fbpx

China is probably one of the most attractive markets for luxury brands. When we talk about China we usually think of what are defined as “first and second tier cities”, such as Beijing, Shanghai, Canton. Chinese cities are in fact categorized – unofficially – into levels. These levels reflect differences in consumer behavior, income level, population size, consumer sophistication, infrastructure, talent pool and business opportunity. In 2017, Morgan Stanley predicted that lower tier cities in China would become key “spending engines” that would fuel the country’s economic growth.

While investors perceive larger cities as offering the largest consumer base, lower-tier cities are larger, richer, and more willing to spend, and – according to Morgan Stanley – will contribute two-thirds of incremental growth. national private consumption as early as 2030.

These predictions appear to be correct, especially with regard to the luxury sector. Lower-tier cities in China, such as Fuzhou, Hefei, Weifang, among others, are now seen as the new growth drivers for luxury brands. The overall consumer spending of cities below the 3rd tier represented a whopping 44% of total luxury sales in China in 2019. According to research by Luxe Digital, 45% of middle-class consumers in 2nd and 3rd level are interested in buying luxury goods (against 37% in level 1 cities). It is also expected that by 2025 more than 500 new shopping malls will be built in sub-tier 3 cities in China.

Here are some characteristics of consumers in lower tier cities:

• A lower cost of living (especially the cost of housing) which translates into higher disposable income;

• Less stressful working hours but also fewer entertainment options that lead consumers to spend more time online, be it shopping, playing video games, watching short videos and live streams or chatting on social networking platforms;

• Different content and product preferences compared to 1st and 2nd level cities. These consumers are attracted to easily recognizable content. They have different tastes and imaginations, which is why the messages used in other markets are often too far from their lives;

• As rising incomes lead to improved lifestyles, these consumers are increasingly looking for higher quality products.

Considering the incredible potential of lower tier cities, let’s take a look at some marketing strategies that can help you reach these affluent consumers:

Use different marketing strategies

Lower tier cities are expected to “mimic” or otherwise follow the trend of higher tier cities. Although this is partially true, we must not give in to the temptation to activate the same marketing strategies for both groups of consumers.
Luxury goods in China are used to assert one’s social status and to express one’s individual characteristics. This need to stand out has characterized higher-tier cities in recent years, with consumers constantly looking for new trends and new products that make them different from the masses. This type of audience is particularly influenced by social media and the ideal brand value, as well as being used to following international trends.

Consumers in lower-tier cities have only recently been exposed to global trends, their lives are largely guided by socialist and egalitarian cultural doctrine: a message of strong individualism and declaration of the “self” is not so effective in these cities. Furthermore, these consumers are characterized by a greater preference for functional products. Consumers in lower tier cities are interested in luxury goods that clearly demonstrate quality of materials and craftsmanship and product performance aspects such as longevity and reliability. Therefore, a popularity-based strategy alone that doesn’t consider the feature aspect will fail in these cities.

The cultural disparities that run between the upper and lower tier cities make the use of the same marketing strategy ineffective – at best – harmful – at worst.

Experiential Marketing

Experiential marketing is a global trend, but in the sub-3rd tier cities in China is not yet a thing. This leaves a huge space for all brands who decide to give potential buyers unique experiences. The purpose of this type of marketing is to provide impressive performance for first-time users, but more importantly, the intention is to leave an indelible impression on existing fans that will guarantee their loyalty.

We – obviously – with digitization: interactive displays, VR, and smart dressing rooms are just some of the new technologies used to create unique interactive in-store experiences.
Live streaming sessions moderated by local KOLs or virtual intelligence, during which games, lotteries or challenges are held, are able to catalyze a younger but decidedly active audience from the point of view of purchases. In particular, the use of KOC seems to be particularly effective, since it is based on word of mouth and trust in the community.
Online digital events and gamification are extremely popular, as long as they leverage the cultural values shared in this type of cities.

Art also plays a crucial role: in lower-tier cities there are not many exhibitions or galleries. Luxury brands can seize the opportunity and offset this artistic deficit by creating shows, co-branding activities and shops / galleries exclusively in lower-tier cities.
Once the boundaries of co-branding are broken down, the possibilities are endless: shops serving wine or food, music events in-store, every weapon at your disposal is valid for entertaining and selling to an audience that has limited access to a certain type of experiences, but the power spending to make them.

Share it:

%d bloggers like this: