SHANGHAI, China — As China ushered in the Year of the Dog with New Year celebrations, shoppers stepped up their spending, splashing out at retailers, restaurants and cinemas this year, according to the Ministry of Commerce.
Chinese consumers spent 926 billion yuan ($146 billion) shopping and eating out during the week-long holiday period that began on February 15, an increase of 10.2 percent compared to last year’s holiday season, the ministry said.
“Chinese New Year is the season for people to ‘throw out the old and welcome the new,’ so there’s always demand for new products and apparel,” James Hebbert, managing director at Hylink Group, the largest independent digital agency in China, told BoF. “This is the season where you’ll be meeting plenty of relatives and friends, so there’s a need to show your status and having the latest collection from a luxury brand is often seen as a sign of prestige and wealth.”
Indeed, Chinese New Year is a golden opportunity for luxury and fashion companies, so it’s no surprise brands are taking advantage of Chinese spending power, particularly that of young Chinese consumers, whose elders traditionally provide them with hongbao, or red envelopes, tucked with “lucky money” to mark the occasion. “Gift-giving culture also represents a tremendous opportunity for luxury brands to target consumers during Chinese New Year,” said Zara Hoffman, director of strategic operations at Jing Daily, a China-focused media publication.
Perhaps one of the biggest opportunities for luxury brands is celebrity dressing during the Spring Festival Gala, which has been aired during the holiday season since 1983 by China’s state-owned television network CCTV and attracts over 700 million viewers each year — more than the Super Bowl audience of 103 million in 2017.
One of the biggest opportunities for luxury brands is the Spring Festival Gala, which has more viewers than the Super Bowl.
While the purpose of the gala is to signify China’s political, cultural and social priorities, it has now become a significant marketing event, as Chinese viewers keenly scrutinise and discuss on social media what their favourite celebrities are wearing. Stars wore Givenchy, Armani, Dior, Gucci and Burberry among others. (However, the show was overshadowed in the Western media by a controversial skit featuring a Chinese actress in blackface and fake giant buttocks in a comedy skit, to depict an African character.)
This year, Chinese consumers purchased more imported goods online. Foreign products accounted for 63 percent of Chinese New Year purchases, with demand coming, in particular, from second-tier cities, according to state-run reports. Yet while online orders increased, most local deliverymen were on holiday and spending time with their families, creating a hurdle for e-commerce giants like Alibaba and JD.com. Some retailers have been hiring foreign students looking for extra cash to deliver the parcels — a strategy also used during the Singles Day event in November, to keep up with surging demand.
Chinese also travelled more during the holiday, with tourism revenues rising 12.6 percent to 475 billion RMB, according to a report by the China National Tourism Administration. 2016 saw a boom in domestic Chinese travellers, while 2017 was the year many first went to adventurous locations like Morocco, Peru and Tonga because more visa restrictions were lifted. This year many opted to stay close to home, said Jing Daily’s associate editor Yiling Pan. “Asian destinations such as Tokyo, Bangkok, Osaka and Taipei were among the most popular.” The number of trips taken during the period rose by 12.1 percent to 386 million RMB, the report said.
This year was the weakest spending growth for the New Year period since 2005.
As luxury boutiques continue to be one of the biggest beneficiaries of the occasion, brands have been gearing up for the New Year spending spree. Alessandro Michele designed a special collection featuring his Boston terriers for Gucci. Adidas released a sneaker pack inspired by four Chinese blessings — each shoe boasts a specific colour combination and Chinese symbols of happiness, wealth, longevity or good luck. Louis Vuitton, Bottega Veneta, Prada, Fendi, Longchamp and Dior have also released digital campaigns or limited-edition merchandise.
Over the coming years, the occasion will mark a larger sales opportunity for beauty brands, with Chinese consumers estimated to spend 715 billion RMB on cosmetics and personal care products globally by 2022 during Chinese New Year, up from 249 billion RMB in 2018, according to BMI Research. “There’s an opportunity for luxury cosmetic brands such as Dior, Shiseido and even Korean brands like Sulwhasoo,” said BMI’s consumer analyst Nainika Singh.
However, while sales totals continue to climb, this year was the weakest spending growth for the New Year period since 2005, with business analysts citing the real estate slowdown and stock market turbulence ahead of the holidays, which may have left Chinese feeling less wealthy than in the past. In 2017, the sales growth rate during the Chinese New Year period was 11.4 percent, and in 2016, 11.2 percent.
In Other News…
Kris Wu becomes China’s first Super Bowl performer. Wu’s performance and the games were broadcasted by Tencent Sport, NFL China’s exclusive live digital streaming partner. The Burberry ambassador, who reportedly brought about a 22 percent increase in the Burberry’s third-quarter retail income, following their first collaboration in November 2016, was also announced as the new Super Bowl Ambassador for NFL China.
Given Wu’s reputation as a fashion plate, it is worth nothing that NFL merchandise — especially clothing and accessories — is an important revenue stream for the sports association and its teams. What’s more, according to the IPWatchdog.com, counterfeit NFL jerseys have been a significant problem in recent years, so an investment in Wu might stem the flow and redirect fans to official merchandise.
Meanwhile, the league’s sights are set on expanding the game abroad amid reports that the NFL’s advertising revenue dropped by 1.2 percent to 2.4 billion dollars in 2017. But in light of Wu’s impressive 25 million strong Weibo following, some industry insiders wonder if his endorsement could overshadow coverage of the games themselves; last year, Weibo statistics revealed that views of Lady Gaga’s halftime show performance was eight times that of the New England Patriot’s win.
Harrods launches WeChat Pay. Available at its flagship and airport retail locations, the payment options are an appeal to tourists from Harrods’ biggest international market. (The department store claims that one in every £5 spent by Chinese visitors to London is spent at their Knightsbridge store, and in 2017 it announced a three-year plan to invest £200 million into in-store and online experience.)
The move comes amid an ongoing rivalry between Tencent’s WeChat Pay and Alibaba’s AliPay, as both companies have pursued global expansion since 2015. In continental Europe, which welcomes approximately 10 million Chinese visitors each year, both companies partner with BNP Paribas, launching the respective services in department stores under the Parisian Galeries Lafayette Group.
AliPay is currently in the lead, with payment and VAT refund services supported across 18 European countries and in stores such as Paris’ Printemps, German chain Zwilling and London’s Selfridges. However, the launch of WeChat Pay in Italy was announced last month, as the result of a deal between Docomo Digital and Digital Retex — the latter company already manages the official WeChat accounts for over 70 European brands such as Ermenegildo Zegna and Valentino.
Shenzhen ups its fashion credentials. As the home base of tech giants Tencent and Huawei Technologies, Shenzhen— otherwise known as China’s ‘Silicon Valley’— is growing into a hub for major players in Chinese retail. Following a wholly owned subsidiary’s acquisition of Shangpin Technology Development Limited in January, Shenzhen-based Hemei Group now holds a 90 percent stake in e-commerce retailer Shangpin.com.
Shangpin, which boasts 10 million subscribers and 1,400 international brands, is set to open Topshop’s first store in China this September as the British retailer’s mainland franchisee. The e-commerce acquisition complements Hemei’s offline luxury retail portfolio. Since acquiring Wenzhou Chonggao Department Store last September, Hemei is now China’s authorised distributor of Giorgio Armani, Dolce & Gabbana, Hogan and Furla.
Another Shenzhen-based luxury power player is Ellassay, who aims “to eventually become a high-end fashion group,” following the company’s acquisition of majority stakes in designer Vivienne Tam’s brand rights and French contemporary brand Iro’s entire operations last year. Though Shanghai is widely recognised as China’s fashion capital, Shenzhen’s cluster of tech and retail giants will be key in attracting valuable talent.
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