Leather Goods Market in China: Digital War

The economic growth in China is a huge driver of the luxury goods market and demand for high-quality products increases correspondingly – there are more international brands entering this space than ever before! In 2021 alone, sales revenue of leather luxury goods reached US$8 541 billion. More young generations purchase fashion and the importance of social media for customers has increased with their tastes expressed in expressing themselves through purchasing high-end items.

The importance placed on having an omnichannel strategy for distribution combined with how much younger generations care about sharing their purchase decisions means retailers need to find ways In this article, we will present the potential in distribution, customer behavior, and special social commerce in China.

China Leather Goods market potential

Comparing both domestic production and imported foreign products, China itself is an enormous exporter of leather goods worldwide generating 25% of the annual global leather production. China’s leather industry is well-known for heavy skin made for manufacturing belts, straps, and soles, as well as light leather used for shoes, bags, and jackets. In 2019, China contributed 40.8 % of the global value of exported leather goods followed by Italy (14.8%) and France(11.5%). As reported by China Leather Organization stated, China leather manufacturers sell shoes (64.8%), luggage and bags (13.46%), leather (11.22%), leather garments (5.55%), and by-products (5.08%) in 2021. 

In terms of the potential of China market, there are growing demands for imported leather of all kinds for manufacturing and foreign manufactured finished products such as quality footwear and leather fashion handbags. Imports of leather and finished products rose to US$9.8 billion, growing by 10.7%. 

China Luxury leather goods Market

• In 2014, leather goods made up almost 30 percent of the personal luxury market. Luxury handbags and leather goods generate sales across all age groups same as luxury jewelry, shoes, and clothes.
• In 2021, the revenue of the Luxury Leather Goods segment is expected to reach US$8.541 million and is predicted to grow by 5.83% annually for the next 5 years.

Bags & Leather Goods Consumption in China

In 2021, the annual revenue of luxury leather goods in China is predicted to be US$8 billion with a 7% growth rate. Famous luxury brands selling leather goods in China are Hermès, Chanel, Louis Vuitton, Gucci, and Dior. Customer purchase factors include design and materials, as well as brands. Among those buyers, 68% of them collect at least a handbag once every other season and 36% even purchase one per season.

Leather Goods Consumers are Getting Younger

Currently, a quarter of Chinese customers purchase fashion leather goods aged from 18 to 24, then followed by the working-classed women aged from 25 to 34(22%) with higher buyer power on average. Some purchase fashion bags and luxury bags to express their fashion taste, as a gift reward, and due to the preference of certain brands, designers, quality goods, etc.

For instance, the French classical luxury shoe brand, Roger Vivier, launches new categories and in-trend colors targeting young generations. Roger Vivier collaborates with Chinese celebrities, such as Nana Ouyang, to promote their luxury bags in China targeting their young customers. They choose their digital presence on one of the Chinese most-used social media, Weibo, to reach Chinese who frequently spends their time on social media.

Additionally, shoppers aged from 18-44 who search for information on fashion leather goods before purchasing have a correlated high transaction rate. Considering this customer group is the primary target in this category, a diverse digital presence, and corresponding marketing would bring your brand more publicity and help strengthen your brand image.

In China, the young generation enjoys socially sharing their purchase including luxury and fashion leather goods, even online. Some share videos in Billibili and RED including unboxing reviews of goods, trends analysis, collections sharing, etc. 

Although customers aged from 45 to 54 only account for 4% of purchases, half of them still search online before purchasing. Meanwhile, they enjoy buying in physical stores as well. Thus, Omni-channels would still be your consideration building your presence in China.

Chinese consumer’s Preference when it comes to leather goods

Seen from the global luxury and fashion markets, nearly every brand under prestigious brands house LVMH, Kering, and Richemont sell leather goods, stated to the fashion magazine. In 2014, leather goods stand for 30 % of the personal luxury market, and leather accessories reached $46 billion next year. 

China customers prefer to purchase internationally well-known brands then followed by the attractiveness of superior craftsmanship and quality of materials. 20% of consumers reportedly spend more on experiences than products(13%). One-third of luxury consumers in China are willing to buy products designed specifically for the country and match Chinese imagery. User-generated content can also bring influence. KOLs and celebrities can also bring huge influence.

Leather Goods Segment in the Chinese market

Biggest market share: Leather Bag

China imported mostly bags which reached the amount of 10450 pieces in 2017. In 2016, the growing interest in online purchases of luggage and leather goods is predicted to grow at 25.4% for a constant five years.

• More unisex bags are designed and purchased for all gender.
• People purchase luxury bags at younger ages and they are the future main customers for luxury brands that would like to compete in line.
• The Chinese luggage market is projected to grow at a CAGR of 7.3% by 2025.
• The second-hand market is growing in this segment

Leather shoes in China

In the footwear category, most sales were credited to women’s shoes (47% and RMB206.7 billion), then followed by men’s shoes(38%) and children’s shoes (63 billion) in 2019. According to HKTDC, primary leather shoe buyers are office workers. Speaking of the factors in choosing leather shoes, men prefer traditional designs as the formal and professional expression in China. Women prefer to purchase trendy and new designs. Generally speaking, the leather shoe segment is the fastest-growing segment in the footwear category in China and is predicted to stable growth of 1.5%. 

Raw materials

In 2020, imported leather goods constituted mainly shoes ($55.6 billion), luggage and bags($44 billion), and raw materials($10.1 billion). China imported those leather goods mainly from the EU (34.7%) and ASEAN (39.6%) and the USA (4.8%) which accounts for $152.4 billion in total in 2020. During 2017-2020, we can see the growing potential of the shoe category and the remaining high travel-related goods and bags. Sustainable leather goods and vegan leather goods can also pay attention to the rising environmental awareness in China.

What are the trends in the Chinese leather Goods market?

Eco-leather trends

Not only do Chinese consumers appreciate details of design, brands, and fabric, but also the production process according to Mckinsey China Luxury Report 2019. With rising sustainable awareness, considering environment (72%), quality (72%), animal welfare (63%), personal expression (61%), and cost (56%), 62 % of China interviewers are willing to pay more to purchase bio-based next-gen leather goods. Also, 90% of Chinese customers like animal-free leather such as next-gen plant-based leather.

The rise of Luxury Leather goods on Chinese e-commerce apps

30 % of consumers purchase online in 2020. Luxury leather goods from brands such as Hermès, Alexander Wang, Prada, and Cartier opened official Tmall stores before 2021. Dior, Gucci, Bulgari, and Versace have their digital presence and e-commerce in WeChat. 62% of customers prefer ROPO(Research Online, Purchase Online). Livestream can also generate sales in China. China customers aged from 21-35 are the new main force in purchasing luxury goods with 8 times purchases on average in 2017.

More relative local organizations and leather industry news:

Click here to see 2021 updated leather goods imported tax regulations.

An All China Leather Exhibition hosted by China Leather Industry Association (CLIA) and APLF will take place in Shanghai on 23-25th November 2021.

What are the main avenues to sell leather goods in China?

Classique distribution: working with Chinese distributors

Distributors in China focus on products’ value and potential to collaborate. Distributors are in charge of product delivery, paper works, and regulation. They do not assist with marketing development. Reaching out to them would be a challenge as well, but the network would be more helpful. 

Brick and mortar stores: still a channel of choice for Chinese consumers

Although eCommerce has gained a lot of ground, the bulk of customers still visits physical stores before making a purchasing decision with a luxury brand. After all, purchasing luxury goods is also about the experience. It is becoming more and more common for luxury consumers in China, to first visit a physical store and later purchase an item online to enjoy some promotion or be able to have access to customization and so on.

In China, joint-venture is the common enterprise model which will also help the trends observations. You can collaborate with an individual or a company in China. To protect your intellectual property, you are also suggested to register your company with State Intellectual Property Office.

Chinese eCommerce Apps

Offer your customers a worry-free transaction directly from their mobile phones. The idea, that eCommerce cheapens the luxury experience is quickly becoming obsolete in the middle kingdom. Indeed, e-commerce apps are designing more and more tools allowing Luxury brands to offer VIP experiences to their customers, even online. Tools such as AR, gaming, live streams, etc.

• Tmall & Tmall global

Tmall is China’s biggest eCommerce platform and is widely trusted by consumers and brands for the services it provides. It also offers a global version for brands that do not have stock in China and have Chinese business licenses. There are 29000 brands present on Tmall Global and mostly purchased here are beauty, mom, and baby products. Both versions of Tmall are a great place to be for luxury brands. Tmall also has a dedicated zone for Luxury brands known as Tmall Pavilion.

Tmall Luxury Pavilion was created in 2017 and 200 brands from apparel to high-end cars were invited to join in only two years. In 2020, Tmall Luxury Pavilion has 750 million users. Tmall’s “Hey Box” feature uses artificial intelligence and big data to select brands presented to the users. On the Tmall Luxury Pavilion webpage, the main section is recommendations from garments, and bags to accessories for both females and males.

In the app, there is a specific luxury platform that features new events, new arrival, new benefit, and new trend. You can pre-launch limitation sales in new events for users to set the notification for purchasing in advance as Michael Kors Super Brand Day. This platform is also connected to Farfetch. Although Tmall Pavilion is available to any customer, only some Tmall users have easy access to it.

Tmall Luxury SoHo is a platform that allows young and trendy luxury buyers to search and discover new designer brands in one place. Brands can sell off-season goods here when brands encounter inventory overstocks; meanwhile, customers can also purchase seasonal goods at more affordable prices.

• JD & JD worldwide

JD.com is another Chinese eCommerce giant we do not need to introduce anymore. If the app was initially more focused on electronics, it has started to catch up with Tmall when it comes to luxury, cosmetics, and fashion.

Over 200 luxury brands have established partnerships with JD. Furthermore, JD provides free service helping launch WeChat mini-programs within just one week to generate extra traffic. JD members can connect to WeChat mini program through JD pages to purchase the products and pay with WeChat Pay. WeChat is not only a social app owning over 1 billion Chinese users, but is also equipped with WeChat stores, mini-program and WeChat Pay, etc.

In 2020, luxury leather goods brands build JD flagship stores such as Smythson, Pringle of Scotland, and Delvaux. For also other British brands, JD Luxury works with the British Fashion Council from 2018 to 2020 to push brands and designers, and even fashion suppliers for the Chinese market expansion.

Where Promote your Leather Goods Brands in China

Xiaohongshu: the Social Ecommerce App for Luxury & Lifestyle Brands

Xiaohongshu is a social commerce app that allows brands to sell & promote products at the same time. It is mainly social media that the young generation uses to share cosmetics, fashion, luxury, and lifestyle. As more and more Chinese customers purchase luxury and fashion for their personality and self-expression, they also share those on Red. For instance, Users and KOLs share their OOTD (Outfit of The Day), brands, and reviews with the hashtag, location, and tagging of that account. Luxury leather goods brands such as Gucci, Coach, and Givenchy present themselves on Xiaohongshu.

Little Red Book is also used to share buying experiences and products review which is extremely valuable for brands in a country like China where word of mouth is key. RED, because of its core function of shopping notes (the reviews) has quickly become a Kols App.

The app also offers a paid ads function as well as an official account & eCommerce store (RED Store) for brands.

WeChat: China’s most used Social media

Not only does WeChat have the largest user base in China, but it also has an abundance of tools and features that can be used by brands to work on their reputation. Having a Wechat Business account enables you to take full advantage of the app ecosystem. With a WeChat business account, you’ll be able to send promotions and campaigns message to your followers but also sell your product, create VIP events, and so on.

Weibo: Perfect for Fashion brand Advertising

Weibo is one of the biggest Chinese social media and is widely used by Chinese luxury consumers and brands. Weibo has one of the best-paid advertising systems for social media in China. Its efficiency/pricing could be compared to Facebook. Because Weibo (like Twitter) is an open social media, posts can become viral quite quickly, offering a lot of visibility. Weibo is a great place to build a following and engage with your target audience. Weibo, also offer an official account system with marketing tools for brands such as contest and lucky draw.

Get Yourself a Chinese Website & rank on Baidu

• Why do you need a Chinese website?

It is all about credibility for your brand. If you don’t have a website, especially in the FCGM industry, consumers might think you are not legit. You would not enter your local market without a website so why would you do so in China?

You may tell me that your local website is enough, but first of all, many Chinese do not speak your language or English for that matter and English website tends to not rank so well on local search engines. Not only that, your current website is most likely optimized for google and probably also uses google plugins that will simply not work in China. The easiest solution is to have a separate Chinese Website, hosted either in China or close countries, optimized for Baidu.

• why do you need to rank on Baidu?

Most of us google a brand/products name to look for more information and reviews about it, Chinese consumers do so on Baidu. You want to be visible, not only to get traffic but for your credibility as a brand on the market. Chinese consumers are not risk-takers, so if no results are attached to your brands when looking for them on Baidu, that is a sign that you are not reliable and that will affect your sales on other channels.

Having ICP (Internet Content Provider) License to build your website locally can provide a better user experience with a faster and more stable server. ICPL enables you to get verified your website with more feature accessibility and bring more trust to be ranked higher and increase your web traffic on the dominant China search engine, Baidu. Moreover, SEO for organic search traffic cost less than investment in campaign and advertisement and can be your long-term investment.

To Conclude: The Chinese Leather Good Market

Omni-channels, local preferences, and purchase factors can help you design attractive products and touchpoints for Chinese customers. As the main customers are the young generation, comprehensive online digital purchase experience, thoughtful after-sales customer service, and values of social sharing bring more attractiveness to Chinese young customers. Besides the apparent personality of brand image, collaboration with influencers and celebrities can also create trends in China.

Contact GMA to Start Selling your Leather Goods in China

Contact-us, we have solutions to help you grow/enter the Chinese leather goods market