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Nov
2013

The growth of e-commerce, mobile technologies, and their affect on traditional physical retailing.

In many previous issues of Luxury Insights China we have reported and commented on the rapidly growing e-commerce sector in China, and that over the past year consumers have become more comfortable buying online, and their trust in certain e-tail sites has improved, particularly for the younger consumers; buying via the Internet and in particular the mobile phone is now the norm. The regular Chinese pastime of ‘showrooming’ has been embellished by m-commerce, and it would not be uncommon to see consumers browsing product in store and not buying. But to leave the physical space of the store only to access the electronic space on their phones in search of the best deal on something they have just seen.

So does this mean that all the efforts of luxury brands over the past 18 months to make their stores more experiential is wasted, and that consumers may continue to use them only as a showroom in which to see, touch and feel products rather than a place to actually part with their money? My view is ‘very probably’, especially as new technologies are commercialised that make the online shopping experience more enjoyable, a fact that will attract a greater number of younger shoppers over the coming years. Let’s not also ignore the current attitude amongst those Chinese who have an opportunity to travel overseas; they visit luxury stores in China to determine the product they want and then buy it in an international location where the price is lower.

This research and purchase model is already well established from the white-collar consumers to the HNWI’s, and its here to stay.

According to the Savills report, very few luxury brands plan store openings in 2013 and activity levels are expected to remain low through 2014, or until the market picks up. Their findings also support our previous predictions of a growth in the affordable luxury sector with new brands in this category aiming to enter China over the coming years, which will also includes boutique and designer brands.

But the bigger question still remains unanswered as to ‘what will the luxury retail environment will look like over the coming few years, and by the time the market picks up, will disruptive technologies have changed the retail experience for ever?’ Although luxury brands have been slow to adopt digital technologies, will they in China at least, be forced heavily in the digital direction by a more tech savvy group of consumers and a need to reach out across the huge expanses of the country to their rapidly growing consumer demographic?

According to the KPMG Technology Innovation survey 2013, China is likely to overtake Silicon Valley in terms of leadership of technological developments because ‘China’s mobile communications market – the largest in the world – combined with its quick shift to the mobile platform, and its tech-savvy urban consumers are all contributors’ …

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