FEATURE11 October 2018

The new luxe

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Asia Pacific Features Impact

China dominates the market for global luxury, but the motivations of its luxury consumers are shifting with a younger-buying demographic. By Katie McQuater

China-louis vuitton

Earlier this year, the Chinese government reduced its import duties on consumer goods, resulting in a number of European luxury brands such as Gucci, Louis Vuitton and Hermès lowering their historically high prices for shoppers in the country.

The decision reinforced the influence of China on the world’s luxury market; it’s estimated that Chinese consumers account for RMB 500bn (around $7.4bn) in annual spend, representing almost a third of global spend on luxury.

Yet the expectations of the Chinese consumer, and the qualities they associate with luxury, are different to that of the luxury buyer in Paris, London or New York. A study from Kadence International found that consumers in China are more likely to associate the qualities of ‘timelessness’ – relating to a brand’s enduring appeal and relevance – and ‘experiential’ – including digital and mobile experiences – with luxury than any other market studied. 

And unlike other markets in Asia-Pacific, Chinese shoppers are less likely to evaluate a brand or product through perceived ‘status’, the study found. Instead, they place more importance on intrinsic value, such as the ‘feel-good factor’.

Kouei Kaku, managing director at Kadence China, says: “The West often looks at the luxury audience in China as the flashy kind, those made of ‘new money’ – and yes, for the past decade or so they have been the biggest group of luxury buyers in China. But there are also those who are understated, valuing the more intrinsic nature of luxury brands rather than being ‘show-offs’. ‘Feeling good’ and ‘recommended by friends’ are significant factors for a purchase decision.”

New generation

China’s luxury consumer base is also getting younger. After a five-year period of sluggish growth, spending on luxury within China grew 20% in 2017, led by women’s clothing, jewellery and cosmetics, according to management consultancy Bain & Company, which found that millennials (aged 20-34 ) were major contributors to growth.

The motivation to purchase luxury has become more about individual expression than a status symbol. “As the confidence and status of Chinese luxury shoppers has continued to grow, and with a new millennial-buying generation firmly in place, the importance of a traditional marque is being supplanted by a desire for individualism and self-expression,” says Liana Gregorians, associate director at Mash Strategy Studio.

“The next generation of Chinese consumers are less concerned with showing they belong to a French or Italian high-fashion set, and more with feeling they are setting the trends themselves, seeking out brands with their unique needs and style in mind.”

Mash research in 2016 found that 25% of Chinese consumers buy luxury goods to stand out, suggesting they are more interested in niche brands that are seen as more expressive and creative, opening up greater potential for local luxury brands, according to Gregorians.

The expectations also differ when it comes to technology. According to YouGov’s Affluent Perspective global study, 77% of Chinese respondents use mobile payments, compared to 12% in the UK and 15% in the US. Almost half ( 43%) said they read product reviews via their mobile while in-store, compared to a global average of 33%. 

Social messaging apps are becoming the next frontier, according to Gregorians. “Social has become an essential tool for driving brand consideration and, although not yet playing a dominant role in purchase, the rise of innovative digital platforms, such as WeChat luxury storefronts and games – combined with growing shopper confidence – indicates huge potential.”