes, dynamic lifestyle aspirations, and high consumer confidence have certainly helped this market phenomenon. Furthermore, there is an emerging factor that has not previously appeared on the radar: consumer credit.

According to Fitch Ratings, personal finance accounted for 32 percent of retail sales in China in 2019, compared to only 15 percent in 2014. Luxury may represent a small share, but this rapid pace of growth reveals a significant shift in consumer sentiment — a commitment to not being left behind. For example, this phenomenon is evident in the luxury automobile sector, with Porsche reporting that the volume of financial services contracts reached 40,832 in 2020, an increase of 22 percent in just one year.

Changing attitudes and behavior towards credit are most pronounced among younger cohorts. McKinsey cites iiMedia data that post-1990s consumers accounted for one-third of China’s consumer credit. And a McKinsey survey reported that 53 percent of Chinese Gen-Z respondents agreed with the statement, “I buy what I want and need, even if it means I have to do it on credit.” This sense of spontaneity, impulsiveness, and privilege has driven consumption, including in categories such as apparel and beauty.

Undeniably, it has never been easier for consumers to use credit financing to purchase items, including luxury. Digital technologies have eased the consumer’s ability can access credit. Fitch Ratings estimated that online consumer loans account for half of the overall consumer loans in China today. For example, the automobile sector is at an advanced stage of development, as more than 60 percent of BMW customers now submit applications and sign contracts via its eFinance app. New convenience and speed for loan approvals and releases are lowering purchase barriers. J.D. Power reported that, in 2021, 58 percent and 51 percent (notably) of automobile loans were approved and released, respectively, within one hour.

Brands have recognized that consumer credit can help increase traffic, conversions, and loyalty. Apple, for example, became one of the most proactive brands by offering interest-free financing and monthly payment options. Consumers can now purchase the latest iPhone they may otherwise not have been able to afford. As in many Western markets, the growing popularity of Buy Now Pay Later (BNPL) payment methods, such as Huabei (Alipay), Baito (JD.com), and Fen Fu (WeChat), are being used to finance luxury purchases. For example, Cartier provides a payment option to use Huabei when you check out because it is integrated into the Alipay payment app.

The bottom line is that Chinese consumers, most notably younger consumers, now use greater financial flexibility to fulfill their immediate consumption desires and aspirations. As such, there is a viable business case for luxury brands to provide flexible payment solutions. The purchase of a designer bag or a luxury watch becomes widely more affordable. Many of these consumers will be buying luxury for the first time. It is also likely that consumers will get enticed to spend even more on luxury purchases; a US survey found that nearly half of its surveyed consumers report spending up to 40 percent more with a Buy Now Pay Later plan.

Yet, executives should also consider potential limitations. Firstly, luxury is generally not associated with consumers using credit. There is a risk that such offerings could devalue a brand’s perceived value in many consumers’ eyes by inferring that luxury has been made available to people who otherwise do not have the financial means to afford such items. Secondly, responsible and strict lending must be enacted to avoid a possible backlash. In fact, Chinese authorities have already implemented a series of regulations to ensure greater transparency and curb risks. Further regulations are expected to be forthcoming.

It is, nevertheless, apparent that consumer credit will continue to play an increasing role in the luxury domain, both online and in-store. And there seems to be no slowing down in this change in payment options. Gen Z is growing up with easier access to credit, aided by new technologies and digital databases. To the younger generations, it is not a big deal nor a surprise that Huabei Fenqi enables aspiring consumers to pay in installments without interest.

Luxury brands in China that fail to offer BNPL could be missing out on this evolving phenomenon. Data from a US survey found that 42 percent of Gen-Z and 69 percent of millennial shoppers are more likely to purchase items if a BNPL service is offered. Luxury brands need to accept that credit in China is an opportunity to be developed rather than a risk to be ignored. China’s easy access to credit should continue to drive growth, and luxury brands need to take the initiative of providing mechanisms that open the doors to aspirational luxury consumers.

Special thanks to Songxin Xue.

Glyn Atwal is an associate professor at Burgundy School of Business (France). He is co-author of Luxury Brands in China and India (Palgrave Macmillan).





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Time’s Up, Hong Kong: China Takes Over Swiss Watch Sales


What Happened: For more than a decade, Hong Kong was the Swiss watch industry’s number one export market. However, that is no longer the case. According to the Sell-Out Index, which measures the aggregated sales performance of the watch and jewelry industry in selected markets every month, China’s special administrative region lost half of its hard luxury sales between 2018 and 2021, down to $2.5 billion from $5.7 billion.

Previously, the duty-free peninsula was the Mainland’s preferred shopping destination for Swiss watches. But a pro-democracy demonstration in 2019 and restricted entry into Hong Kong for non-residents since the pandemic outbreak in 2020 have hammered the city’s retail sector. Now, Chinese shoppers are shying away from spending there.

The Jing Take: Hong Kong’s political unrest and the pandemic have redirected Mainland spenders to shop locally. Now, China has taken over as the top “shopping haven” spot for Swiss watches. From this January to July, exports to the country totaled $2.3 billion, increasing by 63.7 percent over the same period in 2019, while Hong Kong only reached $1.7 billion, placing it in third place after the US ($2.2 billion).

As such, major timepiece brands (Rolex, Jaeger-LeCoultre, Vacheron Constantin) have all accelerated their digital and physical expansions in the country this year by opening flagship stores, launching on Tmall, and holding a “Watches and Wonders” exhibition in Shanghai and Sanya. The latter, the capital of Hainan Island and the Mainland’s new tax-free hub, presents a sweet spot for the Swiss watch industry, likely replacing Hong Kong. If the surging number of Haute Horlogerie houses keep opening stores there, following the steps of the prestigious jewelry brand Van Cleef & Arpels, it will be unlikely that Hong Kong will ever regain its market dominance again.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.





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What Do Chinese Cultural Consumers Want?


Jing Daily’s market report “Chinese Cultural Consumers: The Future of Luxury” is available for purchase on our Reports page. Packed with 88 pages of market research, exclusive interviews, and on-the-ground consumer insights, the report is a must-read for anyone interested in tapping China’s most powerful new consumer base. Get your copy of the report here.

The Chinese Cultural Consumer (CCC)’s deep interest in culture is largely unaffected by commercial considerations. According to Karl Cyprien, managing director of Archive Editions, the China-specific platform launched by Daniel Arsham, “The hierarchy between the mediums is relatively nonexistent compared to the West.” The CCC cannot be likened to classic art collectors, Cyprien said, as they act in an educated, fan-like fashion, collecting and consuming culture in all its facets, whether through branded merchandise or works of art.

Yet, when considering the CCC, a key distinction must be made between consumption and collecting. Whereas consumption — typically involving fashion and luxury brands — often means a relatively straightforward purchase that serves a near-term purpose (such as the need for something to wear), collecting serves longer-term goals, whether investment for future resale or the establishment of a personal legacy. Simple consumption by CCCs is an important sales driver for many major luxury brands today, with Chinese consumers accounting for an estimated 20 percent of all global luxury sales in 2020, according to Bain.

CCCs who buy not only for the sake of leisurely consumption, but also to build their interest-based collections (including rare and hard-to-find items), are emerging as VIPs for top brands. This is particularly true for luxury brands that base their top consumer lists not simply on who spends the most, but what they spend on, their personal networks, and their particular personal tastes. Moreover, for the luxury market, this represents an important sea-change that will make it more difficult for traditional VIP shoppers in Europe, North America, and Japan to get their hands on the most sought-after products.

Another important trend bringing new challenges to international luxury brands is the CCC’s rising awareness of China’s own artists, designers, and heritage. Whereas the core Chinese luxury consumer of just a decade ago displayed a marked preference for Western or Japanese imports over domestic brands, younger CCCs — digitally savvy, educated, and raised in an era during which imported brands can be taken for granted — increasingly value China’s cultural and artistic heritage. As Jing Daily columnist Daniel Langer noted, “Since they grew up in a globalized world, [young Chinese consumers] value local traditions and local talent. They are more patriotic than any generation before and like to support homegrown businesses.”

Fresh Opportunities for Chinese Artists and Designers

This shift has translated into new opportunities for younger Chinese artists and designers, many of whom have worked with international brands on collaborations and collections that are often (but not always) designed specifically for the Chinese market. Examples of these partnerships abound, such as the inclusion of Chinese designers Liu Wei and Zhao Zhao in a special collection of customized Louis Vuitton Artycapucines handbags and the Dior x Song Dong installation at the ART021 Shanghai Contemporary Art Fair in late 2020.

Other brands have appealed to the sensibilities of the CCC by spotlighting native arts and crafts traditions and working with Chinese cultural institutions. These types of partnerships have increased exponentially in the years since Cartier’s groundbreaking “Treasures” jewelry exhibition at the Palace Museum in Beijing in 2009, ranging from museum shows such as Gucci’s 2015 “No Longer / Not Yet” exhibition at the Minsheng Art Museum in Shanghai to Valentino’s interactive “Re-Signify” show at the Shanghai Museum of Contemporary Art in late 2020.

Dior is one of a growing number of global luxury brands that have worked with Chinese artists, such as in this installation of a reimagined handbag by Song Dong that was displayed at the ART021 Shanghai Contemporary Art Fair in 2020. Credit: Dior

Broader arts-focused efforts have increased the representation of Chinese artists and designers in the global luxury market, such as Porsche’s annual “Young Chinese Artist of the Year” award and Chinese textile artist Fanglu Lin winning the Loewe Craft Prize in 2021. Bringing Chinese creative talent into the fold is a win-win situation for brands and cultural institutions alike, as it appeals to CCCs on their home turf while offering fresh sources of inspiration to global luxury brands for future collections.

What the Chinese Cultural Consumer Says:

What has been an outstanding cultural consumption experience of the past year for you?

I’ve been really impressed by Prada’s latest collections in collaboration with Raf Simons. I’m more interested in niche designer brands than typical luxury houses, but their partnership highlighting sustainability, technology, and modern fluidity brought Prada into a new era. Also, their localization initiatives featuring both digital and physical experiences effectively elevated audience engagement.

    – Ciera Xu, 26, Shanghai

I’ve enjoyed visiting art exhibitions over the past year. Physical events are more exciting to me since we went through lockdowns during the pandemic. One of the most impressive exhibitions was Louis Vuitton’s luggage exhibition in Shanghai last year. Even though I didn’t order anything as I can’t afford it at this stage, they are on my wish list. I think they are quite collectible and worth the investment.

    – Wash Wang, 22, Nanjing

Prada Mode Shanghai at Prada Rongzhai was one of my favorite events that I visited over the past year. Although it was not a promotional fashion event but a culturally oriented one, I have spent more on the brand since then as I appreciate how the house supports Chinese contemporary culture.

    – Ashley Qiu, 28, Beijing

Get your copy of Chinese Cultural Consumers: The Future of Luxury on our Reports page.





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