Gaming and the Gateway to China

“People in China buy clothes on gaming sites to make their characters special,” said Guangdong, China native Wang Houran, a 23 year old, business design student at Milan’s Domus Academy.

Wang has been gaming since he was in high school. In addition to his passion for fashion, he is equally passionate about basketball; he’s crazy for the LA Lakers and once paid several hundred dollars for a signed basketball jersey. His favorite online game at the moment is QQ Speed, a 3D racing game by Tencent, a Chinese goliath  and leader in various Internet-related services and products, gaming and entertainment, artificial intelligence and technology.

“I spent 50 euro this year on a car, as a way to make the car more powerful,” Wang said.

Chinese consumers like Wang are the precise reason reason luxury labels like Louis Vuitton, apparel brands and the NBA  are all converging into the gaming sector and all want to do business directly or indirectly with multi-faceted companies like Tencent.

Tencent, also the owner of We Chat, is dominant in the global gaming and esports market and partnering with them is seen as a way for foreign companies to communicate and penetrate the millennial generation.

“The internet in China is in the hands of two giants: Alibaba and Tencent. Their grip is incredibly strong, when it comes to web traffic, payments systems and logistics,”  said Luca Solca, Senior Research Analyst, Luxury Goods at Bernstein. Alibaba, the Chinese e-commerce and cloud leader, only just recently entered the gaming and esports industry in 2017.

Louis Vuitton last week released a physical collection dedicated to its partnership with U.S.-based Riot Games, which is also owned by Tencent, for the League of Legends World Championship.  Action figure designs echoed the type of skins Nicolas Ghesquière designed for League of Legends character Qiyana, who carried a weapon covered in the iconic Louis Vuitton pattern that was sold for about $10.

Qiyana is part of the game’s True Damage, hip-hop group made up of League of Legends champions Akali, Qiyana, Yasuo, Ekko, and the newest addition, Senna.The market is now awaiting Ghesquière’s designs for Senna, who is expected to don a Prestige Edition skin designed by Ghesquière in early 2020.

“Associating luxury to games is a just another way for luxury to prepare for the next generation of consumers,” Solca said.

In a luxury world expected to rise four percent to 1.3 trillion euros this year, the industry’s top priority is a Chinese, young customer—someone who lives in “the now” and is totally digital. “Brands who understand this [that China is the future] are set to grow,” said lead Bain & Company luxury goods analyst, partner Claudia D’Arpizio at the Altagamma luxury conference in Milan.

As of December 2018, the online gaming population in China increased by 9.6 percent to 484 million, out of a rising population of about 1.4 billion people. In other words, 6.7 percent of the entire population is engrossed in online games, China’s Internet Network Information Centre reported.

A report by Bain & Company last month illustrated how the Chinese market, millennials and Gen Z will be the main drivers of the personal luxury goods market, a segment that is expected to rise to 282 billion euros this year, up from 262 billion euros in 2018. In the longer-term, one out of two personal luxury goods are expected to be purchased by individuals of Asian origin.

A global phenomenon, League of Legends is especially popular in China. And it should come as no surprise that Nike had also targeted Chinese players by forging a deal earlier this year with the League of Legends Pro League, now China’s biggest e-sports competition, becoming the official apparel provider for the league. That includes clothing, sneakers and team jerseys.

Earlier this month, Gucci also inked a deal with Shenzen-based Tencent, a partnership designed to establish a framework across the board that will stimulate innovation and leadership in the digital arena — particularly in the Internet of Things, Artificial Intelligence, Data Science, Smart Retail, Content Generation and Digital Thought Leadership, one of Gucci’s main motivations was Tencent’s unique digital ecosystem that would allow Gucci to resonate even more among Chinese consumers.

“Through this collaboration with Gucci, we will jointly build exceptional experiences for Gucci’s community, conveying Gucci's fashion sensibility and contemporary aesthetics to Chinese consumers,” Tencent president Martin Lau said in an official joint press release.

Outside of luxury, Tencent has a deal with the NBA for exclusive streaming rights and the NFL has a partnership with Twitch and Epic Games, which publishes Fortnite, on a series that involves NFL players with Twitch streamers, who pair up and compete for a charity. Elsewhere, Adidas forged a partnership with gamer Ninja. Puma and K-Swiss are also active in the eSports arena.

Echoing the success of the NFL and NBA, the eSports industry has made amazing strides in 20 years and since the dawn of Fortnight, it has skyrocketed past physical sports in terms of earnings.

According to Newzoo, a website dedicated to insights about the gaming industry, there are now more than 2.5 billion gamers across the world. Combined, they will spend $152.1 billion on games in 2019, representing an increase of 9.6% year on year.

By comparison, the NFL garnered 15.8 billion viewers in 2018, according data released by CNN, yet the NFL’s revenues pale in comparison to that of the online gaming industry, at only  $8.78 Billion shared by all teams in 2018.

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