Luxury E-commerce Potential: "China Consumption Downgrade"

Consumption downgrade has become a worrisome development for Chinese and the world at large. This is compounded by the fact that for many years on the run the talk of the town has always been the consumption upgrades. This sad state of events is largely because of the middle class, who makes up the largest population, switch of their consumption trend. There is a growing preference for products imported or highly priced products to cheap and locally produced products. For instance people will prefer products like Nike, iPhone, Starbucks lattes to cheap phones and tea.

This trend has resulted to evident China’s slowing economy which is taking with it shopping habits. For the last few years Chinese currency has witnessed a significant loss in its value. The people attribute this worrying situation to continued trade war between the US and China. For many of them the future holds little to no hope.

What’s more traumatising is the rate at which people can’t seem to afford even the basic. The famous slogans doing round right now are; ride bikes instead of taxis, drink beer instead of cocktails, order a medium-size milk tea instead of a large, take up dancing in public squares instead of going to the gym, and many more. As a matter of fact most people are eating meat instead of tofu because soya beans are more expensive thanks to American tariffs. This has gotten the eye of the authorities as they are more concern with the increasing trend of youths refusing to be parents. It is no surprise an article titled “This Generation of Young Chinese, Brace for the Bitter Days Ahead", by Ming Na, attracted an overwhelming support from more than 300,000 people. What is clearly coming out from this great piece is an advise to the youths to stop going out to the malls and nightclubs. She symbolise the age of the consumption downgrade to a loud crashing sound.

Another notable trend supporting this change of pattern is how some products which were reserved for the rural because of their cheap price are now treasured products among the city dwellers. For instance, a Chinese app focused on cheap, sometimes iffy goods initially enjoyed the attention from the rural areas is now widely used across the board. In fact, most people living in the city are finding it hard to even pay their housing.

It is a common knowledge now that China has the largest consumer rate in the world. It is also worth noting the fact that in the recent time China has experienced an increased in luxury e-commerce market. It is for this reasons therefore, that most companies are responding to this Chinese consumer’s demand by switching gears.

In the recent time luxury brands from western countries have been launched in Asia and China with a clear intention of selling their products in Chinese mainland. It is not surprising therefore, with the change in consumption pattern that this initiative is gaining momentum. This has seen the sales of locally produced goods in the whole Asia dropping significantly. It is clear therefore, that the Chinese consumers have a preference for buying goods from a luxury brand online instead of purchasing a product from a store in China. That is to say, the luxury brands are gaining a lot on the online platform. Even though the luxury e-commerce in China is still evolving, it is believed that it will reach its maturity in 2018.

According to the Secoo whitepaper released recently, the millennials have a higher spending rate and it’s the highest source of the country’s discretionary income in 2015, which is predicted to reach more than 48% by 2022. It is interesting to note also that almost half of China’s luxury shoppers in 2017 were below 30. Secoo is expecting a growth of more than 5% every year from 2018 to make an approximately 530 billion RMB. This growth of sales among the youths has been fueled by social media channels like WeChat and Weibo who accounts for estimated 75% of their luxury news with only 24% derived from traditional media sources.

As Luxury e-commerce market is getting larger, leaders in Chinese luxury e-commerce will have more opportunities to grow better, especially for Secoo, which accounts for largest market share in China and Asia. Secoo also expands to lifestyle business, covering all aspects for consumers, which will also increase the competition capability. (To tell people, Secoo will have a future).