Illustration: Lu Ting/GT

Although Chinese demand for luxury goods remains a key revenue driver for the world's upmarket brands, luxury sales in the country have lost some of their luster recently thanks to the central government's anti-graft campaign as well as rapid evolutions in consumer behavior. Despite these well-known obstacles, China remains the world's second largest luxury goods market and the growing spending power of local consumers continues to have a profound impact on the global luxury industry.

In recent remarks from a Shanghai-based representative of Bain & Company, a global management consultancy, 2013 was a lackluster year for the Chinese mainland's luxury market as annual growth slowed from 7 percent in 2012 to just 2 percent last year. Sales of menswear and watches were particularly hard hit - contracting by rates of 11 percent and 1 percent respectively - as crackdowns on official excess weighed on wearable luxury items, the firm explained.

Nonetheless, Chinese buyers were still the world's most enthusiastic consumers of luxury goods last year, accounting for 29 percent of global sales as many flocked to Hong Kong and Europe in search of better prices. Indeed, Bain & Company figures show that up to 67 percent of Chinese luxury goods sales were actually made outside of the mainland last year.

In the meantime, Chinese shoppers are becoming increasingly sophisticated. As countless marketing professionals have attested, until quite recently Chinese consumers were prone to following mainstream trends and largely believed that more expensive products were inherently better. But little by little, as local shoppers became more knowledgeable about brands both at home and abroad they also become savvier and started to demand products that could help them express their individuality. Niche brands have picked up traction thanks to this shift, displacing the items with big logos and flashy designs that once captivated status-conscious consumers. For evidence of this, one need only look at the recent coining of the Chinese term tuhao, a somewhat derisive word used to poke fun at the excessively glitzy style preferences of the country's wealthy elite.

Needless to say, changes in Chinese market dynamics and consumer behavior are putting pressure on global brands. To keep pace, many are introducing new product ranges and competing fiercely to win attention from local buyers.

Western brands are busily incorporating Chinese tastes into the design of their products. Thanks to booming sales in China, for example, Italian sports carmaker Maserati has started taking Chinese preferences into consideration when it comes to designing its vehicles, according to statements from Christian Gobber, managing director at Maserati China. Specifically, about one quarter of the carmaker's global sales were made in China last year, and this proportion is expected to hit as high as 40 percent in the future.

Many brands are also making headway when it comes to connecting with Chinese shoppers via digital media. According to a consumer survey conducted by Bain & Company, 73 percent of respondents on the mainland said they normally get information about luxury goods from the Internet, much higher than other sources of information, including magazines, friends, stores and television advertisements. Not surprisingly, the agency found that some brands currently devote between 20 to 25 percent of total marketing expenditures toward new media, a proportion which is expected to grow even bigger in the future.

While most foreign brands appear willing to employ the Internet for communication purposes, many are reluctant to offer discounts online. Many are likewise concerned that an over-reliance on e-commerce could rob their brands of their exclusivity. For example, Emanuele Aliotti Visdomini, vice president of Vhernier, an Italian jewelry brand, said recently that e-commerce may help accelerate its progress into the Chinese market, yet it was also concerned that the Internet could wear on its credibility. These anxieties are shared among many prominent Western brands, which attach great importance to differentiating between their bricks-and-mortar outlets and their online stores.

Lastly, the growing importance of the Chinese market has compelled several luxury brands to modify their traditional business models - particularly models which centralize major decisions concerning strategy, design, creation and production. According to Michel Gutsatz, adjunct professor at the China Europe International Business School (CEIBS), in 2010, Chanel added Chinese elements to its Paris-Shanghai collection, which was very successful at that time. But hiring a Chinese designer or employing colors seen as auspicious according to Chinese culture is no longer enough to satisfy China's changing shoppers. With time, consumer behavior in China will only continue to evolve and mature, which means that brands will have to keep up with the trends or fall by the wayside.

The article was written by Global Times reporter Wang Jiamei based on speeches made at The CEIBS 6th Prestige Brands Forum 2014. bizopinion@globaltimes.com.cn