Tier-1 cities like Shanghai Beijing and Guangzhou on average have citizens with greater than average wealth vs. the rest of China. However the most wealthy Chinese tend to live in Tier-2 cities, and growth of netizens able to afford luxury products is higher in Tier-2 and below cities as well. Since many brands do not have physical retail presence in these cities, it makes adoption of ecommerce and scalable education through digital platforms critical to sales growth.
The vast majority of growth for consumers is outside Tier-1 cities like Shanghai, Beijing, Guangzhou and Shenzhen.
While total volume of luxury goods sales in 1st tier cities is higher, the growth in luxury demand is happening in 2nd and 3rd tier cities. Reaching these cities via ecommerce is key.
Customers still prefer to purchase products from luxury stores. Luxury brands should consider a “trunk show” solution to regions that they do now have a physical retail presence.