Online and mobile commerce for luxury brands in China has risen at an exponential pace, while smartphone penetration continues to grow rapidly, according to a recent survey of 10,150 consumers in China.
KPMG has launched a new ecommerce survey of online spending in China, in partnership with Mei.com (A China-based online luxury flash sales retailer) and Weibo (An online social media platform in China).
The joint survey titled – China’s Connected Consumers – analyses responses from 10,150 luxury consumers in China on their online spending patterns. The report is a sequel to a 2014 survey which also analysed online luxury spending in China. It highlights the rise of online transactions, as well as the increasingly important roles of social media and mobile devices.
Amongst the key findings, 45 percent of respondents said they purchased most of their luxury items through online options. They also indicated the maximum amount they felt comfortable paying online for a single item is RMB 4,200 – far higher than the RMB 1,900 they indicated in 2014 – an increase of 121 percent.
Egidio Zarrella, Clients and Innovation Partner, KPMG China, says: “China is the largest market in the world and will lead global ecommerce. The smartphone is the most commonly used device for retail; we expect mobile commerce expenditure to soon far exceed the PC internet platform, as Chinese consumers become more sophisticated and expand their purchasing platforms.”
From the survey analysis, the average spend levels went up about 28 percent compared to the previous 2014 survey. China’s consumers are spending close to one-third more on online purchases – averaging around RMB 2,300 on each single luxury transaction.
The top driver for purchasing online remains pricing and better deals. However the survey found that close to one-third of respondents had made luxury online purchases at the full, non-discounted price. This is an important development as other factors are starting to have more of an impact on people’s purchases, including product origin and its uniqueness.
Thibault Villet, CEO of Mei.com, says: “Price is becoming less of a driver. But value remains important as customers are well informed about global prices, since most of them travel physically or digitally.”
The survey also found that Chinese online luxury shoppers are increasingly willing to buy most categories of luxury products online.
The survey points to an increase in the average amount spent on luxury purchases in most product categories. It highlights a higher amount spent on average for popular categories such as bags (109 percent), women’s apparel (58 percent) and cosmetics (18 percent), and also noted a significant increase in spending on categories such as watches (126 percent) and jewelry (65 percent) that accounts for a relatively smaller share of total online luxury sales.
Cosmetics is the most popular product bought online, followed by women’s shoes, bags and leather goods, women’s apparel and accessories.
Online to offline (O2O) meanwhile is an important and growing trend; the survey finds that among the key online triggers to purchase luxury e-commerce, the most persuasive one is reading about a product on a blog or social site and seeing the product in an online shop. While online shops are setting up temporary or pop-up stores, most luxury brands are also increasingly developing their China websites and shops on popular ecommerce platforms.
Zarrella notes: “The pace of change in today’s marketplace in China is taking retailers and brands by surprise. This change is unrelenting and now outrunning the company strategy in many cases.”
In addition to luxury items, the survey finds increased numbers of luxury services purchased online, including online hotel and restaurant bookings, followed by domestic and overseas trips. The survey also points to tremendous growth in overseas luxury e-commerce spending. 48 percent had bought items overseas over the previous 12 months, close to a majority. More than two-thirds of these claimed they increased their overseas online luxury purchases in the past 12 months.
The survey sees a near doubling of Chinese luxury online consumers planning to buy overseas trips online – from 35 percent who indicated they bought an overseas trip online during the past 12 months, to a forecasted 61 percent during the next 12 months –growth of more than 70 percent.
Zarrella concludes: “Chinese consumers have a significant propensity to spend, they are technology savvy and want the best quality. Therefore both new and existing entrants to China must expect to compete in a dynamic and fast-paced market. They must develop the right strategies to survive and thrive in an increasingly disruptive environment.”
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About the survey
KPMG China and Mei.com commissioned Intuit Research and WIMI to conduct a survey of Chinese consumers on their online spending patterns for luxury and other items. In total 10,150 qualified survey responses were received between January and February 2015 from respondents who claimed to have purchased premium or luxury items in the past 12 months. Respondents were based in over 90 cities, covering all provinces in China, and were between 18 and 50 years of age.
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have 155,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
KPMG China has 16 offices in Beijing, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong Kong SAR and Macau SAR, with around 9,000 people.
KPMG China refers to the member firms of KPMG International in Mainland China, Hong Kong SAR and Macau SAR.