Chinese Expats Can Boost Growth for Western Brands

While the term “globalization” became popular in the 1980s, by 1848, Karl Marx had already developed an academic theory similar to globalization. According to Marx, “The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere.”

In other words, the world is becoming smaller as the bourgeoisie uses new commerce routes and markets to trade goods, ideas, and capital. This modern age stands in contrast to the regionalism of past centuries when self-sustaining societies could function without the support of foreign actors and individuals were confined to limited space. But that isolationism isn’t feasible anymore.

Today, we live in an interconnected and interdependent world, and a mobile group of individuals called expatriates — or “expats” — has become a driving force behind the economic success of various nations. Made up of talented employees assigned overseas, scholars studying abroad, and individuals who’ve moved to foreign lands for personal reasons, expats are widely considered to offer unprecedented support to new and innovative sciences, tech, and cross-border trade projects. And since their incomes from overseas jobs are usually higher than similar jobs in their homeland, expats have become an interesting consumer base for brands. Although they’re hard to make generalizations about, common denominators can be found in this group.

According to a report titled Shopping behavior and attribute evaluation of expatriates — a cross-cultural study, expats “are usually highly educated and receive an above-average income including all kinds of (tax) benefits and remunerations.” Furthermore, the study mentions that expatriates “are often regarded as cosmopolitan consumers.” As a group, they are intelligent, multicultural, and wealthy buyers, and these characteristics make them an excellent target for luxury brands. Yet marketing campaigns didn’t target expatriates directly until recently.

There have been particular cases (mostly in the U.S.) when shopping malls marketed directly to expatriates. According to a study conducted by Geri Wijnen, Astrid Kemperman, and Ingrid Janssen, “examples are the Legaspi Group centres (Hispanic community), the Mitsuwa Marketplace chain (Japanese community), the South DeKalb Mall in Atlanta (Afro-American community) and the Diamond Jamboree mall in Irvine (Asian community), and the Japan Centre in London.” Interestingly enough, despite the high spending power of affluent Chinese expats, luxury retailers rarely mention them in advertising campaigns. According to a study by Bain &Co., Chinese spending accounted for 33 percent of the global luxury market in 2018. But luxury retailers put all their eggs in that basket and became dependent on Chinese tourists instead of diversifying by also focusing on the highly lucrative expat community.

Andrew Browne from the Wall Street Journal says that “even when the emperors did their utmost to keep them at home, the Chinese ventured overseas in search of knowledge, fortune, and adventure. Manchu Qing rulers thought those who left must be criminals or conspirators and once forced the entire coastal population of southern China to move at least 10 miles inland. But even that didn’t put an end to wanderlust.” Browne is correct in his assessment. The Chinese conducted voyages and explorations, inaugurated the Silk Road, and according to recent research, Zheng He — a Chinese Muslim eunuch — even discovered America more than 70 years before Columbus. It comes as no surprise that now, as the Chinese population gets wealthier, their desire to explore the world has returned full force.

According to Marty Hurwitz, CEO MVI Marketing, Chinese expats are “actually driving a lot of luxury spending now,” and as the Asia-Pacific region surges to the top of the world’s wealthiest areas and the number of Chinese millionaires and billionaires continues to grow, those top earners have started sending not just their money internationally but also their families. And with this new affluent expat class comes the same Chinese cash flood that redesigned the luxury housing markets in Canada, the European Union, the United States, and Australia. It’s been widely noted that Chinese expatriates have shaped the real estate market in Sydney, Vancouver, London, Los Angeles, San Francisco, and New York, however, apart from pricey real estate, this affluent consumer base also tends to invest in unique luxury retail pieces.

Hurwitz says that Chinese “are driving brand growth in many categories, but certainly in jewelry.” He argues that Chinese jewelers are ahead of the curve, understanding their compatriots better than foreign businesses, which comes as no surprise. In fact, Chinese jewelers Chow Tai Fook and Luk Fook opened stores in New York primarily to capitalize on the influx of Chinese luxury buyers. Additionally, Luk Fook has inaugurated new stores in California and Canada — areas with a high Chinese population density.

Data from the Migration Policy Institute shows that the number of Chinese immigrants in the United States grew from 1.7 million in 2010 to 2.3 million in 2016. As noted in the research, Chinese students make up a significant portion of the expat category, and 83 percent of Chinese millionaires now want to send their children to study overseas. We don’t commonly associate extravagant expenditures with these spendthrift Chinese students, but that’s only one segment of this phenomenon since their mature visiting family members tend to engage in luxury shopping sprees. Joshua Freedman quotes data from Emerging Communications when he argues that “high-spending Chinese students in the UK number about 95,000, with each of them receiving an average of 3.3 visits per year from family members.”

“In traditional Chinese culture, the family is the basic unit of society,” explains Victor Lum, vice-president of Well Trend. “So much so that the concept of family is extended to include close friends who are often referred to as ‘brothers’ and ‘sisters’. There is an expectation that family members who have gone abroad, especially to wealthy and developed countries, should provide support to their family back in China.” And this support doesn’t just refer to payments but also luxury gifts. Therefore, Chinese expats don’t just go on shopping sprees for themselves but also to buy for their extended families, so luxury retailers need to make a conscious effort to adapt to their needs and target them through extensive communication and marketing strategies.

Australia is another interesting market for this demographic. Jane Cadzow from the Sydney Morning Herald says that in Australia, Chinese expats “have injected billions into the economy, spending with particular enthusiasm on real estate and their children’s education but also supporting a range of niche industries.” One of those niche industries is cosmetic plastic surgery. Mark Ashton, president of the Australian Society of Plastic Surgeons says that he and his colleagues devote a significant portion of their time to surgeries and cosmetic procedures that Westernize Asian features. Three procedures are the most in-demand with Chinese expats: “eyelid surgery (to create European-style folds), rhinoplasty (to make the nose less flat), and breast enhancement.”

But apart from luxury shopping sprees, expensive real estate, and plastic surgery, Chinese expats also make serious investments in the country itself. The Sydney Morning Herald indicates that Chinese investors represent the biggest source of overseas funds coming into Australia, and in the financial year of 2016, the Foreign Investment Review Abroad authorized over $47 billion in Chinese investments. In Canada, figures show a similar story and even in the U.S., Chinese expats remain a powerful engine of the economy, bringing growth in domestic consumption. According to research by Environics Analytics, “household spending from the two largest groups (South Asians and Chinese-Canadians) combined accounted for nearly 9 percent of total consumer expenditure in Canada in 2013,” and a report titled Ethnic Marketing in Canada shows that “South Asians and Chinese-Canadians reported 2013 household spending growth of 9 percent and 5 percent, respectively, versus just 2 percent for the average consumer household.”

The Chinese expat base offers incredible opportunities for luxury brands who perhaps can’t afford to pursue a long-term business plan inside China or don’t have a holistic market-entry strategy, and luxury retailers would be wise to carefully study the Chinese expat base if they want to unlock a new source of growth that continues to trend steadily upward.

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