#62: The “darkest days” of China luxury market 💎 , factory TikTok 2.0 🎥, consumer privacy safety concerns soar 😨| Following the Yuan
If you’re a paid member and interested in attending the YCW x KCL China event, I’m happy to get you tickets!
This Saturday, I’m going to be at King’s College London for the 8th Young China Watchers-King’s College London China Conference.
I will be joining Rory Green, the chief China economist at TS Lombard Research Partners, and Andrew People, the News Editor at The Wire China on the discussion “Is China’s 5% GDP growth target still in reach?”
I’m especially keen to bring up the idea of alternative metrics for institutions like the IMF and World Bank. Often, using the wrong KPI leads organizations and people astray. In China’s case, I’ve been wondering: at the political level, is GDP growth still a useful indicator? And in business, is store expansion still a meaningful measure of success as people’s attention shift to short videos and livestreams en mass?
Beyond the data, I’m excited to bring color and anecdotes to the conversation. If you’re a paid member and interested in attending, I’m happy to get you tickets—just let me know! (see full program at the end)
The “darkest days” of China luxury market 💎
2024 was the most challenging year for China’s domestic luxury market, with sales dropping by 17% to 504.4 billion RMB, luxury research institute Yaok reported last week.
While this is something we have been vaguely aware of, by plummeting China sales of major luxury groups and frequent news of store closures from Gucci to Armani in first-tier cities, it’s rare to see clear data of both domestic and overseas consumption side by side. We can see from Yaok’s data that this is the steepest drop since 2011, worse than the post anti-corruption dip in 2012-2013 and the 2019-2020 COVID slump. In the meantime, overseas consumption gradually re-emerged from COVID to around 2013 levels.
I’m seeing more luxury and designer brands redirecting from offline to online presence, and other consumer brands outside of food and beverage are following suit. Yaok predicted that luxury malls would have to suffer from 40% vacancy rate in near future.
“In the next 3–5 years, brands driven by offline channel expansion will face significant challenges,” the report said. “Any brand that has relied on large-scale offline expansion to drive sales growth will encounter situations where they are ‘too big to pivot’ and where assets effectively turn into liabilities.”
If you want to learn more about China’s consumer space from the fashion lens,
recently penned an excellent piece for us about China’s designer fashion market, detailing his observations since 2017, give it a read:
China factory TikTok 2.0 🎥
Chinese manufacturers are gaining noticeable traction on TikTok, again, how and why?
While this trend isn’t entirely new (see Andrew Deck’s piece on factory TikTok in 2021 and Louise Matsakis’s 2024 newsletter on a glycine seller), it has resurfaced amid surging concerns around overcapacity from the China side, alongside US consumer anxiety about rising costs—both intensified by the impact of Trump's tariffs.
The heightened visibility is driven by a rise in consumer-facing sellers from China including bags, fitness clothing, etc., making these accounts more prominent to everyday TikTok users.
However, this information has been open secrets to Chinese consumers; the dupes are all over e-commerce sites no matter what countermeasures the platforms take.
Chinese consumers can easily access dupes of fashion brands while looking up brand names with key words such as “factory”, “cheap alternative” and “outlet”. In 2020, I discovered that Taobao’s algorithm goes as far as promoting counterfeit luxury goods through mobile payment app Alipay under a section called “Large Brands Price Drop”, indicating that products featured in this section are branded items on sale.
Compared to factory TikTok 1.0, with excellent role models like Tony from LC Sign, a master in imitating accents, the “Alumulumu” lady who sells mobile houses in a heavy northern accent, this new generation of factory TikTokers and sourcing agents are are faceless, as it's not about them, it's about how good they are speaking into US consumers' collective anxiety.
Privacy safety concerns soar among Chinese consumers 😨
A pregnant woman received messages about baby photography immediately after going into labor; a hotel guest accidentally discovered that she had been recorded while staying in her room; an online user faced harassment and death threats after an argument with another user — today, the danger of overcollection of user information and resale of personal data is creeping into the public consciousness.
These concerns first grew with the popularization of e-commerce before COVID, as people’s waybills were collected from the trash and resold. As that gained national attention, delivery companies started masking people’s info since 2017, only leaving 4 digits of phone numbers in the middle, for example. As of late 2023, 250 million out of China’s 330 million daily deliveries, or 75%, were masked.
Now, public concern has escalated with the popularization of facial recognition and horror stories like the above. There are few guardrails around access to hardware, software and the sale of personal info.
The legal publication Fangyuan Magazine, which is overseen by the Supreme People's Procuratorate, focused on the public security video surveillance for its April issue. It was until April 1 that the "Regulations on the Administration of Public Security Video Image Information Systems" came into effect. Individuals and organizations that violate the regulations of installing video survellience equipments in “public bathrooms, changing rooms, nursing rooms,” for example, would be fined between 5,000 and 20,000 RMB, and may be subject to public security penalties or criminal charges.
This deserves more nuanced discussions in Western media, and it would be important to see how Chinese consumers, who are thought to care less about their privacy, are now beginning to stand up for themselves. 🔚
