The China Luxury Playbook

Over the past year there has been a reshuffling of the expectations toward China’s luxury market. In the years leading up to the COVID-19 pandemic period, and the first two years after the onset of the pandemic, China has been both a major growth engine for luxury brands, as well as a floodgate to help offset the impact of the pandemic in European and American markets during the early periods in 2020 and 2021.

The paradigm has shifted.

So whats next? We now move into a single-digit growth phase, where in order to grow, brands must take an optimized approach to creating, protecting and retaining their brand value.But how? We present a 5+1 playbook, highlighting five key areas that brands must address to enable the long-term growth in China (as well as other markets). These areas have global ramifications and as such must be addressed in a truly global AND local way, with the hidden golden thread running throughout is a close communication between HQ and China teams.

What are these five areas?

Wholesale Excellence - wholesale practices during COVID have led to a confusing consumer environment when it comes to China product availability and pricing. A focus on creating wholesale excellence which includes assessing wholesale partners, pricing control and product traceability is needed.

Discount Management - while discounting is inevitably a key driver of sales for many brands, stricter management of the width and depth of discounting must be maintained to build equity and avoid a race to the bottom and eventual corrosion of brand value.

Product Pillars - consolidating and investing behind specific product pillars is a key ingredient to mitigate risks associated with either heavy dependence on a few products or a sub-optimal and less consolidated approach through rapid product innovation.

Channel Expansion - the pandemic period saw a rapid expansion of the quantity of sales channels in China. Moving forward a focus on quality over quantity will help ensure a healthy ROI on expansion investments.

Differentiation & Desirability - a reassessment of the localized interpretation of a brands’ global positioning, coupled with a strong focus on bringing locally relevant activations and communications is key to success in China.

Tying these all together is the +1 element of our 5+1 framework:

Goal Alignment - consolidating performance around the five key areas for improvement additionally requires a shift in the KPIs measured by brands to ensure a ‘healthier’ growth.

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