As Western retailers and luxury brands look to attract the next generation of shoppers, they need only look to China, who’s younger consumers and millenials are snapping up luxury products faster than one can say ‘Gucci’.
According to a report by Deloitte in association with Chinese companies, Secoo and Tencent, Generation Z and Millenials will be responsible for 50 percent of luxury sales by 2025. This will largely be driven by young Chinese consumers' love of shopping online, something that western brands will have to embrace to target this demographic.
The report attributes China’s rising luxury-consuming class to several reasons
"The first reason may economic with the Chinese government introducing policies to stimulate demand for domestic luxury consumption by reducing import duties on categories, such as cosmetics, luggage and apparel," Secoo Luxe's Mr. Chan said. "The second reason is that young consumers, even though their total amount of wealth is much smaller than their parents’, have more disposable income and are more willing to spend money.
"The third reason is because the young consumers understands the true meaning of luxury," he said. "Their purchasing of one luxury product is no longer to show off, but to treat themselves."
Western brands must learn to speak the ‘Millenial’ language
"One major suggestion for western brands is to embrace online shopping," said Eric Chan, CEO of Secoo Luxe, Beijing. "This doesn't mean that the western brands should quickly start to sell their products online, but means that they should know the language the young generation is talking."
According to Luxury Daily, 48 percent of China’s luxury buyers are under 30 years old. These young consumers are fully embedded in the digital space and do a large majority of their shopping online.
Data for the "Chinese Luxury Ecommerce Whitebook" was collected between Oct. 1, 2016 and Sept. 30, 2017 and features a combination of Chinese luxury retailer Secoo's real shopping data, mapped against Tencent's digital and social media data from consumers, including videos they have been watching. Tencent is the parent company of China's popular social messaging application WeChat.
But while China is showing the greatest consecutive growth in luxury sales, the U.S. remains the largest luxury market in the world, accounting for 22 percent of sales. China comes in at a close second at 21 percent.
How do young Chinese consumers differ from other countries?
Chinese millennials discover trends from brand websites not social media. Surprisingly, when millennials look for the latest trends, social media is the most cited channel in all countries except China, states Jing Daily. For Chinese millennials, fashion magazines and a brand’s own website are the most important. It shows that even though Chinese millennials live and breathe social media, when it comes to the authority of fashion, brands and publications still hold sway.
Quality over quantity
Quality is the No.1 listed factor that draws millennials to luxury brands across the board. According to Deloitte, quality is the “one attribute likely to push a consumer to buy luxury when they could buy utility,” and “extensive data” from social media empowers them to judge a product’s quality.
Surprisingly, Chinese millennials ranked higher for favoring “uniqueness” when buying an item, compared to millennials in the West. They also like intangible factors such as “the stories it tells.”
According to the conclusion of the report, the luxury spending level of young Chinese consumers may not be as diverse as expected. Since their choices and influence are still very authoritative, brands have plenty of room to research how they’d like to be recognized, rewarded and engaged with. More than 50 percent of those surveyed said they use loyalty program apps, an area that merits further research.
Photo credit: Tiffany, Resonance China, Deloitte "Bling it on" Report; Article source: Jing Daily, “5 Surprising Facts About the Luxury Shopping Habits of Chinese Millennials;” Luxury Daily, “Almost half of all Chinese luxury buyers are under 30: report”