The definition of “luxury” is shifting worldwide from “having” to “being,” finds a new report by Boston Consulting Group, and—believe it or not—wealthy Chinese are following this trend.
A new report called “Shock of the New Chic: Dealing with New Complexity in the Business of Luxury,” takes a look at the rise of “experiential” luxury among the world’s wealthy. Rather than buying handbags, watches, and jewels, a growing contingent is becoming more interested in things like “exotic holidays, gourmet meals, and art auctions.” According to BCG, experiential luxury now accounts for 55 percent of all luxury spending worldwide, and is growing at 14 percent annually.
China, as well as other emerging markets, is still far more focused on material luxury. According to a BCG survey, 29 percent of Chinese consumers said they preferred “enriching experiences” over products, compared to 51 percent of U.S. respondents. This fact is not surprising when considering the fact that a December study by research firm IPSOS found that 71 percent of Chinese consumers gauge their success by the things they own, and hard assets remain a valuable source of investment for China’s wealthy.
This may change sooner than one would think, however. For Chinese consumers, annual growth in luxury “experiences” grew by 15 percent annually in 2013. Providing an example of the new, experience-oriented wealthy Chinese consumer who enjoys activities just as much as he or she likes material goods, the study cited the following story:
“Recently, a wealthy Chinese individual spent $1.5 million on a luxury travel package that will take him to nearly 1,000 UNESCO World Heritage sites during a two-year trip. Meanwhile, his son, who had just bought his second Piaget watch, signed up to dive with hammerhead sharks.”
Some categories of Chinese luxury consumers are more experience-oriented than others. The report outlines three main demographics of Chinese luxury consumers: successful entrepreneurs, newcomers, and the younger “sugar generation.” According to the study, the youngest generation is more interested in experiential categories of luxury such as travel in addition to traditional luxury goods. BCG estimates that this group accounts for 13 percent of China’s affluent population and will grow to more than 30 percent within the next five years.
In order to benefit from this transition, traditional luxury brands need to find ways to make their products more “experiential.” This is already happening in China—for example, Louis Vuitton has added an invitation-only floor to its ultra-luxury “maison” shop in Shanghai. The floor is decorated like a deluxe private residence, and customers can receive hair styling while an artist creates a personalized bag for them.
Material luxury items clearly aren’t going anywhere anytime soon—especially in China—but the country’s rising number of outbound tourists are likely to include more than just shopping on their itineraries in the years to come.