How overseas shopping and cross-category competition are driving China’s luxury resurgence

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China is a long-standing player in the global luxury goods industry, and despite the market’s increased volatility as of late, brands have shown resilience by increasing their investment and marketing efforts. In 2024, two emerging trends are reshaping the way Chinese consumers shop for luxury: the first being the return of international shopping, and the second being the convergence of mainstream fashion with luxury style codes.

Experts agree. In exclusive conversations with Vogue Business, Tencent Marketing Solutions general manager Kiki Fan, and Veronique Yang, managing director and senior partner of Boston Consulting Group (BCG), highlight the challenges and opportunities presented by these shifts.

According to them, the resurgence of international channels, currency fluctuations and customers’ growing emphasis on the “quality-price ratio”, are some of the factors driving these trends.

The resurgence of Chinese overseas spend

This year, China’s outbound tourism sector has experienced a notable upturn. According to a BCG survey conducted across 2,890 Chinese consumers aged 18 to 55 between April 2023 and April 2024, 52 per cent of luxury consumers purchased goods overseas in the first half of 2024. By region, 32 per cent have purchased from Japan and South Korea, 29 per cent have purchased from Southeast Asia, and 57 per cent from Hong Kong and Macau SAR. South Korea and Japan overtook all markets in Southeast Asia to become the second biggest luxury shopping destinations overseas, attracting 8 per cent of Chinese luxury spend.

LVMH’s first-quarter results placed Japan as the only market to witness double-digit sales growth in Q1 2024, increasing by 32 per cent. Favourable exchange rates are the biggest driver in encouraging Chinese consumers to travel abroad to buy luxury products, with BCG’s Yang emphasising that luxury brands should be aware that a significant majority of their customers are travelling abroad with clear intentions to purchase. These consumers conduct thorough research into brands and their products (mostly online) before heading abroad, so marketing and communication within China’s luxury market is crucial.

“When it comes to marketing strategy, it’s interesting to note that a large majority of consumers — around 98 per cent — begin to consider luxury goods after being exposed to them passively,” says Yang. “Additionally, about 50 per cent of consumers show a keen interest in content that effectively conveys brand stories and connotations.”

Tencent’s Fan says WeChat, which has approximately 1.4 billion monthly active users, is one of the leading channels for Chinese consumers to conduct research into overseas luxury shopping. “Luxury brands can utilise WeChat to provide consumers with reliable, accurate, timely and convenient brand information prior to and during their international trips,” she explains.

The use of WeChat, for example, allows sales associates to engage in personalised communication with consumers. Several brands have developed global shopping mini programmes, enabling customers to conveniently access inventory and pricing information from the global market with a single click; creating a cross-border path to purchase that begins at home and facilitates conversion abroad.

Cross-category competition intensifies

Chinese luxury consumers have propagated a rise in spend on emerging designer brands and high-end sportswear labels in recent years, influenced by changes in lifestyle and the growing demand for personalised products.

According to Fan, these recent changes indicate that competition in the luxury industry is expanding beyond its usual players. Non-traditional high-end brands are now vying for the attention of consumers who value quality of life and have the means to indulge in luxury. “Tencent has hundreds of millions of potential luxury consumers, and interestingly, we see high-end brands in other industries are also ‘competing’ with luxury brands for the same core groups,” she continues.

BCG data also shows that China’s light (annual spend below RMB 50,000) and medium (annual spend between RMB 50,000 and RMB 300,000) luxury spenders have diverted their budgets to experiential consumption such as travel, sports and fitness, and food and beverage. In terms of luxury consumption, 72 per cent of respondents who have reduced their spending turned to aspirational designer brands, notes Yang.

In the face of this changing landscape, Fan emphasises the significance of establishing a strong emotional connection with Chinese shoppers, alongside highlighting brand distinctiveness and individuality. Meanwhile, luxury brands can take advantage of significant marketing opportunities like this summer’s Paris Olympics to tap into the intersection of luxury and sport in the Chinese market.

Yang also highlights the connection between the integration of luxury brands and sport and the desire of Chinese consumers for “brand vitality”, as revealed in the study. “Vitality is not just about being ‘lively’ or having a high brand volume; it goes beyond that, reaching a level of connotation,” she says. An exceptional luxury brand should remain dedicated to its original DNA, aesthetics and craftsmanship, while also staying attuned to global trends and actively embracing local culture.

China’s luxury market has experienced rapid growth in its early stages and has now reached a stable and upward trajectory, which presents a challenge for major brands to sustain long-term mindsets. Platforms like WeChat, one of China’s largest social platforms and content ecosystems, enable brands to achieve high-quality brand building and expand their reach to attract new users and consumers.

Through these types of partnership, the luxury industry has the potential to discover areas for growth and make significant advancements in the coming years. And by adapting quickly to new trends, like the rise in outbound travel and overseas shopping, brands can mitigate increased competition across different categories, as well as the merging of fashion with other lifestyle pursuits such as sport and entertainment.

BCG conducted a survey of 2,890 luxury consumers in China aged 18-55 from April 2023 to April 2024. The survey investigated consumers’ changing attitudes, purchasing needs and consumption behaviours. BCG’s definition of luxury includes leather goods, ready-to-wear, footwear, accessories, watches and jewellery, as well as other lifestyle products (excluding beauty).

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