Luxury Brands Are Digitizing, and China Is Their Fiercest Digitizer

In the past several years, the world of high fashion has been constantly facing a host of sudden changes that, at times, seemed detrimental to the industry. The rise in public eco-consciousness resulted in a number of global brands abandoning the use of real fur and exotic skins in their products. Several trend disruptions brought street style to the forefront, prompting traditionally high-brow luxury brands to switch their focus from loafers and gowns to sneakers and hoodies. But behind all this is a staggering transformation in their consumer base – it got younger, digitally savvier, and more demanding, and nowhere else is this more evident than in China.

One of the preeminent powers of the global luxury industry, Louis Vuitton, recently made a move that wowed not only the global fashion community, but also retail market pundits the world over. After an immensely successful joint collection with Supreme several years ago, the fashion giant became even more adventurous and struck up a collaboration with “League of Legends”, an online game created by the California-based developer Riot Games which is owned by the Chinese tech behemoth Tencent. This sort of alliance would be unheard of just some ten years ago, when the average computer game fan was a penniless teenager in a dirty t-shirt in front of a PC screen. 

The advent of mobile internet and subsequently mobile gaming has caused a major shift in how and by whom games are consumed. PCs or consoles like a PlayStation were stationary objects that required commitment from a person who wanted to use them. To play a favorite game one would need to allocate a considerable amount of time just to sit at the computer and enjoy the process. Most money-making adults simply did not have that privilege. 

Nearly the third of global luxury sales will be online by 2025. Sales of premium goods in USD billion (%). (Source: Luxe Digital)

China’s mobile revolution ushered in an era of on-the-go content consumption that spans games, live streams, short videos, mini-blogs and pictures. The key demographic guzzling these digital products is still young. But instead of wasting their time at home staring at a computer screen, these youths are grinding at work and at school, while filling the gaps with mobile entertainment. Unsurprisingly, some of these people happen to have money for luxury goods. Not to mention that China’s relatively recent economic rise has drastically improved people’s livelihoods and given rise to a whole generation of young people born into wealthy families, the so called fuerdai (富二代; lit, ‘rich second generation’).

According to McKinsey’s 2019 China Luxury Report, the driving force behind the burgeoning Chinese premium goods market are the post-80’s and post-90’s generations. It’s the people who have grown concomitantly with China’s global economic glow up, who now spend 41,000 yuan (~$5,860) per person each year on luxury items. Another important insight from McKinsey shows that only 13% of the post-’80s and ’90s consumers surveyed in their research grew up wealthy, meaning that most of those consumers are new to the market and are in the process of acquiring tastes and preferences.

Luxury advertisement expenditure in China and the USA was forecasted to grow from 2017 to 2019, which is especially evident in China’s 14.4% rise in “all other digital spend”. Digital advertising here is divided into five categories: display, search, video, social, and all other digital. (Source: Luxury Advertising Expenditure Forecasts 2018, Zenith)

Deloitte, in their Global Powers of Luxury Goods 2019 report, came up with a slightly different description of essentially the same consumer, calling them HENRY, which stands for High-Earners-Not–Rich-Yet. These people possess significant discretionary income, are highly likely to be wealthy in the future and are heavily reliant on technology and digital channels in making purchase decisions. For one, they prefer to pay online with mobile devices. In fact, China is awash with HENRYs.

The brands see a clear trend and go to great lengths to tap into the young Chinese appetite for mobile consumption. Gucci is partnering with Tencent to make the most out of KOL marketing, hiring internet influencers to appear in their video campaigns. Burberry is launching an online retail platform, while pretty much every big brand already has a WeChat official account and a mini-program allowing users to make purchases directly through the social media platform. Michael Kors have even gone as far as to launch a campaign on Douyin (The Chinese domestic version of TikTok), a young controversial short-video app that seems to be the farthest thing from a hub for luxury consumers.

A section in McKinsey’s report underscores that “instead of legacy reputations established over hundreds of years in Europe, these new luxury consumers are influenced more by what is happening right now, leaving ample room for brands with the right strategy to shape their tastes.” This explains Louis Vuitton’s willingness to partner with an online game as a way to gain exposure among young Chinese consumers, who might not have the historical appreciation for the brand, but who love mobile entertainment and have several thousand dollars to spare. Considering that China’s gaming population is soaring close to 500 million people, according to the China Internet Network Information Center, and that the League of Legends World Championship, to which Louis Vuitton dedicated their new collection, was watched by 99.6 million unique viewers worldwide, that seems like a fair bet.


If you want to explore China’s tech ecosystem but don’t know where to start, check out DecodeChina, a one-week immersion program organized by insiders from Pandaily. The latest installment will take place in Beijing and Shenzhen on January 13-19, 2020. Visit decode.pandaily.com to apply and secure a spot!