In the pursuit of growth within China, luxury brands are reshaping their strategies to cater to a discerning clientele, often referred to as Very Important Clients (VICs). This shift comes in response to the post-pandemic economic slowdown, where the spending power of the once-aspirational middle class has diminished. Companies like LVMH, Richemont, and Burberry are now redirecting their attention to the elite 5% of luxury consumers who contribute significantly to sales in China, aiming to enhance exclusivity and deliver personalized experiences.
The conventional approach of hosting mass events to raise brand awareness is being replaced by a more targeted strategy, focusing on cultivating relationships with high-net-worth individuals. These VICs are being offered perks such as private events and exclusive access, with luxury brands aiming to create an environment that goes beyond traditional advertising. The objective is to make these individuals feel special and engaged with the brand on a personal level.
Despite concerns about a subdued rebound in luxury demand following China’s post-pandemic reopening, luxury brands remain optimistic about the country’s potential. China is anticipated to account for nearly 40% of global luxury sales by 2030, according to industry consultants. This long-term outlook is encouraging luxury companies to invest in building lasting relationships with their Chinese clientele.
However, the current economic landscape in China poses challenges, with a property crisis and record-high youth unemployment affecting consumer spending patterns. High-end retailers, from Chanel to Cartier and Gucci-parent Kering, are fiercely competing for the discretionary spending of a select group of affluent customers who remain keen on indulging in luxury purchases.
The shift in strategy involves selling fewer, more valuable items and providing a heightened level of personalized service. Brands are allocating more retail space in exclusive locations for their wealthiest clients, and events are designed to reflect a deep understanding of local culture. The emphasis on personalization extends to monogramming and exclusive meet-the-designer events. Despite a more cautious approach among VICs, who now carefully evaluate the value of their luxury purchases, retailers see this shift as an opportunity to reinforce the desirability of their brands. The challenge is not only to weather economic uncertainties but also to position their brands as indispensable, even in the face of cost-cutting considerations. As luxury companies navigate these complexities, they are also expanding their global footprint, recognizing the need for a balanced approach in maintaining their brand’s allure in the world’s second-largest market.
