SHANGHAI, China — China may be a vast and growing fashion market, but it is not — as many foreign brands and investors might assume — a nation with unified tastes when it comes to online shopping.
It is a fascinating exercise to dig deeper into our exhaustive well of data to compare and contrast the way people shop in the major cities and the outlying provinces, which are home to an extraordinarily diverse array of second, third and fourth tier cities.
To get to the bottom of this, I recently commissioned an in-house survey to look at how high-end spending patterns were being affected by recent events in China. Even with the clampdown on corruption, where gifting has become less common, sales are up in the provinces, but somewhat level in the major cities.
Why is that? I will use the example of Prada sales to explain. We are still seeing growth in the poorer province of Ningxia, for example, with an average basket size of almost RMB4,000 ($590), mainly because the less sophisticated buyers there still want a handbag with a name that can be seen as a visible example of their affluence, and are prepared to pay for it. Less affluent inland provinces, such as Yunnan, Anhui and Hunan, are not far behind in spending significant amounts for prestigious brands.
Conversely, in the more affluent cities, the average basket size is lower. In the two most important cities, Beijing and Shanghai, purchasers already have the big-ticket bag, so lean more towards the purchase of accessories like shoes and scarves, which may also be branded less ostentatiously.
The market everyone wants to target in future is, naturally, the millennials, and our figures show that in some of the smaller cities — places that would have no resonance internationally — there is a higher proportion of enthusiastic consumers than the national average. Also, our customers in general are getting younger: two years ago we had just under 10 percent in the 20 to 25 age bracket, whereas last year the figure rose to 15 percent.
With the help of big data analytics, there are still huge opportunities to be reaped from China’s affordable luxury sector.
Another interesting statistic concerns Topshop jeans, one of our most popular products. In the northern parts of China, where temperatures remain below zero for most of the winter, sales start to drop in October, with people opting for thicker material trousers and knitwear.
Generally speaking though, Topshop has more resonance in the larger cities, amongst their more cosmopolitan citizens. In fact, more than 60 percent of Topshop's sales right now come from cities in the top two tiers, with almost 40 per cent of sales coming from the most affluent top tier cities of Beijing, Shanghai, Guangzhou and Shenzhen. The core buyers are aged between 26 and 31.
Having such detailed data allows us to aim campaigns for Topshop, and other brands, at targeted audiences like the event we did marking the birthday of the celebrity Yang Mi, who has 53 million social media followers: we handed out red packets and got a phenomenal spike in sales for the Topshop denim top she wore.
As someone from an IT background, I am fascinated by big data and really believe it can be used to great effect. But, like most things in China, it is difficult to stay with the curve, let alone be ahead of it, which is why we plough a significant amount of our resources into research.
Some of the data that emerges can be quite surprising — even amusing. Our figures show that people tend to shop for underwear in the late evening, for instance. Such subtleties reveal valuable insights into the Chinese market and are points that only people on the ground can fully understand, appreciate and act on. With the help of big data analytics, there are still huge opportunities to be reaped from China’s affordable luxury sector.
David Zhao is the founder and chief executive officer of Chinese fashion e-tailer Shangpin.com, which sells over 800 international and local brands including Lanvin, Topshop and Alexander T Zhao.
The views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.