Connecting with the Luxury Consumer in China

July 3, 2019

At the end of March, ForwardPMX and Baidu hosted a joint event in Sanya and where we shared insights on how to target Chinese luxury consumers. Brands such as: Bally, Mulberry, De Beers etc travelled from different countries to attend this event.

The Chinese luxury consumer is a group that is discussed globally, thanks to their increasing weight in the luxury industry. There are a couple of key points that brands are particularly keen to understand, or are missing altogether in their strategy which is severely limiting their growth in this market.

1. Who are the luxury consumers in China and Do you really understand them?

Luxury goods only began to be imported and become available to consumers in China after 2002. Before that, the country had no hard currency freedom and it was all about B2B (importing luxury goods to the government owned companies) even at the beginning of the 20th century. Meaning the development of luxury goods in China happened within just 15 years.

People who were born in the 1980s (who are now in between 30-40 years old) were the first luxury consumer group, there was no other local demographic group ahead to influence them. Following this, those born in the 1990s, new century or even after 2005 (we also call them Gen Z in China) are fast becoming the core luxury consumers.

There is one similarity between these consumers – the majority are single child. Therefore the percentage of “rich kids” with old money is far higher compared to the rest of the world. They simply have much more disposable income to purchase luxury goods.

Luxury goods are in many cases sought by the middle class and above. Compared to the rest of the world, the Chinese middle class with disposable income are much younger (around 40 years old) and come with a significantly different background.

The multitude of differences between the consumer groups. can be attributed to the fact that they are all very young and therefore the age gap is more pronounced, leading to different behaviour. We usually advise our clients to look at 5 year intervals per group, instead of the usual 10-year segments in this market, because they use very different platforms for social media, speak very different forms of internet slang and follow different types of celebrities or Key Opinion Leaders (KOL)

There is not a one-fits-all strategy in China, and you will instead have to tailor your strategies individually to connect with all age groups.,

2. Connection with Chinese consumers.

From a business perspective, luxury companies strive to sell more products and gain revenue share in China., yet as a designer, the focus is often on winning awards. These are two very different objectives and this can create a conflict during operations within the China market.

Remember your consumers in the west are much more mature with already established influencers around them, so awards and fashion trends have a greater effect on driving sales. These two objectives work together well in the west. Whereas in China, fashion trends change too fast. Chinese tastes in fashion can be very unique and in many cases they value brands differently compared to the majority of the world. Designer awards have very little impact on Chinese consumers.

That being said,. if a company wants to set its core objective as increasing sales, connecting with your consumers is the only way to success in China. It might sound simple but many brands get this wrong. A true story, one major brand exhausted most of their budget on fashion shows in order to win awards and be visible to industry experts, they then left very little budget to connect with real consumers in China. As a result, their brand awareness is still struggling and they have been left with no incremental sales YoY. They are wondering how this happened as their approach has been “successful” throughout the rest of the world.

After a long time convincing brands to set up the correct strategy in China, it can still very easily go wrong if they are not paying enough attention to how they are targeting their consumers. Below are some typical mistakes brands make:

  • If you advertise with messaging you used for the 1980s on platforms which hold a majority user group from the 1990s – you will fail.
  • If you advertise on platform A this year, which was popular last year – make sure you research into whether people are still actively engaging
  • If you hired a KOL who is Singaporean-Chinese tasked with targeting Mainland China – you will fail.
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