Why luxury fashion brands are opening specialty coffee shops in China

luxury fashion coffee
  • In China, luxury fashion brands have been launching specialty coffee shops within their stores in a bid to attract young, affluent spenders 
  • Gen Z and millennials are luxury brands’ target consumer group, and they also represent 66% of China’s coffee consumption – making the combination of luxury and specialty coffee a strategic move
  • Coffee shops are a way for high end brands to diversify their customer base during tough economic times, and also to redirect clients back to brick and mortar stores to experience luxury lifestyle in an era of online consumption  

LUXURY FASHION, jewellery and lifestyle brands in China have started to dabble in the coffee market, with many of them launching cafés in a bid to retain existing customers and attract traffic from young, affluent spenders.

China’s coffee shops experienced explosive growth during 2023, mainly driven by Cotti Coffee and Luckin Coffee’s booming popularity. 

From 2015 to 2020, the Chinese coffee market’s value almost doubled, going from USD 7 billion in 2015 to USD 12 billion in 2020. Gen Z and millennials are at the root of this market expansion, as they represent 66% of China’s  coffee consumption.

Meanwhile, China’s luxury market – the largest in the world today – increasingly caters to Gen Z, which has been identified as one of the highest spending powers. Combining luxury and coffee is simply a strategic move, and one that is trending.

In Taikoo Li in Sanlitun, a shopping centre in Beijing, Ralph Lauren launched its first café in its flagship store a few years back. The first few months following its opening saw long queues at the store entrance, despite the relatively high prices of the coffees on offer.

Hot on the heels of this success, Ralph Lauren opened another café that same year in Shanghai at the Jing’an Kerry Center store, which was an immediate hit in the city.

In 2022, Shanghai’s Taikoo Li retail project announced the launch of its first Dior café in mainland China. The café attracted netizens to the Dior brand flagship store and café, motivated by its luxury afternoon tea experience complete with a curated selection of desserts, teas and coffees. 

Burberry, Louis Vuitton, Armani, Chanel, Fendi, and luxury jeweller Bulgari have also been increasing their presence in the Chinese coffee market over recent years as a way of tapping into new demographics.

Luxury brands are moving from “class to mass” 

Although the pace of China’s economic recovery has levelled off since the third quarter of 2023, Chinese personal consumption remains cautious because of other factors like the housing crisis, geopolitical risks, and unstable income and employment.

International brands are also experiencing competition from a rising wave of local brands who are doing increasingly well with Chinese fashion and luxury consumers. 

According to Kapferer in his book Kapferer on Luxury: How Luxury Brands Can Grow Yet Remain Rare, luxury is moving “from class to mass.” Luxury brands can no longer rely uniquely on their niche clientele, and are feeling the need to become more accessible to new consumer groups to stay afloat or grow their brand.

Dior and Ralph Lauren aren’t trying to join the coffee industry by opening cafés, but rather seek to provide customers with a different type of consumption scenario that narrows the distance between brand and consumer and reaches audiences beyond their usual radar.

Tapping into a broader range of consumers through coffee shops or pop-up events is a strategy to drive the sales of their more accessible products or product ranges without losing any of the luxury allure that makes them attractive in the first place.

“Luxury and well-known fashion brands entering the coffee and food and beverage (F&B) sector is a trend in the city (Shanghai),” says Alan Grillo, Owner of Cometa, an Italian restaurant in Shanghai. “We did events for Puma and All Saints in our venue. Both were small campaigns designed to reach out to audiences outside of their usual fashion circles.”

For Chinese consumers, it’s about experiencing an extension of the brand’s environment. Cafés and other F&B venues not only convey the brand’s culture and philosophy, but also allow consumers to immerse themselves in the brand’s atmosphere. 

Getting customers to experience the luxury lifestyle in person

In a landscape of predominantly online consumption ill-suited to the elitist, highly curated experience associated with high fashion, coffee could be the lynchpin that drives consumers back to luxury brands’ brick-and-mortar stores – which is where the “magic” happens.

At the antithesis of the very mainstream and mass consumer experience of online shopping, luxury brands seek to cultivate a secretive, VIP-access appeal with a high level of customisation. However, global luxury consumption shows a weak trend, and the growth rate of China’s luxury market has also slowed down. 

With the gradual recovery of physical stores, offline channel marketing is becoming a competitive arena for major luxury brands to boost their image. Having their own branded coffee shops ties into that strategy.

“Cost-wise, it makes sense because they (brands) can spread out to multiple venues at the same time and link their clients to an online event or campaign, getting them to share content and hashtag the brand,” says Alan.

Specialty coffee, which is becoming increasingly popular with China’s younger demographic, offers the allure and incentive they need to get people back into their stores. “Collaborations with F&B venues allow brands to connect customers immediately to a luxury lifestyle environment, something they aspire to,” says Alan.

Against a backdrop of economic and consumption slowdown and local competition, it has become critical for luxury brands to actively explore new sources of growth, which is driving their expansion into coffee and F&B.

However, coffee remains a side business for luxury brands – it’s a marketing strategy rather than a commercial investment. The main goal is to bring more traffic to “offline” stores and to provide a branding space for promotional activities. 

If the strategy works, it could mark the start of a new promotional model for other sectors and regions looking to grow by marketing a lifestyle, and looking to boost their “offline” presence again.

Coffee Intelligence

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