Luxury brand’s expansion in China - Opportunities and possible strategies

Abstract

Since the economic reform of China in 1978, the country has been under a process of industrialization and modernization. The average household income has risen, where the proportion of middle-class households, earning more than RMB 3 500 per month, has increased. In addition, there is a great share of the „China elite‟, which consists of the upper middle-class and the very wealthy. Due to China‟s enormous market of 1.3 billion people and the growth of wealthier households, the country has become the largest market for luxury. Many luxury brands are established in the market today, some with a greater presence, others more limited. The aim with our thesis is to investigate potential opportunities, in the aspects of customers and cities, for a luxury brand to consider when it seeks to expand in this vast market of China. We will also look into possible marketing strategies that luxury brands can apply. We conducted our study by looking at available secondary data, and have ensured the credibility of our study by evaluating various sources regarding the information required in order to answer our research questions. To further support our empirical data and analysis, we have conducted a case study of Burberry, which is an international luxury brand that has succeeded exceptionally well in the Chinese market. The result of our findings is that in the perspective of customers, they can be divided into demographic or psychographic views. The four demographic groups identified can exhibit different psychographic attributes. However, a demographic group can respond very well to a specific psychographic view. For a luxury brand that wants to succeed in the Chinese market, a sustainable customer base would consist of all segments from the both perspectives. Regarding the important cities, apart from the major cities Beijing and Shanghai, we have recommended five cities with potential growth in luxury consumption in the up-coming future. Some possible strategies that luxury brands can apply in order to pervade the Chinese market are using local faces and celebrities in their advertising, having an easy navigation of its websites that provide e-shops and different language choices, and most importantly, highlighting its specific firm advantages and bring forth its brand heritage in its products and promotions. It is also essential to have great patience when expanding in a market like China where the culture, norms and values highly differs from the West.