Chinese luxury fashion consumers prefer instore to online, finds McKinsey

03 June 2019 Consultancy.asia

When it comes to the luxury fashion segment, a new McKinsey report has found that young Chinese consumers are traditionalists – preferring to purchase instore rather than online.

Looking good continues to be a sign of distinction and sophistication among the wealthy. No less so in Chinese high society. New analysis from McKinsey & Company shows that the Chinese luxury goods market is set to boom over the coming decades. Chinese consumers however remain tied to the tactile experience of shopping instore – bucking a wider trend in China for online sales, although research remains largely an online affair. 

According to McKinsey’s data, the Chinese fashion market has seen strong growth during recent years, with Chinese consumer spending on luxury items at home and abroad up from ~$50 billion in 2012 to ~$110 billion in 2018 (equivalent to a third of the global spend) – delivering more than half the global growth in the luxury segment during this period. And China is expected to contribute 65 percent of additional global spending to 2025.

Chinese contribution to global luxury market growth

Exploring key trends around the most influential channels for marketing and sales in the luxury segment, the McKinsey report notes that Chinese consumers are increasingly focused on the sophistication that comes with luxury. Thus, the acquisition of luxury items is not merely to show off financial status, but also knowledge of what is good quality and therefore worthy of being shown off.

Here, Chinese luxury consumers spend a considerable among of time per week – at between three to five hours – learning about key brands and products, on average accessing 16 sources of information on luxury goods, with all survey respondents influenced in part by online channels. Given that many of these consumers are relatively new to the luxury market, being able to reach and influence them in the formative stages of a purchasing lifecycle is of significant interest to brands.

Age demographics of Chinese luxury consumers

The survey found that local consumers acquire new information on luxury brands from a wide number of sources, including among others; ‘word of mouth’, influential for 96% of respondents, followed by key opinion leaders (94%), celebrity/sponsorships (87%), digital ads (84%) and, for 87 percent, the online channels from the brand itself. Traditional ads however fare poorly for influence at just 39%.

Yet, while the overall Chinese consumer market has increasingly turned to online sale channels – with Alibaba now one of the world’s largest ecommerce platforms – when it comes to actually buying luxury items, local consumers are much more interested in the tactile experience of a purchase, with 92% of respondents buying offline. In addition, 99% say they also access official brand channels offline.

Although online sources are likely to remain a key channel for the gathering of information, the McKinsey research shows when it comes to making a purchase, the instore experience remains key. When asked of the three most impactful offline channels that influence a purchase, almost half of the respondents cited suggestions from in-store sales assistants, followed by over a third who said instore try-ons, and one fifth who pointed to instore displays.

Online percentage of luxury purchases in China

And the researchers expect this instore preference to continue dominating the local luxury sales market into the near future, with the experience of luxury shopping in person the reason why young Chinese consumers return back to offline stores – two thirds of respondents agreeing with the sentiment that luxury shopping is not just about the product, but high-quality service and experience.

“Since the majority of luxury purchases are made offline, brands should reimagine the in-store experience,” states McKinsey. “Catering to young consumers’ desire for personalisation is key, as is doubling down on the concept of the store as its own media channel. Brands would be wise to invest in highly-trained staff capable of maintaining one-to-one relationships with customers in and beyond store, in effect becoming their personal stylists, backed by customised narratives and personalised product recommendations powered by AI.”

Looking further ahead however, McKinsey suggests that brands can tempt their young customers online by digitising the intimate, personalised experience that currently attracts them to brick-and-mortar outlets. “Virtual try-on services and matching suggestions curated by artificial intelligence (AI) both increase the likelihood consumers will purchase online, as can premium perks like 24-hour white-glove dispatch, and distinctive shopping bags,” the report states.

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