Strategic and Operational Highlights

CEO Sandy Xu emphasized JD.com’s focus on improving user experience, leading to significant growth in active users and engagement. The company continues to provide a superior combination of selection, speed, quality, and price, resonating with consumers nationwide.

AI in Livestreaming

On April 16, 2024, JD.com introduced an AI digital representative of founder Richard Qiangdong Liu for its livestreaming rooms. This innovation attracted over 20 million views within the first hour, marking a significant milestone in AI integration within e-commerce.

Healthcare Expansion

JD Health partnered with pharmaceutical giants like Pfizer and Sanofi to debut new drugs online, enhancing accessibility and upgrading its one-stop medicine retailing and healthcare services through collaborations with Shanghai Pharmaceuticals and Daiichi Sankyo.

Logistics Growth

JD Logistics expanded its support for Chinese brands globally. In Q1 2024, it provided integrated supply chain services to MINISO stores in Australia and Malaysia, showcasing JD’s international warehousing and fulfillment capabilities.

Financial Highlights

• Revenue: Net revenues for Q1 2024 were RMB260.0 billion (US$36.0 billion), a 7.0% increase from Q1 2023.
• Income from Operations: Reached RMB7.7 billion (US$1.1 billion), up 19.8% from Q1 2023.
• Net Income: Net income attributable to ordinary shareholders was RMB7.1 billion (US$1.0 billion), up 13.9% from Q1 2023.
• Earnings per Share: Diluted net income per ADS was RMB4.53 (US$0.63), a 15.3% increase from Q1 2023.

Between January 1 and May 15, 2024, JD.com repurchased 98.3 million Class A ordinary shares (49.2 million ADSs) for US$1.3 billion, representing 3.1% of its outstanding shares as of December 31, 2023.

There are some new “situations” in this year’s 618 festival.

On the one hand, 618 has become an important opportunity for online shopping of high value and large commodities; on the other hand, it’s also a good time for families to stock up, including the sales of home appliances, 3C, food, beauty products, and etc, which will reach the peak in the first half of the year during 618.

At the same time, many big brands lead the promotion activities, and the promotion discounts also attract many new consumers.

Smart and high-quality differentiated products have become the hot spots trends in the field of home appliances, driven by promotions from both home appliance brands and major e-commerce platforms.

Get an introduction of 618 Shopping Festival here.

80% of the enterprises, surveyed by Chinese media Yibang, participated in Tmall 618, more than half of them invested more than 30% of the 618 budget in Tmall, and 40% of the enterprises surveyed expected that more than half of the 618 sales would come from Tmall.

50% of the enterprises interviewed said that in the past year, Tmall had the highest conversion among all platforms.

CIW Dossier: 618 Shopping Festival provides a perspective of the merchants regarding the performance, advertising budget, and sales expectations on the top e-commerce platforms for 618 shopping festival.

Update (21 June 2021): During this year’s “618” (June 1-20), the State Post Bureau observed more than 6.59 billion pieces of parcels, a year-on-year increase of 24.24%, and an increase of 84.16% compared with the same period in 2019.

China’s total 618 sales in 2021 reached 578.48 billion yuan, an increase of 26.5% YoY, according to data from Syntun. Top 3 channels by total sales are Tmall, JD, and Pinduoduo. Download CIW Dossier: 618 Shopping Festival to get more sales insights.

Alibaba Tmall 618

Over 67% consider Tmall as the top platform for 618.

Among the enterprises surveyed, 51% invested more than 30% of their budgets in tmall. Among them, 10.6% of enterprises allocate more than 80% of the ad budget on the Tmall platform; most allocate 30% to 50% of their total 618 budget on Tmall.

Tmall is giving away RMB10 billion (US$1.57 billion) in consumer coupons and subsidies to help further stimulate post-Covid consumption during Tmall 618 Festival 2021.

According to the official introduction of Tmall, huge discounts will be launched from June 1 to June 20. The specific activities are as follows:

• 20 yuan off every 300 yuan purchase with a total subsidy of 10 billion yuan
• 88vip members will receive additional 520 yuan
• Beauty products at flagship stores are cheaper than duty-free stores

A total of 250,000 brands participate in this year’s Tmall 618, which is 2.5 times that of last year. A total of 13 million products participate in offering discounts, of which 1.4 million are new products.

Tmall merchants almost all started the official live streaming for this year’s 618 shopping festival. About 100 celebrities have locked in Taobao Live to interact with fans. More than 500 CEOs have already made time for Tmall 618 in the agenda to face consumers and offer more brand discounts.

For more established brands, this year’s 618 festival is all about membership engagement. Shoppers who have signed up their favorite brands’ membership on Tmall can expect more additional benefits.

Tmall 618 sales

Millions of loyalty-program members on Tmall helped drive sales for 25 brands, which had each exceeded RMB100 million in transactions on June 1.

As of June 16, brand merchants have acquired nearly 60 million new members during Tmall 618, and some saw more than 50% of the transactions come from members. On June 1 alone, the first day of Tmall 618, there were 25 brands with a turnover of over 100 million yuan from members.

Since the beginning of this year, Tmall has strengthened its membership operation. The exclusive rights and benefits of brand members will be revealed many times in the search results and commodity display pagse, and various tools such as exclusive rights and benefits of members and member interaction are also provided for merchants.

About 20 brand merchants exceeded 10 million member milestone on Tmall. Alibaba didn’t disclose detailed sales value this year.

Tmall Hey Box: Alibaba’s best seller incubator for top brands

JD.com 618

Jingdong announced it will focus on live streaming, short videos, graphics, and quiz to enrich its content marketing for the ongoing 618 Grand Promotion at a kick-off event on May 20 in Beijing.

JD.com will invite more than 300 celebrities, and executives from nearly 600 brand partners to participate in various promotions through live streaming during the promotion.

The company will also invite KOLs and celebrities to create short videos to assist promotion. More than 1,000 professional buyers or KOLs from different categories will be invited to share their favorite products to drive more traffic to JD.com.

JD will hold two galas through live streaming inviting celebrities to bring consumers the festive atmosphere of 618. Leveraging JD and WeChat’s strength, JD will offer live streaming through 10 WeChat accounts.

Over 30,000 new brands and stores were launched during 618 on JD Super, JD’s online supermarket, with over 2.4 million new products.

Shoppers in Nanjing, Jiangsu province are the most active, taking the crown for the largest order volume.

Group buying is most used in Harbin. The average amount per group buy order in the chilly capital of Heilongjiang province in Northeast China this year exceeds RMB 1,000 yuan.

Other top competitors for 618 include Kuaishou, Douyin (TikTok), Pinduoduo, and Meituan.

JD & Douyin (TikTok)

JD signed a 20 billion yuan collaboration agreement with Douyin (TikTok). And, JD’s products are integrated on Douyin in this year’s 618 festival and users can buy JD products on Douyin directly without being redirected to an external page.

JD 618 Sales

In the first three minutes on Jun. 18, JD Super, JD’s online supermarket, saw sales increase 10 times, and in the first two minutes, packaged foods exceeded RMB 300 million yuan while the maternal and baby category exceeded RMB 200 million yuan.

In the first hour on Jun. 18, JD Fresh saw sales increase 70% YOY. Looking at sub-categories, seafood, meat, eggs and poultry, and fruit and vegetables increased 160%, 105% and 80% respectively. Sales of food which require little effort to prepare increased 160%.

JD.com reported a total transaction of over RMB 343.8 billion yuan for its 18-day 618 shopping festival 2021, representing a growth of 27.7% YoY from the same period in 2020 (RMB 269.2 billion yuan).

The pet category has boomed. Post-90s consumers spent an average of RMB 507 yuan per month on pet products in 2021. During 618, smart pet products increased 47% YOY.

Luxury products. Sales of Ferragamo, TOD’s, and BALLY increased 150%, 232% and 600% respectively. In addition, over 20 designer brands saw sales increase over 15 times YoY on JD platform. Consumers continue to embrace the convenience of buying luxury products online.

Sales of imported gaming phones on JD Worldwide increased by nearly three times. Imported dry cat food increased by 108%.

During the 18-day promotion, sales of JD’s online real estate business increased 230% YOY. Sales of housekeeping and cleaning services increased 6.3 times while the order number of car maintenance increased 285%.

Genetic testing service sales increased 23 times, making it the fastest-growing category of healthcare services on Jingdong. Oral health product sales increased 447%.

The top five international brands are Aptamil from Germany, Estee Lauder from the U.S., A2 from Australia, Nintendo from Japan, and Sulwhasoo from Korea. In the fresh food category, 5 million Zespri kiwis and 260,000 durians from Thailand were sold during the 18-day sale.

Social e-commerce Pinduoduo’s road to brand upgrade

618 Sales performance of other brands and platforms

Xiaomi 618

From June 1 to 18, the total GMV across all Xiaomi’s platforms exceeded 19 billion yuan (US$29.37 bn), with a year-on-year growth of 90%.

Its sales volume of smartphones ranked first among all Android phones, the TV category won first place in the sales volume / sales values. Xiaomi 11 Pro is the best selling model on both JD and Tmall.

Xiaomi’s offline sales channels saw 123% YoY increase in total transaction values. Live streaming delivered 1.34 billion yuan in total sales, an 92% growth YoY.

Douyin (TikTok) 618

Douyin 618 started on June 1st and ended at 8 a.m. on June 19th. The top 5 best-selling brands are:

1. Chuchu (new brand)
2. WHOO
3. China Gold
4. Shepinhui
5. Huawei

Apple ranks sixth overall or second after Huawei under “3C electronics” category.

The top five are expected to have sales of more than 100 million yuan. Unfortunately, Apple, Adidas, Nike, and other international brands are not expected to exceed 100 million yuan in sales on Douyin, according to Chinese media Yibang Dongli.

Douyin saw the largest new user growth of over 392% YoY among post-00s, followed by post-90s (+225.9% YoY).

This is Apple’s second year of participation in 618 and saw a sales increase of 16% YoY, according to data from Counterpoint Research.

You can bookmark this page or sign up for our weekly newsletter for future updates.

Social e-commerce Pinduoduo’s road to brand upgrade

Centered around the theme of the ‘Spirit of Nature’, this collaboration draws upon Burberry’s longstanding exploration of the relationship between humans and nature.

The fashion house’s affinity to the outdoors links harmoniously with Honor of King’s character Yao, who embodies the spirit of nature and is able to take the form of a deer – also an expression of the Burberry animal kingdom house code.

In keeping with the fashion house’s signature gabardine, pioneered by founder Thomas Burberry and designed to protect its wearer against the elements, Yao plays the role of a protector for her fellow gamers within Honor of Kings.

Yao’s two exclusive skins have been inspired by Burberry house codes as reinterpreted by Riccardo. Seamlessly blending the physical and digital worlds, Yao’s ‘Spirit of Nature’ new skin draws upon Burberry’s rich heritage and includes references to the iconic House check, the trench coat, and the Thomas Burberry Monogram.

Burberry launched its first luxury social retail store, empowered by WeChat

This skin draws upon the classicism of these Burberry hallmarks and reinvents them into a modern look for Yao to reflect her strong, dynamic and adventurous character.

Yao’s ‘Spirit of Nature’ deer takes a mirrored form, drawing upon Riccardo’s fascination with the concept of duality and the creativity found in two perspectives.

In Honor of King’s first collaboration with a brand on its ‘Legend’ skin offering, Burberry has co-created a ‘Spirit of the Forest and Ocean’ Legend skin for Yao using one of the runway looks from the house’s Spring/Summer 2021 collection ‘In Bloom’ – a collection inspired by thoughts of regeneration, dynamic youth and reconnecting with nature.

Yao’s look draws upon the collection’s mythical marine references and features a statement warm royal blue collarless trench coat and a crystal-embroidered vest. Mirroring the essence of the look, the ‘Spirit of the Forest and Ocean’ Legend deer pulsates blue light through its crystal body.

Building upon the existing partnership between the luxury fashion house and Tencent, this collaboration continues to reflect Burberry’s ambitions to push boundaries through innovation and creativity, enabling the Burberry community to explore the digital realm of Honor of Kings in an exciting new concept.

The exclusive Burberry skins will be available to purchase for all Honor of Kings players in mainland China. The skins will then remain part of the players’ permanent collection.

China luxury consumer behavior study 2020

Entering the Mini Program, the user becomes a “Mom” by virtually adopting a Burberry elf for free. And, Tencent and Burberry expect this to be an attractive feature to the female audience in China. Customers can also unlock exclusive content and personalized experiences and share them with their friends.

As customers interact more in the store and online, the elf will constantly transform themselves, upgrading new roles and new styles for customers to explore. Rewards include Burberry’s exclusive Cafe meals and digital content.

Burberry also launched “social currency”, which rewards customer interaction by issuing social currency to unlock exclusive content and personalized experience. In addition, there are many places in the mini program with the voice guide service of spokesperson Zhou Dongyu, and the celebrity will provide room tour.

Through the WeChat mini program, customers can get all kinds of contents such as in-store guide and product information. User can choose to book “Burberry Space” fitting room. Each fitting room has a unique theme, and there are 10 different spaces.

At the same time, users can choose the clothes they want to try on in advance, and Burberry can play different types of music according to their preferences.

Offline shopping experience service is more than just fitting on. “Burberry Space” offline is a place of shopping and fitting, afternoon tea, and style design.

“Fitting in” selfie is a necessary procedure for many girls to go shopping. Burberry has set up a self-portrait spot in each offline fitting room to encourage customers to take photos and share them with friends.

In addition, high luxury theme cafes are no longer new, such as Dior café and Chanel café in Shanghai, but Burberry has played something that China doesn’t have.

Burberry launched Thomas’ café, which is not just an ordinary coffee shop, but a special area for the Burberry community to connect and interact. It offers lectures, workshops, and live performances in addition to various kinds of snacks echoing the “British and Chinese tea culture”.

Users can book or register upcoming events on the WeChat Mini Program. This is the second in the world; the first is in its flagship store in London, UK.

WeChat advertising trends for luxury products in 2020

Data-driven, social media and omnichannel are the focuses of digital marketing growth for luxury brands, while “young”, “geographic concentration” and “social” are the keywords that best describe the trend of luxury brand marketing in China.

A recent report, jointly published by Tencent Advertising and Boston Consulting Group, revealed three major pain points for luxury brand marketing in China:

• how to better reach out to customers
• how to better increase customer loyalty
• how to better use data assets to drive business growth.

Luxury marketing in China: Young, geographic concentration and social are the keywords that describe the future trend

In 2018, China’s luxury market exceeded 110 billion Euros while maintaining a growth rate of 6%, accounting for 33% of the global luxury market. It is expected to grow at a CAGR (compound annual growth rate) of 5-6% in the future and to contribute over 40% of the global luxury retail sales by 2025.

It is an indisputable fact that China has become the most important market for luxury brands. The report shows that this growth is mainly driven by three major trends of Chinese consumers:

• luxury consumers continue to be young
• Geographically, the majority of luxury consumers are from the top 50 cities
• Social media influence remains strong

The report reveals that luxury consumers are becoming younger. Consumers aged between 26-35 y-o contribute 62% of luxury sales and consumers between 18-25 y-o contribute 12%.

Geographically, the majority of luxury consumers are from the Top 50 cities: At the same time, luxury consumption has become more widespread in China and shows an apparent trend of geographic concentration.

High-end luxury consumption has gradually penetrated into second-tier cities. Luxury consumers in the first and second-tier cities account for around 70% of the total number and contribute over 70% of total sales.

Currently, domestic luxury consumers from first and second-tier cities tend to travel abroad to buy high-end luxury goods while due to a limited number of local luxury shops, luxury consumers from third & fourth-tier cities tend to make their purchase in the first & second-tier cities. Therefore, how to use digital channels to manage retained customer assets will be one of the focuses in the future.

Social media influence remains strong. Because of the ubiquity of mobile social media in China, Chinese consumers have also demonstrated strong social orientation when making luxury consumption decisions. More than 80% of Chinese consumers choose the “rational” way of researching online and purchasing offline when buying luxury goods, far above the global average.

The core channels influencing Chinese luxury consumers’ purchase decisions are shifting towards high digitalization. The social media penetration rate is now as high as 67%. Luxury brands can, through social media platforms, better reach out to their target customers, attract and influence the younger generation of core consumers with customized contents.

For luxury brands, the key to growth is to know how to better leverage social media platforms and to achieve a tight online-offline connection in order to form closer relationships with their customers.

Pain point 1: How to leverage social media and reach out to customers

According to the report, customers spend a significant amount of time on social media platforms and contents, and at the same time, KOLs’ endorsement has a very significant influence on their purchasing decisions.

Therefore, how to leverage on social media has become a critical topic that luxury brands need to think about.

Kiki Fan, General Manager of Tencent Advertising’s Key Account Sales and Operation Department, shared the new idea of leveraging on social media with Tencent’s Smart Marketing Solutions:

“…no longer focus on a single social media platform, but use a more global perspective, connect users with all touching points through four major traffic channels, and make social media the key to generating traffic.”

First, the brands must have their own traffic. Currently, an increasing number of luxury brands have set up their own WeChat official accounts, mini-programs, and other tools in the WeChat ecosystem.

Because of the unique characteristics of luxury brand marketing, proprietary channels can best present the brand image and allow them to position most precisely in order to achieve in-depth interaction with their customers, which is also the best way to retain and accumulate loyal customers.

The social media traffic is in turn generated from fission marketing as well as voucher campaigns initiated by the brands. In this way, they can acquire traffic from the social behaviors of their customers within the WeChat ecosystem.

This approach can maximize the social energy of WeChat and help achieve exponential traffic growth. In the end, this traffic can still be directed to the brand’s own channels such as their mini-programs in order to build a true marketing closed loop.

The report shows that researching online and purchasing offline is the main way Chinese consumers make their luxury purchases.

Tencent’s Smart Marketing & Smart Retail Solutions offers a series of tools to allow brands to convert their offline traffic into online traffic and integrate the two. This can help them convert their traffics in offline shops and from shopping guides into direct sales.

The advertising traffic provided by Tencent Advertising, as paid traffic, can be an amplifier for brand marketing campaigns, enabling a wider range of customer connections under diversified contexts of the Tencent platform.

A number of luxury brands, including Cartier, Bulgari, and Gucci, are experimenting with these four traffic solutions provided by Tencent to effectively expand their customer base and realize growth.

Pain point 2: How to better improve customer loyalty

According to the report, among the current online purchase channels, proprietary channels are emerging and account for over 30%. Brand-managed mini-programs and WeChat public accounts became the fastest growing channels last year.

This phenomenon is closely related to the unique characteristics of the luxury industry. For luxury brands, their customers expect the same shopping experience online as in offline boutiques. Therefore, for luxury brands, the key to realizing future growth breakthrough is to build proprietary platforms in an asset-light fashion that can interpret their brand image and help them build a tighter relationship with their customers.

Kiki Fan stated that: “Tencent Advertising provides the Brand 2.0 model for luxury brands. With mini-programs as the core, we can help brands establish and operate their proprietary sales channels on WeChat mini-programs and help them achieve closed-loop marketing throughout the chain.”

Brand 2.0 does not only allow brands to establish their proprietary sales channels in an asset-light way through mini-programs and mobile payment but also enables them to offer consumers a richer shopping experience through the social media platform of WeChat.

Online mini-programs can provide brands with long-term online boutiques as a non-stop sales channel. It can also be used as the ground for pop-up shops as the brand’s online marketing campaign.

Tiffany launched its limited edition product line in its pop-up shop mini program during the 520 period (20 May, Chinese Lovers’ Day), and achieve efficient sales conversion with the help of advertising campaign in WeChat’s social sharing channel Moments and injection of social media traffic.

At the same time, on their proprietary channels, brands can deepen the emotional connection with consumers through collaboration with IPs or KOLs, or by creating customized contents that attract consumers.

On these channels, brands can communicate with consumers effectively, and by using the Tencent Smart Advertising tools to analyze and manage collected data, service their consumers more precisely, create their own CRM and in turn increase their brand loyalty.

Pain point 3: How to achieve business growth leveraging on data assets

In the past, the communication and marketing of luxury brands relied mainly on creating emotional resonance with and conveying brand values to consumers.

In a highly competitive market environment, how to collect and retain consumer data from the four major channels and convert it into business and strategic insights in order to drive growth has become the third biggest pain point. Tencent Think Tank can effectively address this pain point and help brands explore potential growth opportunities.

Thanks to its accumulation of data insights over the years, collaboration with third-party partners, and excellent multi-dimension strategy development capabilities, Tencent can help brands match target consumers as well as potential consumers through its Data Think Tank, provide advertisers with many options of group combinations and expansion models.

With Model LAB’s more intelligent customizable model, flexible targeting, positive-negative target sample comparison functions, and machine learning training models, Tencent help advertisers precisely target group combinations, optimize marketing budget allocation, increase client base expansion capability and ultimately boost conversion throughout the entire chain, according to the report.

This is like providing luxury brands with a compass on the sea and help them effectively reduce the time spent seeking growth in China.

For luxury brands, China still has huge prospects and potentials to be explored in the future.

“Data capability is the foundation of growth for luxury brands, and is the basis on which marketing strategies should be developed.” Kiki Fan said.

She states that thanks to Tencent’s Data Think Tank’s multi-dimensional insight and strategy development capabilities, brand data assets collection and analytic capabilities, and the one-click marketing applications, luxury brands can obtain 360-degree portraits of their consumers at different stages of the consumption cycle and truly understand them.

This can allow them to identify key loss/conversion nodes in the consumer decision path, and to understand the relationship between audiences and advertising. Brands can then develop a more optimized and effective marketing strategy in order to capture the business opportunities and achieve growth brought by China’s 820 million mobile Internet users.

Chinese consumers were expected to contribute 40% sales to the global luxury goods market and hence drive 75% of this market’s growth.

58% of luxury goods consumers were the youthful population. 58% of them located at tier-2, tier-3, and lower-tier cities. Mobile occupied 54% of luxury goods consumers’ attention. 58% of consumers prefer collecting information online and buy luxury goods through offline channels.

China’s personal luxury goods market is going to grow at a compound annual growth rate of 6%. Retail sales of luxury goods in China reached €105 billion (US$120.41 bn) in 2017, which was estimated to hit €162 billion (US$185.77 bn) by 2024, accounting for roughly 40% of the global luxury goods market, according to a joint report by BCG and Tencent.

58% of luxury goods consumers were the youthful population who ages between 18 and 30 years. 71% of them at least held bachelor degrees. 71% of them were female.

58% of them located at tier-2, tier-3, and lower-tier cities.

They were deeply influenced by digitalization and obtained a variety of news from smartphones. On average, they spent 87 minutes on WeChat or QQ, 45 minutes on mobile games, 75 minutes on video, news, and music.

The consumption path of luxury goods was highly digital and fragmented. They would collect relative information from various social media and online platforms once they find favorite luxury goods.

After that, they tend to buy the products via a set of channels not just limited to brick-and-mortar, if that works, such as Daigou (a freelance cross-border shopping agent), online mall, overseas e-commerce platforms, brand’s official accounts, and social media.

Mobile occupied 54% of luxury goods consumers’ attention. To break it down, KOL (WeChat and Weibo) for 12%, brands’ social accounts for 12%, brands’ official website/app/mini-programs for 11%, brands’ digital ads for 8%, third-party e-commerce platforms for 7%, and online word-of-mouth for 4%.

Tencent-affiliated mobile apps took 50% of users’ mobile usage time. By comparison, Facebook accounted for just 22% of  American internet users’ mobile usage time.

KOL (Key Opinion Leader) played an essential role in reaching users. On average, every account of the top 30 online celebrities attracted 3.2% of consumers’ attention. Brands’ official accounts or mini-programs had its way to interact with consumers.

The average page view of articles could reach 20,000. Furthermore, the page views of some good content could occasionally exceed 100,000.

Speaking of purchasing method, 58% of consumers prefer collecting information online and buy it through offline channels.

16% of consumers in tier-3 & lower-tier cities bought luxury goods online while that was 8% in tier-1 cities and 9% in tier-2 cities. On the other hand, 51% of consumers would make some comparisons online and go to nearby higher-tier cities to buy it.

Though platform shopping is still the mainstream, social shopping has been rising quickly in the luxury goods market. 11% of Chinese consumers bought luxury goods through social shopping channels like WeChat while that was just 2% in Germany, America, and Europe.

Continue to read China’s luxury consumption trends in the new retail era

Three major trends are shaping China’s luxury market today: expansion of luxury brands into everyday categories, increased attention towards niche brands and personalization, and “normalization” of online sales of luxury goods.

On August 21^st, CBNData and Tmall published a report entitled “Luxury Consumption Trends in the Era of New Retail, 2017”. Using Alibaba’s consumer data to analyze consumption patterns, the report highlights several trends in changing luxury consumer demographics as well as showing the changing ways that luxury brands pursue consumers in China.

Between 2014 and 2016, the number of luxury brands using online sales channels has continuously increased; by 2021, online sales are expected to account for 13% of the luxury goods market.

Changing consumer demographics…

It considers young consumers, consumers from small cities, and cost-conscious consumers to be the up and coming forces driving growth in luxury consumption.

The generations known in China as the “post-90’s” and “post-95’s” are now a major market for luxury goods, and increasingly the primary targets of marketing campaigns by major players. There has been steady growth in the numbers and purchasing power of the post-90 generation since 2013, and the past few years have seen a rapid expansion of the post-95’s online presence.

Residents in the increasingly prosperous smaller cities, with lower costs of living and fewer pressures to save, are entering the market en masse, making up an ever-larger portion of consumers. Online sales of luxury goods have driven their penetration into second- and third-tier cities and rural markets where few have an offline presence.

In 2015, the size of the average luxury purchase by consumers in third- through sixth-tier cities surpassed the average for first- and second-tier cities. At the same time, the ten cities with the highest growth in luxury consumption are almost uniformly third-tier and lower. High-end cosmetics and watches are particularly explosive markets in smaller cities.

Consumers generally fall into three categories: “quality of life” consumers, mass consumption consumers, and price-conscious consumers; price-conscious consumers are coming to the forefront as the generations born after 1970 and 1980 settle into family life and more closely consider how to spend their larger disposable incomes.

In recent years luxury goods brands have effectively pursued the latter two markets, increasing their market share in those demographics. However, marked differences remain between each group’s purchasing habits; cost-conscious luxury consumers embrace brands with an image of utility (ex. Tissot) and up-and-coming brands, while “quality of life” consumers remain focused on household names such as Burberry.

… and new market trends…

At the same time, it shows that three major trends are shaping the market today: expansion of luxury brands into everyday categories, increased attention towards niche brands and personalization, and “normalization” of online sales of luxury goods.

Luxury brands have “infiltrated” certain sectors to the point where they account for significant portions of daily spending; from 2013, the share of skincare product sales held by luxury brands has continuously increased, while luxury brands now account for more than 40% of all watches and alcoholic beverages sold. Luxury goods, in these sectors, are no longer conspicuous consumption; they’re just consumption.

“Luxury” is no longer synonymous with “LV, Gucci, and Hermes”; rather, Chinese consumers are increasingly aware of niche brands which more closely match their needs and preferences. When entering the market many brands choose to list on Tmall and other e-commerce platforms to increase visibility and attract younger consumers.

In years prior, Singles’ Day events provided a huge boost to luxury goods sales; in the past two years that effect has become less pronounced, as luxury goods have become a more “normalized” part of people’s everyday consumption patterns

… are changing the luxury goods market

These three trends are improving customer experiences and quality assurance to further drive movement of consumers to e-commerce, making new retail formats the preferred choice for luxury consumption. Luxury brands are working to more finely target smaller markets, with goods that will fill gaps in their everyday lives, through online channels.

Other trends affecting the market include gradual reductions in tariffs for imported luxury goods, relaxation of import regulations, and global pricing strategies on the part of major brands, all reducing the appetite for grey market goods or those purchased while traveling abroad.

One result is that the flow of luxury spending abroad is gradually coming back to China, with part of the 600 billion yuan (US$90.2 billion) currently spent by Chinese abroad on luxury goods shifting to domestic e-commerce platforms.

Deloitte released the “2017 China Whitepaper on Luxury Consumption online”, hoping to answer two questions: Who are the consumers buying luxury goods in China, and what are their consumption habits?

The answers may be surprising; China is second only to the United States as the world’s largest market for luxury goods, and the average age of luxury goods consumers has dropped from 35 to 25. Even more surprising is that the primary drivers behind luxury sales are not women, but well-educated men.

Informed observers believe that China’s Millennials and Gen Z’s will change the face of China’s luxury markets in years to come. How brands respond to these changes will be crucial to their success in China. Both digital and diversified sales channels are important, but young customers want to experience personal contact and exclusive experiences which make them feel valued.

In 2017, the trend among luxury goods brands is to develop diversified sales channels, including online channels; for these brands, this is not just a change to their channels, but also a shortcut to understanding consumer preferences.

Several main points from the white paper are covered below:

Luxury consumers average 25 years old

Despite the feeling in recent years that younger consumers are dragging down the luxury market, not expanding it, Deloitte found that the average age of luxury goods consumers has fallen markedly. In 2017, almost half of China’s luxury goods were purchased by people less than 30 years old, with many saying that even recent graduates can afford Gucci and LV.

By 2025, it is projected that China’s Millennials and Gen Z’s will account for 50% of disposable income in China. Since they grew up with the internet, they’re used to buying everything online, and that trend will no doubt continue when it comes to luxury goods. Although online sales accounted for only 8% of sales in 2017, the white paper predicts that this will rise to 13% by 2021.

They are geographically diverse

Geographically, the top four markets are Beijing (10%), Guangdong (9%), Sichuan (8.8%), and Shanghai (8.5%); the presence of Sichuan on this list is surprising, as despite its large population it is a relatively less-developed province. It’s residents outspending Shanghai’s on luxury goods is a new phenomenon. Less surprising is the fact that first- and second-tier cities still account for nearly half the market, at around 48%.

They aren’t all female

In fact, they’re 51% male, exactly in line with China’s gender distribution. Analysts speculate that, for men, luxury purchases are driven by business needs, while women’s purchases are concentrated in beauty products.

They want more personal experiences

Consumers are turning to niche brands, as opposed to the biggest name brands, because they’re seeking more personal and less mass-produced experiences. This trend extends even to personalization, with more than 40% saying they want to be able to personalize and customize their luxury goods and experiences, while only 20% say they do not. No longer do consumers buy things to show them off; rather, they say they want to be “a little better to themselves” or “search for a higher-quality luxury”.

They’re changing their whole lifestyle

Not all luxury goods buyers read “Caijing”, own an iPhone, and watch documentaries; in fact, more of them love watching TV dramas.

Over half have a high-end phone; while a third of those do have iPhones, nearly as many have Huawei’s. Compared with ordinary consumers, luxury consumers pay more attention to antiques, TV dramas, and arts and culture. There is also a strong correlation between luxury consumers and those people willing to pay considerable amounts of money to own and support pets, or on their children’s education. All of this information suggests that they are changing their lifestyles in a comprehensive fashion, not just upgrading their purchases in one category, and luxury brands should market and brand themselves accordingly.

Younger consumers shop differently from older ones

They’re more likely to believe information from official channels or informed experts, and pay little attention to celebrity endorsements. Expert bloggers have been invited catwalks and product releases, because they influence these young consumers. WeChat public accounts connect with them and drive sales of everything from bags to BMW’s. Moreover, they’re not brand-loyal in the way that earlier generations were, tending to prefer whole clusters of brands and product types.

China’s retail market has seen huge shifts in consumer preferences and buying habits over the past decade, a trend which has only accelerated in the past few years. To cope with the changes, retailers are rushing into the high-end market and integrating on- and offline retail experiences into a seamless package, selling experiences and quality of life rather than goods.

New retail boosts the high-end retail market

The e-commerce segment of China’s consumer electronics market is trending towards saturation, forcing changes to retail patterns. Online retailers are increasingly venturing offline as well, breaking the barriers between the two and developing an “all-channel” sales strategy, ushering in a new era for retail.

Consumers, under the influence of this new retail paradigm, are also shifting from consumption based on the need to consume for personal development, from standard consumer goods to the provision of customized services. This trend, moving away from material needs and towards personal ones, means that the future of China’s consumer electronics market can be summed up with: higher prices for higher quality and personalized service.

According to data gathered by GfK, China’s offline retail sales rose 7.0% year-on-year in the twelve months trailing July 2017, and high-end retail markets grew by 8.1%, accounting for 18% of the market. In the same timeframe, online retail sales rose by 39.8%, with high-end retail rising by 51.9% to account for 14% of the market. This indicates that high-end retail still makes up a higher portion of offline purchases than online, but its online segment is growing rapidly.

High-end retail should focus on differentiated services

To meet the needs of a changing market, retailers should not only integrate on- and offline sales channels and shift to high-end merchandise, but also consider the high-quality services which can be added onto such goods. In the high-end market, retailers should improve product development, displays, and customer service to provide consumers with a better experience.

In the regional high-end retail market, major retailers have kept pace with changes in consumption patterns, shifting from the sale of goods to the sale of lifestyles and experiences.

For example, when Sundan updated its flagship store on Suzhou Times Square, it’s interior design scheme used woods and natural tones to give the store a warm and people-oriented feeling. At the same time, it scrapped its “suggested purchase” guides and let the consumer take control of the shopping experience. The addition of a rest and leisure area in the store pushed the idea of the quality of life to the forefront of the consumer experience.

Customization and differentiation are the future of high-end retail

As the online retail market exhausts the supply of low-hanging fruit and the battle to attract traffic brings increasing costs, the newest issue retailers face is trying to entice consumers back to offline modes of commerce.

Sundan’s drive to differentiate the shopping experience and service quality at its flagship store highlights this trend and points the way forward for high-end retail. In the future, high-end retailers will focus on high-end goods and services both, seeking to differentiate themselves on the basis of service and experience, not just price, to position themselves in the future high-end retail market.