Deloitte released the “2017 China Whitepaper on Luxury Consumption online”, hoping to answer two questions: Who are the consumers buying luxury goods in China, and what are their consumption habits?
The answers may be surprising; China is second only to the United States as the world’s largest market for luxury goods, and the average age of luxury goods consumers has dropped from 35 to 25. Even more surprising is that the primary drivers behind luxury sales are not women, but well-educated men.
Informed observers believe that China’s Millennials and Gen Z’s will change the face of China’s luxury markets in years to come. How brands respond to these changes will be crucial to their success in China. Both digital and diversified sales channels are important, but young customers want to experience personal contact and exclusive experiences which make them feel valued.
In 2017, the trend among luxury goods brands is to develop diversified sales channels, including online channels; for these brands, this is not just a change to their channels, but also a shortcut to understanding consumer preferences.
Several main points from the white paper are covered below:
Luxury consumers average 25 years old
Despite the feeling in recent years that younger consumers are dragging down the luxury market, not expanding it, Deloitte found that the average age of luxury goods consumers has fallen markedly. In 2017, almost half of China’s luxury goods were purchased by people less than 30 years old, with many saying that even recent graduates can afford Gucci and LV.
By 2025, it is projected that China’s Millennials and Gen Z’s will account for 50% of disposable income in China. Since they grew up with the internet, they’re used to buying everything online, and that trend will no doubt continue when it comes to luxury goods. Although online sales accounted for only 8% of sales in 2017, the white paper predicts that this will rise to 13% by 2021.
They are geographically diverse
Geographically, the top four markets are Beijing (10%), Guangdong (9%), Sichuan (8.8%), and Shanghai (8.5%); the presence of Sichuan on this list is surprising, as despite its large population it is a relatively less-developed province. It’s residents outspending Shanghai’s on luxury goods is a new phenomenon. Less surprising is the fact that first- and second-tier cities still account for nearly half the market, at around 48%.
They aren’t all female
In fact, they’re 51% male, exactly in line with China’s gender distribution. Analysts speculate that, for men, luxury purchases are driven by business needs, while women’s purchases are concentrated in beauty products.
They want more personal experiences
Consumers are turning to niche brands, as opposed to the biggest name brands, because they’re seeking more personal and less mass-produced experiences. This trend extends even to personalization, with more than 40% saying they want to be able to personalize and customize their luxury goods and experiences, while only 20% say they do not. No longer do consumers buy things to show them off; rather, they say they want to be “a little better to themselves” or “search for a higher-quality luxury”.
They’re changing their whole lifestyle
Not all luxury goods buyers read “Caijing”, own an iPhone, and watch documentaries; in fact, more of them love watching TV dramas.
Over half have a high-end phone; while a third of those do have iPhones, nearly as many have Huawei’s. Compared with ordinary consumers, luxury consumers pay more attention to antiques, TV dramas, and arts and culture. There is also a strong correlation between luxury consumers and those people willing to pay considerable amounts of money to own and support pets, or on their children’s education. All of this information suggests that they are changing their lifestyles in a comprehensive fashion, not just upgrading their purchases in one category, and luxury brands should market and brand themselves accordingly.
Younger consumers shop differently from older ones
They’re more likely to believe information from official channels or informed experts, and pay little attention to celebrity endorsements. Expert bloggers have been invited catwalks and product releases, because they influence these young consumers. WeChat public accounts connect with them and drive sales of everything from bags to BMW’s. Moreover, they’re not brand-loyal in the way that earlier generations were, tending to prefer whole clusters of brands and product types.