Luxury labels embrace "new normal" as Chinese market shrinks

Among Bain's 1,400 respondents, 70 percent said they had used daigou: Competitive pricing, convenient mobile applications and safer payment methods were all cited as determining factors.

Adaption

Confronting the "new normal" of lower long term growth and emerging sales channels, such as daigou, global luxury producers are actively adapting themselves to the changing market dynamics.

Winning the country's growing middle class has become the priority for struggling luxury brands as a McKinsey & Co report predicted that the nouveau riche in second and third tier cities would be the new drivers of the domestic luxury market.

According to the firm's predictions, this group, who do not frequent luxury shops, now accounts for up to 61 percent of luxury customers.

Brands such as Louis Vuitton, Gucci and Coach are all actively shifting their strategies -- ditching flashy logos being the most notable trend -- to woo this newly emerged group, who are believed to have a different understanding of "luxury".

In its Shanghai-based flagship store, Coach has minimized the number of handbags emblazoned with its iconic logo, this category now accounts for less than a quarter of the store's display.

Gucci, instead of "standing high above the masses", streamed its fashion show online. Other mainstream luxury brands including Tiffany, Catier and Chaumet invited popular fashion bloggers from China to their events.

In addition, accounts on China's many social networking sites has become a must for luxury brands wanting to promote new collections.

Cosmetic brands, such as Clinique, have lowered the prices of some products in China. Luxury watch brands, including Zenith and Hublot, are expected to be priced the same in Chinese and overseas shops.

Zhou Ting, president of the Fortune Character Institute said the "consumption drain" following the variation of information and purchase channels has prompted luxury brands to consciously slash prices in China.

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