What Is The Contribution Rate Of Chinese Consumers To The Sustained Growth Of The Global Personal Luxury Market?

In December 2019, Bain and Italy luxury goods association Fondazione Altagamma jointly released the 2019 Global Luxury Industry Research Report (Autumn Edition): Mainland China as the main engine of global luxury industry growth, overall sales increased by 26% to 30 billion euros. Globally, the contribution rate of Chinese consumers to the sustained growth of the global personal luxury market is 90%, accounting for 35% of the total global luxury consumption.

In other words, every three packages sold around the world are purchased by the Chinese. In the next few years, the Chinese market will become the largest market of luxury goods in the world. But paradoxically, the second-hand circulation rate in China is only 2%-3%. Over the past few years, the luxury goods industry has not welcomed the long-awaited outbreak. The outbreak in early 2020 brought uncertainty to many consumer industries, and triggered the chain effect of change in formats.

Goods and people -- the foundation of explosion

According to a report by Bain, the stock of idle luxury goods in China is as high as 8 trillion yuan and is growing at an annual rate of around 20%.

In the interview, the founder and CEO of the package master, Nilan Zheng show, also mentioned: conservative estimates, in the past three years, China's luxury goods stock reached 2 trillion and 500 billion. In recent years, a large number of second-hand luxury goods business has emerged in the second tier cities, and they all have strong ability to receive and fund, and there are tens of thousands of B end merchants with stock of more than ten million.

In China, the number of idle luxury goods or the size of employees is clearly enough to support a relatively perfect purchasing environment.

However, a large number of B end merchants have also caused the current situation of the seller's market being mixed up. The prevalence of fake and high imitation continues to interfere with the buying behavior of consumers.

The new consumer statistics counted the guests who visited The Peninsula Hotel luxury stores in the afternoon of 5~7 p.m. in March 3, 2020. They interviewed 21 consumers aged 21 years (Hannah), 24 years (Meng) and 30 years old (Sara) by way of occasional sampling. They said they spent 30 thousand yuan, 50 thousand yuan and 200 thousand yuan each year on luxury goods, but they also expressed doubts about the second-hand luxury transaction.

This distrust is mainly reflected in the suspicion of the authenticity of the goods.

Second hand luxury goods transaction belongs to the "deep water area" and the supply chain is decentralized.

Nalan Zheng shows that the high imitation products of China can reach 100 billion scale annually, although the crackdown continues, but the high profits are still driving this abnormal industry.

The destruction of high imitation products to the second hand luxury goods industry is far-reaching, and even eventually leads to the effect of the "bad luck" that drives bad money away from the good currency, thus completely disintegrating consumers' trust in the second hand luxury market.

Only by creating a "true" consumer environment for consumers can we get the future of the healthy development of the second hand luxury market.

For example, Vestiaire Collective is one of the largest second-hand luxury transaction websites in Europe, and sellers need to be authenticated. After the customer submits the transaction order, the seller needs to deliver the goods to the website identification center first, and the professional appraiser will be responsible for testing the authenticity of the goods, then send them to the customer's hand after the "checked" labels are attached.

Similarly, the domestic luxury platform, such as Bao master and temple library, will also be identified and sold on the shelves after receiving the goods, and the "authoritative appraisal" should be noted.

Nilan Zheng show said: we need to create a service experience for users to enjoy authentic products, seek truth and feel sincere.

In interviews with consumers, both Hannah and Meng indicated that they were interested in buying second-hand luxury goods. Apart from the consideration of authenticity, the cost performance and style were also decisive factors.

However, the supply chain of second-hand luxury goods is fragmented, and it is not easy to have diversified styles and high performance price ratio.

Take the master of package as an example, Nilan Zheng shows the supply chain management mode of the package master to the consumer internal reference: the characteristics of the second-hand luxury business determine that every B terminal merchant's inventory can not cover all the styles. The original solution is the replacement of merchant's point to point goods, while the master of package provides the online cloud storage for each other's own needs, which allows merchants to upload their goods, so as to improve inventory management efficiency and dynamic sales rate, and solve the pain of the industry in a lighter way. Give roses to your hand, and your hands will last.

Second hand luxury platform uses online cloud storage to shift the risk of its own inventory. Although it has sacrificed the premium generated by some second hand luxury resale, it has leveraged the operation capital of each B terminal merchant, covering a large number of goods styles.

Nilanzheng believes that in the field of second-hand luxury, direct recovery can enjoy higher profits, but it needs to bear the pressure of turnover alone. If there is a black swan event similar to the epidemic situation, there will be dramatic changes in the scene under the line. Heavy duty will face enormous pressure.

Platform, as a link between buyers and sellers, plays a role of underpinning in the transaction process. To create a good shopping atmosphere and enhance the immunity of the platform itself to external uncertainties is the necessary way for the platform and the foundation of the second hand luxury market.

Culture and IP -- a bursts of combustion improver

According to Bain's report, the "millennial generation" (generally referred to as the person born in 1980~1995) has become the backbone of luxury consumption. In 2019, it contributed 35% of the total consumption of global luxury goods, and it is expected that this proportion will further increase to 45% by 2025. In China, the trend of younger consumption of luxury goods seems to be more obvious.

In order to prove it, the new consumer insider interviewed Eric, Louis Vuitton of The Peninsula Hotel in Beijing. He spent nearly six years in luxury goods sales and received tens of thousands of customers. He said that 60% of the spending power was younger and the high paid young people buying luxury goods had become normalized.

The younger generation grew up in the era of China's economic rise. The wave of consumption upgrading pushed them to higher quality consumption, pushing them to the front door of luxury stores, giving them a new understanding of luxury consumption.

Nilan believes that the younger generation of consumers is self-confident consumers, and its tolerance for luxury consumption is also stronger. Their confidence comes from self-confidence in cultural and economic conditions, and their own independent judgement and dare to consume.

Young people in China know what really good things are compared with the previous generation. As an only child, they no longer have heavy financial pressure on luxury purchases.

In addition, the luxury brand side has also adapted to the change of the concept of the younger generation of consumers, and has adopted a new strategy quickly. Compared with the past styles, the new style is more prosperous and the logo is more prominent.

Whether Gucci is full of retro style advertising blockbusters or reinvented the Dior of the classic printing design of the last century, the luxury brand is catering to the aesthetics of the younger generation while vigorously creating a revival.

Undoubtedly, many classic brands have won a lot of exposure opportunities and consumer preferences, and also promoted the frequency of second-hand luxury goods transactions. For example, in 2018, after the Dior re launched the saddle bag series, the sale of second-hand saddle bags on the Vestiaire Collective platform surged 30 to 40%, and sales volume went up all the way.

The younger generation's acceptance of second hand luxury goods is getting higher and higher, which is related to the brand's marketing and marketing. According to a survey by Bain consulting, more than half of the millennials are willing to pay for brand values.

In other words, as long as young people feel this product is cool enough, they are willing to pay for it. The concept of shared economy and circular economy emerged in recent years is one of the fashionable lifestyles pursued by young people.

This is why a similar luxury brand like Stella McCartney has already been used overseas to convert the old goods into the brand coupons mode. The old goods are resale through the second-hand platform, and some buyers can also serve as the seed users of the brand.

For the circular economy mode in China, which is in a high-speed development stage, Nilan Zheng shows that master Bao may even try to cooperate with some big group companies in the future to help them carry out the new and old cycle.

She believes that although the trend of luxury goods market in recent years is still new, the recycling economy will develop more vigorously with the gradual progress of consumer awareness and the rise of luxury goods. The most important part of the circular economy is the intermediate service providers, but the brand awareness in this area is still slightly weaker. Therefore, master Bao will also focus on brand IP in 2020.

In 2019, the live broadcast of electronic commerce became one of the most popular ways of carrying goods, and the second-hand luxury platform also joined the ranks.

For example, the live broadcast of red brin is mainly carried out on the red brin APP. It will also be broadcast live on larger platforms such as Taobao. The anchors are recruited from outside, and need live experience. Red cloth will train relevant brand knowledge.

The anchor of red brin will display the products in the direct broadcast room according to the needs of buyers. The second-hand goods can clearly see the old and new details in the lens, so the direct viewing and attention of the live broadcast will be relatively high. In addition, live broadcasts will provide opportunities for buyers and sellers to establish a solid triangular relationship between anchor, platform and customers.

Judging from the amount of viewing, red brin's most popular popularity is the "special collection" and "special live broadcast". The selling rate of some anchors is up to 60%.

Coincidentally, recently, the second-hand luxury live TV channel brand has already completed tens of millions of dollars in A round of financing. At present, dozens of live rooms have been set up in nearly 10 cities nationwide, with nearly 60 hosts.

On the live platform, there is no clear boundary between the buyers and sellers of the fish. During the live broadcast, the anchor will emphasize that fans can either buy or sell.

According to statistics, 1/3 of the buyers of the concubine fish will come to the platform for two times. The open trading will increase the stickiness of the individual users and bring a steady stream of passenger flow to the platform.

Whether it is the master, or the red brin and the concubine, and even the luxury brand giants, they are trying to get closer to the younger generation, and gather up their favorite cultural forms to create a rich cultural form of IP.

Right time - tipping point

Young consumers tend to linger between new products and second-hand goods when purchasing luxury goods, and the trade-off between the two "new and old" platforms is more rigorous.

"The profit margins of second hand luxury goods are larger than those of new products," said Nilan Zheng show to reporters. "But the breadth of the market, the new product has a clear advantage.

In many consumer scenarios, users only include new products within the scope of consideration. No matter the male consumers who give gifts for the purpose of purchase, or the female consumers who are catching up with fashionable new products, although they do not buy second-hand luxury goods, they are good suppliers of second-hand goods.

When idle luxury goods enter the secondary market, suppliers will continue to buy new products with the "return blood", so the circular economy will work.

Faced with this trend of becoming more and more normalized, trading platform needs to be guided in an orderly way.

Under the guidance of the platform, the wheels of China's second hand luxury market are accelerating to the brink of explosive growth.

Referring to the developed Japanese second-hand luxury market, Japanese consumers have experienced the luxury consumption brought by the bubble economy in the last century, and Japan has also become the world's largest consumer of luxury goods.

But then the economic downturn and the bubble burst hit every Japanese dream, remodeling the consumption habits of the nation, and also spawned the developed second-hand luxury market. It can be said that the education of Japanese consumers is not only a coincidence, but a historical opportunity.

In addition to the stock base and the service providers, the outbreak of the second hand luxury industry needs a detonation point, just like the yeast's expansion fermentation of dough.

With the advent of the epidemic, the economic pressure faced by consumers is emerging again. This is a great stimulus to buyers and sellers of second-hand luxury goods.

The sale order of master Bao has shown a large increase since February, and Nilan believes that this may be the signal for the coming of the second hand luxury industry.

"We may see within one or two years that the industry has climbed rapidly from two hundred billion to three hundred billion in the past 100 billion market scale. We hope to take the time to polish up the services and products and prepare for the outbreak of the industry. She said.

On 15 February this year, Forbes was named "the 20 potential women in the business world", and her potential is probably a microcosm of the potential of China's second hand luxury market.

Salute the players!

In the vast commercial world, there are not only two business models, but there are really two rules.

Limited games and unlimited games.

In the limited game, rules are eternal, and there are doomed losers and winners. Once the winner is created, the game will stop abruptly.

In the infinite game, consumers and businesses play together with rules. New opportunities, new products, new services and new experiences are constantly being created in pursuit of the never-ending market changes. As long as we do not stop, consumers and businesses can let value flow in the process of amplification, and produce unexpected beautiful results.

Second hand luxury goods are from the past, but the rules of the game belong to the future, waiting for us to create. The new consumer review reviewed several outstanding companies in the second hand luxury market in China. Although they are not the last ones to win, they are the real "players" who deserve our praise.