Social commerce platforms like Douyin are playing an increasingly important role in the luxury sector in China, helping brands to connect with their consumers on a more personal level, writes Qing Na from Dao Insights
In stark contrast to the overcast outlook of China’s overall economic recovery, the luxury sector has seen positive signs after what has been described by Vogue Business as “expectation-beating growth” in the second quarter of 2023, retaining the momentum gained in Q1.
This is evidenced by Burberry’s 46% sales growth in the mainland in the first three months of the year. Similar traction was also captured by heavyweight LVMH, which clocked sales growth between 40% and 45% in the first half of the year.
Nevertheless, the resumption of offline vitality in the luxury market doesn’t seem to have stolen the thunder of digital practices looking to energise the revival of the sector, as signposted in the China Luxury Market Digital Trends 2023 Report released by Tencent Marketing Insight with additional analysis provided by Boston Consulting Group.
Douyin (the Chinese version of TikTok), which is home to more than 600 million monthly active users, 150 million of whom show a strong appetite for extravagant purchases, has become increasingly important for facilitating the growth of luxury in China. According to the 2023 Douyin Luxury Industry White Paper jointly published by Ocean Engine, Douyin E-commerce, Trend Insight and Deloitte China, the viral short video app has now become a marketplace for over 70% of China’s luxury buyers.
The platform expects to see its most heavyweight luxury consumers increase their annual spending by 7% from RMB 600,000 (£66,470) to RMB 643,000 (£71,234) in the coming years, while moderate and light luxury buyers, who are more price-sensitive, are expected to reduce their yearly consumption of luxury items by 5% to RMB 112,000 (£12,497) and 15% to RMB 16,000 (£1,772), respectively, reflecting a more cautious consumer behaviour.
While stylishness/trendiness and the ability to cater to the pursuit of individuality remain core considerations for Chinese consumers, the overall trend of making purchases for self-satisfaction is growing in relevance for luxury consumption, and has been shown to be a priority for almost half (47%) of Douyin’s luxury seekers. Luxury products are also expected to be more compatible with daily life, as agreed by 49% of 1,590 respondents, while allure is enhanced for those seeking items for more diverse occasions.
Meanwhile, due to ongoing economic uncertainty, the attribute of preservation of value has been growing in appeal to luxury shoppers, resulting in items such as jewellery, watches and luggage seeing the fastest growth in sales. The subcategory of bags and suitcases, which currently has a market share of 35%, drew the most interest from Douyin users who fall under the age groups of the post-80s and post-90s generations (i.e. Millennials and Gen Z).
These demographics are paying more and more attention to product quality and are more likely to immerse themselves in short video content focusing on product attributes, as well as evaluations or reviews from key opinion consumers (KOCs). Sixty four per cent of these demographics endorse mainstream luxury brands, and 66% invest in classic designs, with affordability for varied use scenarios, including work and life, being the most valued. This indicates that collaborating with KOCs who can share their user experience in a way that is viewed as “more genuine and authentic” should be a core strategy for luxury brands in leveraging Douyin’s ecosystem, to not only resonate with their target audience but pull off sales growth in the discussed category.
Jewellery contributes to nearly one-fifth (19%) of Douyin’s luxury market space, thanks largely to the youngest cohort: post-00s shoppers. Characterised as “trend chasers”, this demographic is interested in branded marketing events, such as fashion shows, exhibitions and pop-ups, while crossover and artistic collaborations are also likely to turn their heads. In this vein, luxury brands are advised to take agile actions in tapping into topical events in their marketing executions, while online synchronisation of offline activations is the rule of thumb for brands looking to expand their traction amongst the younger generation of luxury shoppers.
While watches comprise 15% of the digital marketplace at present, that figure is expected to rise to 18% as users born before the 1980s – who are deemed to be “lowkey” shoppers who pursue a sense of value – become the backbone consumers for the watch segment. Owning watches is intended to portray a sense of “quiet luxury” on special occasions, which is in line with their consumer persona.
The content interests of this consumer demographic appear to be centred around brand culture and history, and they are also more likely to follow brands’ official accounts. This gives luxury timepiece makers a special edge in capitalising on the “closed loop” e-commerce system in Douyin, enabling a seamless online purchasing experience while deepening their relationship with luxury watch fans.
The phased rebound in the luxury sector has boosted confidence in China’s consumer market, leading to a prediction of an annual market growth of 18% to RMB 580 billion (£64.25 billion) this year, per Deloitte. As a digital space, Douyin will play a greater role in assisting luxury players in connecting with and further engaging China’s potential luxury buyers who are digitally savvy, continuing to act as a centrepiece for the industry to follow the same trajectory.
