‘You Are What You Buy:’ China’s 20-somethings Learn to Splurge

    There’s a growing trend for younger buyers in China to leapfrog traditional credit cards and get online credit set up as their first credit usage.
    Photo: Shutterstock
    Christine LeeAuthor
      Published   in Fashion

    Spend, spend, spend. That’s the clear picture that’s emerging of the 18-to-twentysomething Chinese consumer. Across the board, studies are showing that, while most of the children that came out of China’s one-child policy that began in the 1970s spend more easily than their frugal parents and grandparents, the splurging among those born after 1995 is particularly striking and unprecedented.

    New generational patterns, the convenience, and speed of mobile buying and a rabid consumer culture are to blame, experts say. For many college-age consumers, getting credit is easy. There’s a growing trend for younger buyers to leapfrog traditional credit cards and get online credit set up as their first credit usage, according to Benoit Garbe, senior partner in Shanghai for global branding and marketing consultancy Prophet.

    According to an April report by iReseach, a consulting group based in Shanghai, the handful of people born in just the five years 1995-1999 already have become the major consumption force in China’s online shopping. The report stated that around 25 percent of the e-commerce shoppers are in this age cohort, and 64 percent of the respondents said they use e-commerce sites everyday, with 10 percent of them purchasing online everyday and 35 percent of them purchasing at least once per week.

    Image: iResearch | April 2018
    Image: iResearch | April 2018

    Moreover, they splurge a the drop of a hat, and especially when they perceive a bargain. “Nearly two-thirds purchase impulsively when there is a big discount,” said Echo Zhang from iResearch.

    Experts believe that this phenomenon among young Chinese consumers is based on a “You are What You Buy” mindset. “Young generations are embracing identity affirmation in which they want to define themselves explicitly to the outside world, which is ‘you are what you buy,’” Garbe said. “Online credit offers them more flexibility in strategy consumption, allowing them to keep up with more passion in both the digital and physical world so as to be perceived as a multidimensional person, beyond simply buying a LV bag.”

    The tempting webpages designed by luxury brands and e-commerce platforms also add fuel to that consumption fire. “The platforms are using alluring webpages and ads to attract youngsters to purchase,” said Xi Chen, director of Secoo Finance in Beijing, a luxury e-commerce platform. “For instance, platforms all have big data to track consumers’ habits and behaviors, so when youngsters find a page that is full of their favorites, especially when there are discounts, they won’t be able [to] control the spending desire well.”

    The iResearch report also showed that the post-95s are attracted to vivid and visualized forms such as pictures, videos, and audios. They are more interested in soft advertising, for which short video is the most popular ad form among post-95s online users, with 57.4 percent of the respondents said they favor short video ad.

    Image: iResearch | February 2018
    Image: iResearch | February 2018

    In this age group, debt, at least so far, doesn’t appear to be a major issue — although experts warn that will likely change. But for now, although young people's consumption habits are heavy, data indicates most young users spend no more than two-thirds of their credit limit each month.

    Their relatively good repayment rate versus American youth might be helped by both generous parents and the fact that most Chinese youth don’t have the heavy student bills common in the U.S. According to a recent report by the CollegeBoard, tuition, and fees at U.S. private universities have risen to an average of 34,740 USD per year, while China’s high-ranking colleges are usually public, with tuition cost between 3,300 to 9,900 USD per year.

    Another survey, released just last week, “Tencent Post-00s Generation Research Report” found that the young generation is realistic and mature with regards to their finances. As their parents usually give them enough money to spend and are transparent with them about what they can afford, they have a clear understanding of their economic power. Eighty-four percent of surveyed respondents said they would not purchase items that were beyond their capability.

    It's difficult to amass statistics because various researchers have age cut-off points slightly different. The definitions of Millennials versus Gen Z versus post 95 are fluid and sometimes contradictory — but extrapolating from a host of studies, luxury retailers should note that teen/young adult Chinese shoppers are becoming extremely active shoppers.

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