The luxury market in Asia, especially in China, Japan, and South Korea, is grappling with notable challenges due to various economic and social factors.
Recent economic conditions and regulatory measures in these countries have heavily impacted the sale of luxury goods.
What are the challenges for luxury brands?
In this article, we will cover the initiatives that both countries are setting in place and how the luxury sector can turn this hiccup into an opportunity while still working to increase their brand reputation.
China: The context of the crackdown
In China, the government’s “Clear and Bright” campaign reflects a broader initiative for “common prosperity” under President Xi Jinping.
This campaign aims to address economic inequality by discouraging materialism and promoting a collective societal ethos.
Influencers such as Wang Hongquanxing who earned the moniker “China’s Kim Kardashian,” have been banned from platforms like Douyin and Bilibili after the Chinese government’s Cyberspace Administration watchdog issued a ruling that social media users are barred from creating “ostentatious personas.” This represents a stark shift in the digital landscape, where luxury brands typically thrive.
South Korea: CSR and Daigou Trade Issues
In South Korea, the approach to influencers’ lavish display of wealth is less severe but there is growing pressure to adopt more socially responsible images.
This awareness goes hand in hand with other economic turbulence that the country is experiencing.
In fact, South Korea’s luxury market faces turbulence due to a crackdown on the daigou trade. This trade involves intermediaries buying luxury goods abroad to resell in other Asian markets, often bypassing taxes and duty fees.
The crackdown aims to curb tax revenue losses, which amount to over USD 7 billion globally. This has led to stricter customs controls and efforts by brands to harmonize prices between regions.
However, what is less openly addressed is the fact that the lavish lifestyle showcased on social media is becoming an issue.
This is not so much because of the showcasing of overwhelming wealth. Rather, it is because there is a growing concern over the lack of social responsibility of luxury brands among a younger generation of very wealthy consumers.
Japan: Grappling with the Cost of Living is becoming an issue
Japan’s luxury market, while more resilient, is also under pressure from global economic uncertainties.
The declining value of the Yen and rising costs are impacting consumer spending.
Japan relies heavily on imports, and higher prices for essentials have made consumers more frugal, particularly younger ones who prioritise savings over luxury spending.
Implications for Luxury Brands
In our latest report on the use of blockchain in the luxury industry, we explored the shifting priorities of luxury consumers.
Today’s buyers place a high value on corporate social responsibility, realising that a brand’s commitment to social and environmental sustainability is as crucial as its prestige.
Our reports show that consumers now favour brands with strong environmental, social, and corporate governance commitments.
Additionally, we have highlighted that luxury consumers across the globe seek purpose and responsibility over mere displays of wealth.
With 40% of luxury purchases influenced by online perceptions, brands must actively manage their reputations by promoting sustainable and socially responsible practices, perhaps starting to move away from ostentatious displays of wealth. This shift is vital for maintaining consumer trust and loyalty.
Additionally, most Asian countries are stabilising in terms of economic growth, leading to a more balanced distribution of wealth.
While we can expect a growing wealth, there is also potential for a more equitable middle class. This economic balancing could reshape the luxury market, influencing consumer behaviour and preferences. Brands need to adapt to these changes, aligning their strategies with the evolving expectations of a more socially conscious and environmentally aware consumer base.
What can luxury brands do?
Luxury brands must update their marketing to match changing social values.
Consumers now seek authenticity and substance from brands. Luxury brands must transition from symbols of wealth to embodying values like sustainability and social responsibility.
This shift is crucial for rebuilding trust and ensuring long-term customer loyalty.
Brands that successfully adapt will resonate more deeply with socially conscious consumers.
For those looking to enter the Asian market quickly, understanding the local cultural shifts can provide a competitive edge.
Explore how we can help you navigate these dynamic markets and build a strong, responsible brand presence.
