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Why luxury must cater to young Chinese

Why luxury must cater to young Chinese

Monday, 13 May 2019
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Christophe Roulet
Editor-in-chief, HH Journal

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4 min read

The latest McKinsey report on China paints a picture of young luxury consumers leading digital lives but still traditional in their purchasing habits. As the generation that will be making half of global luxury purchases in a very near future, best listen to what they have to say.

As China continues to emerge as the keystone holding up the luxury market, a string of reports offer their insight and analysis. McKinsey’s “China Luxury Report 2019 – How young Chinese consumers are reshaping global luxury” is the latest in line, focusing on the wants and wishes of the country’s thirty-somethings. Why such interest? The figures speak for themselves. The McKinsey report reveals that by 2025, Chinese consumers will make up 40% of the global personal luxury goods market and deliver 65% of additional spending. In value terms this means that in six years’ time, Chinese shoppers will be spending EUR 160 billion on luxury compared with EUR 102 billion today. Until now, the market has been driven by the generation born in the 1980s, whose 10.2 million luxury consumers were the main beneficiaries of China’s rise to economic superpower. Now the next generation of post-90s consumers is taking up the (designer) mantle, with 6.7 million luxury consumers in its ranks. It’s easy to see why these two demographics should be the focus of attention.

Chinese influencers are the new emperors, holding court over their millions of followers.

The picture that emerges from the report is one of a gilded youth whose behaviour isn’t that different to patterns already observed in the West. For these young Chinese consumers, many of whom are new to luxury, prestige purchases are both social capital and a way of distinguishing themselves from others; a means of “feeling different rather than fit in.” Unsurprisingly, brands hold sway over these consumers, and foreign brands in particular exert huge appeal. This power of seduction is even greater among those brands that rapidly roll out new products, collaborate with other high-profile names, or whose products are associated with the celebrities who dominate social media. This brings us to what is probably one of the principal distinguishing features of the Chinese market, namely the importance of digital not just as a source of information but as an arbiter of taste – a role played by influencers. They are China’s new emperors, holding court over their millions of followers. Opinion leaders such as Mini Yang, Angelbaby, Tiffany Tang and Karry Wang each command more than 50 million fans on Weibo!

China, the kingmaker

As for the rest, China’s luxury buyers are surprisingly traditional. No matter how digitally engrossed they may be, when it comes to actually making that purchase, advice and suggestions from sales staff in stores are critical. Also, in keeping with their perception of luxury as social capital, word-of-mouth has a non-negligible influence on purchasing decisions. This explains the still relatively small proportion of China’s luxury spending (8%) taking place online. Nor is this about to change. According to McKinsey, offline is expected to remain the preferred luxury sales channel, with stores still accounting for 88% of Chinese luxury spending in 2025 – hence the importance of sales assistants who are expected to make recommendations based on their understanding of customers’ personality and preferences, and keep in touch through social media or by email. This online experience must also extend to the underserved customers in lower-tier cities who have no physical touchpoints with luxury brands.

McKinsey recommends that brands take an "always on approach".

Conclusion: now is not the time for brands to rest on their laurels. For them to win the attention of China’s young luxury consumers with their shifting zeitgeist, more driven by aspiration than heritage, they must develop what McKinsey calls an “always on approach”, built around a rapid cycle of product launches, modernised stories, collaborations with influencers, and engagement through online and offline touchpoints. It’s a strategy that demands fast decisions, a sharp understanding of local culture and probably a shot of vitamins. Given the stakes, it’s worth the effort. Especially as, in China, winner takes all!

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