"Consumers are becoming more selective about where they spend their money, shifting from products to services and from mass to premium segments," wrote authors of the McKinsey report on modern Chinese consumers.
Luxury European apparel brands with a presence in the country, such as Dolce & Gabbana, Gucci, Hugo Boss, Christian Dior
and others could build steady relationships with Chinese consumers who have more extra cash to spend and are opting for high quality goods. The same goes for accessories companies also in the region like Michael Kors
, Louis Vuitton and Coach
But to truly cash in, all of these retailers must be tech savvy. If retailers don't factor in the tech-driven life of most Chinese shoppers, it's a sure way to lose.
The country's online retail market is the world's largest, nearly 80% bigger than the United States', which it overtook some three years ago. E-commerce in China accounts for 13.5% all retail spending, a higher share than that of all large economies but the United Kingdom, according to the McKinsey report "How savvy, social shoppers are transforming Chinese e-commerce," by Kevin Wei Wang, Alan Lau and Fang Gong.
The authors cited four major areas of growth:
- Uptake of online shopping among consumers in low-tier cities.
- E-commerce penetration beyond first-mover product categories such as apparel.
- Purchases initiated from social media platforms.
- Use of cross-border shopping to supplement domestic channels.
But there are challenges for the retailers even if they are tech-friendly, wrote the authors: "Capitalizing on opportunities is becoming harder for consumer-facing companies as e-commerce penetration rates plateau in high-tier cities and as digital attackers, especially in the online-to-offline space, cut into incumbents' margins."