China’s millennial consumers are a driving force behind the global luxury market

By Wang Han Source:Global Times Published: 2018/2/22 19:48:39

The new buyers

According to the 16th edition of Bain & Company's annual global luxury study in December 2017, globally Chinese nationals purchased 32 percent of personal luxury goods in 2017. The study also pointed out that China's rapid rise of luxury product sales is mainly driven by millennial consumers. To glean insight into the shopping preferences and consumption habits of Chinese millennials, the Global Times recently interviewed a number of local shoppers born after the 1990s or 2000s.

Photo: VCG

 Huang Yibei, 26, moved to Shanghai as a white-collar worker after graduating from a university in Hangzhou, capital of East China's Zhejiang Province. Huang told the Global Times that most luxury items she purchases are handbags, skincare products and cosmetics.

"Since I started to earn money by myself after graduating, I wanted to buy high-end brands to reward myself," she said.

Zhang Ke also from Hangzhou, is only in his third year of middle school but told the Global Times that he started to buy luxury brand clothes when he was just 12 years old.

"My parents run a clothing business and shop at high-end malls. That's how I began to know lots of big brands," Zhang told the Global Times.

Wang Chenchen, 27, is based in Shanghai but studied in the US during her undergraduate years. "I started to buy luxury products in the US. I love fashion and love shopping," she said. "When I see something I love, I buy without hesitation."

She feels that luxury products can bring her joy and happiness. "Shopping makes me happy. When I earn some money through my own work, I am willing to buy some luxury products as a treat for myself," she explained.

Veronica Wang, associate partner of OC&C Strategy Consultants, told the Global Times that there is an increasing willingness to spend on luxury items among younger Chinese, even if they cannot afford it.

"We also see a growing preference for niche luxury brands instead of traditional brands. In retailing trends, we see a growing strategic play of online with offline channels, which serve to reinforce each other, as this generation does online and offline research and then seeks the best price," she said.

Photo: VCG

Acceptable amount

In terms of how much a person spends per year on luxury products, all of our interviewees said that 10 to 20 percent of their annual income is acceptable.

"I think as long as you can afford the items you want, it doesn't matter whether you purchase them with your savings or a credit card," Huang told the Global Times.

Wang Chenchen added that she tends to spend 500,000 yuan ($78,628) every year on luxury products, all which is money from her own income. But she suggested that it really depends on a person's personal financial condition.

"For me, I believe the amount of money people spend on luxury items should not exceed one's income, and should not add extra financial burdens," she said.

Unlike Huang and Wang, who use their own income to buy stuff, middle school student Zhang said all the money he spends comes from his parents.

"They are quite supportive, as they think this can cultivate my fashion sense at an early stage of life," he said, adding that many of his peers buy expensive brands with money also coming from their parents.

But Zhang said he only buys things that cost under 20,000 yuan. "I don't have any mental burden or guilt under this amount," he clarified.

Photo: VCG

Economic confidence

All the interviewees believe that the use of luxury items can reflect one's financial and social status. "If a person can afford lots of luxurious products, that person's financial condition is not likely to be too bad," Zhang said.

So what are the major factors that contribute to the younger generation's desire to purchase luxury products?

Wang from OC&C told the Global Times that this desire is driven by millennials having higher economic confidence than their actual income.

"They in general have a willingness to spend [across all categories, on products and services] and a low propensity to save. They are willing to buy luxury products even if they can't really afford it," she said.

She also explained the notable behavioral changes of post-90s generation Chinese consumers' shopping habits for luxury items compared with their post-70s and post-80s generation counterparts.

One difference, according to Wang, is that Chinese millennial consumers are more digital savvy than seniors.

"Their luxury purchases are influenced heavily by online interactions all the way from getting to know the brand, browsing the products and researching prices to shopping and then sharing their commentaries," she said.

Can't fool us!

Apart from digital proficiency, millennial preferences are more individualistic than previous generations, opting to buy products that reflect their own personality and style, according to Veronica Wang.

Huang, for instance, said her purchasing decisions are not affected by social media, celebrities or friends. "I buy a luxury item based on my own preference and need," she said.

In contrast, Zhang said he prefers to buy only the hottest designs or bestsellers, as he wants to gain recognition from others. "I hope people around me will recognize my choices, so I tend to buy the most popular designs," he said.

Zhang admitted that wearing luxurious clothing makes him feel better about himself. "To be honest, wearing high-end brands makes me feel more confident and have a feeling that 'I am rich,'" he said.

Veronica Wang also pointed out that Chinese millennials generally have more overseas travel experience and broader horizons than their older countrymen, and therefore tend to buy luxury products where the most "value for money" options are.

"[They] usually [buy] in a brands' home market, such as France, the UK and Italy," Wang said. "But these brands can no longer fool Chinese consumers, especially the post-90 generation, with excessively high prices in China boutiques."

Professional buyers

Many of our interviewees told the Global Times that they prefer to buy luxury products through professional buyers, which are widely known as daigou in Chinese, or via e-commerce platforms.

Zhang said that after he finds all the new products he wants to buy, he just asks Chinese friends abroad or daigou buyers to find these products for him.

As for Wang Chenchen, she prefers to wait until she is traveling abroad, or just buy on foreign shopping websites. So what strategies can all these luxury brands adopt to attract a younger generation of Chinese consumers?

Veronica Wang pointed out that they should fully leverage their online presence not only as a sales channel but also a marketing method to engage and interact with younger consumers.

"Given the power of Key Opinion Leaders [KOLs], luxury brands need to work hard to identify and hire the right KOLs to influence and inspire the younger consumers," she said.

She added that brands also need to develop a unique image. "Younger generations are not looking for broadly accepted symbols of social status. They are pursuing ways to express their individuality," she said.

"To attract younger consumers, luxury brands need to truly understand the needs and preferences of their target customers and deliver something [a product and brand proposition] that can reflect their values."


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