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Chinese love luxe life

China is the second largest consumer of luxury goods after Japan, with sales of luxury goods reaching US$12.6 billion in 2011 accounting for 28% of total global luxury consumption. The country has left US behind in consumption of luxury products. This interesting bit of fact was released recently by Starcom MediaVest Group’s research study called ‘Luxe’. The study focuses on the growing luxury market and consumers in China.

The study has also highlights the fact that this increasing number of ‘beginner’ consumers of luxury goods are driven to buy due to strong digital media influence in their daily life. Jeffrey Tan, SMG China’s National Research & Insights director, says, “SMG’s Luxe sought to capture the pulse and mindset of China’s luxury consumers who are constantly evolving as they become more affluent and exposed to luxury brands. There is a growing level of sophistication and discernment among tier 1 consumers similar to that found in mature luxury markets like Japan, Hong Kong and Singapore.”

In conducting the study Luxe covered 43 tier one to three cities, interviewing 1,002 respondents, aged between 25 and 44 over a period of three months. According to Tan, the criterion for the selection of respondents included stringent conditions such as a minimum monthly personal income of over RMB20,000, and a minimum yearly luxury consumption and spending of over RMB10,000, to ensure that we are targeting the right affluent crowd.

The booming market and economy has brought about thousands of new Chinese luxury consumption ‘beginners’. Now many luxury brands are finding their interests, behavior and buying power as the right impetus to set up their presence in the market. In fact the ‘Luxe’ study reveals that tier two and three cities have become the battlefield of luxury market expansion. However when looking at the behavioral mindset of consumers in different city tiers is very interesting to note. The reports states that as mature luxury consumers, most tier one luxury consumers tend to focus more on the quality of the goods and the inherent brand story, choosing to buy more unique and lesser well known high quality brands. In contrast, since luxury brands are relatively new to lower tier cities, consumers there are in the beginning stages of buying luxury which they wear as “badges of success” to show to others that they have made it. Price is still the main barometer to judge the desirability of a luxury brand.

“We see a very distinct shift from external validation (i.e. “showing off”) to more internal appreciation (i.e. buying luxury for its quality and brand heritage). Lower tier consumers on the other hand are having their first taste of buying “obvious luxury” (i.e. prominent and socially accepted status symbols) and are hungry for brand knowledge in an attempt to move beyond price comparison,” explains Tan.

In terms of consumer profile, the study shows that the fashion conscious young man with string style sense are increasingly spending on quality products. The other segment that has emerged very big consumer of luxury products are the young parents who want to increase their ‘cool’ quotient. Interestingly, in the tier 2 and 3 cities it is the younger generation and often youngsters who are the early adopters of luxury products in China.

When we look at the highest media channel of influence, ‘Luxe’ shows that print media especially lifestyle magazines remain the catalyst for consumers to learn about luxury brands and products. However, digital media is taking on a more influential role as consumers proactively go online to search and be informed. In tier 1 cities, there is an increase in online shopping of luxury goods, as more and more elite consumers prefer the convenience of browsing a variety of products and also the exclusivity of buying items only available online. According to the study, the consumers on tier 2 cities like some form of branded entertainment campaign, and brands should create innovative mobile applications to remind consumers of exciting brand experiences when they are near a luxury store. Finally, social media plays a major role in promoting a luxury brand since the Chinese consumer love to talk about and share their experience of using a luxury product. So the study concludes that those luxury brands looking to create a strong foothold in the Chinese market should actively look at generating ‘earned’ media.

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