Beauty Brands in China Unsure Whether to Invest in Online or Offline Retail

Research and consulting companies love to write reports on the state of art of luxury evolution, which is a good way to attract attention or the budget from luxury brands.

According to CB Insights, the NECESSARY trend measured by high industry adoption and market strength is “unlocking China’s online channel”, which is on the top right corner of the below diagram. It sounds it should sit on the first item of the luxury brands’ strategy agenda, even surpassing many shiny technologies in the market, such as AR/VR, authentication, blockchain…

The logic behind is simple as BCG’s report already told:

  • Chinese consumers should eat up to 40% of the luxury market share

  • And needless to say, they are young and digital savvy

Though online is crucial for discovery, according to the latest Mckinsey report,  purchases, yes purchases we say this word again, are still made offline and in-person. It provides two beautiful survey graphs to show it.

Nevertheless, the hopes for selling luxury online are still running high. Whether McKinsey or BCG, both suggest that the momentum for luxury e-commerce, especially targeted at lower-tier cities, will grow much faster in a few years to come.

BCG concludes platforms like Tmall, JD platform remain to be the mainstream.

Meanwhile, Mckinsey dives deeper to pinpoint that building a presence across these major platforms is a strategy favored by smaller luxury brands only. So far A-level luxury players have been acting quite cautious about stepping toes in the “platform water”.

Today the key innovations surround luxury brands in China are still about:

  • Wechat & KOL
  • Pop-up stores
  • Certain fancy in-store technologies

It does not mean they do not intend to be more creative or proactive, but we have to bear in mind, a special sector like luxury in which images matter the most, there is not much space left out which could be squeezed or maneuvered for blunt or blind experiments.

By: Cecilia Wu