Key Takeaways:#
Luxury goods sales are projected to double between now and 2025 while other major global luxury markets, such as the US and Europe, are moving much more slowly.
Tencent and BCG reported that the average age of luxury consumers in China is 28 years old — a full ten years younger than the average age of luxury buyers in most other parts of the world.
The post-00’s generation is more influenced by trendy concepts than brand names or pricing, and it also has triple the savings of the post-90s generation and higher purchasing power/financial autonomy.
Despite recent pandemic disruptions, Chinese consumers have remained the biggest growth opportunity for the luxury sector. Boston Consulting Group predicted luxury spending in China grew 20-30 percent during 2020.
We’ve already seen a handsome rebound in luxury consumption in China. Luxury goods sales are projected to double between now and 2025, yet other major global luxury markets, such as the US and Europe, have only shown small and slow signs of recovery. And as Chinese consumers convert their international budgets to domestic spending, brands must focus more on them where they live.
One distinct difference in Chinese luxury consumers is that they are a lot younger. Tencent and BCG reported that the average age of luxury consumers in China is 28 years old — a full ten years younger than the average age of luxury buyers in most other parts of the world.
The sophisticated post-00’s Chinese consumer is also growing to take on the luxury market. Bain & Co. estimated that by 2035, the generation could make up 40 percent of the country’s luxury buyers. The oldest of China’s 163 million post-00’s have reached college age, and they will soon enter the workforce.
These Gen Zers are more influenced by trendy concepts than brand names or pricing, and they also have triple the savings of the post-90s generation and higher purchasing power/financial autonomy. Since they have remarkable differences from their elders, let’s take a closer look at the four groups of the young luxury heroes in China today.
Luxury’s up-and-comers: Who are they?#
Self-made teen stars#
The scope for this group can be very large and ranges from small and local KOLs, influencers, or livestreamers to nationally-known pop idols. The annual income of these self-made public figures can also range significantly, from thousands of RMB to millions. Yet, regardless of their level of success, today’s teen stars must maintain a clean image, as many of their fans value their idols’ morals more than their talents. To remain affluent, they need to be well-mannered, sporty, and patriotic. A famous example of this consumer group would be Jackson Yee (易烊千玺).
Sample Profile
Name: Xie Yifan
City: Chengdu
Short bio: Born in 2003, Yifan came from a normal household in Chengdu and made a name for himself by posting journal content on Bilibili. He has amassed over 30,000 followers on the platform, and he receives a decent income by doing collaborations and promotions with lifestyle brands. He enjoys purchasing luxury products and will share his product reviews and experiences with his followers through various social media handles.
Celeb kids (星二代) and rich second generation (富二代)#
Members of this group are the second generation of the rich and/or famous. They were born into prestigious families, possess great wealth and status, and have been exposed to luxurious lifestyles at young ages. They are usually educated overseas, so they are Western-influenced and aspire to an international lifestyle. These kids cover a spectrum of behavior patterns, but, generally, they are not as active in the public eye, keeping a comparatively low digital profile. One example within this group is Angela Wang (王诗龄).
Sample Profile
Name: Jing Jing
City: Shanghai
Short bio: Born in 2003, Jing Jing is the heiress of a Chinese software company. She went overseas to complete her education after her primary school years and is very western-influenced. She is a fashionista and enjoys buying all sorts of luxury items, be it statement fashion and artful runway pieces or luxury streetwear and sneakers.
Tier 1-2 high school/university students#
Despite having more spending cash than previous generations, this group usually acquires luxury goods as gifts from their parents. Luxury is an expected standard of life for them and their peers, and they purchase it for blending in or gaining recognition. They are the ambassadors of the off-to-online market, relying on omnichannel sales to discover product information and make in-store purchases. They have a spend-now-worry-later mentality when buying luxury goods and will not do as much research on the products they buy, as compared to consumers in the US or Europe.
Sample Profile
Name: Yang Zihan
City: Hangzhou
Short bio: Born in 2001, Zihan tends to spend the most on cosmetics and shoes, as they are lower-priced luxury items she can afford. She will occasionally splurge on more expensive luxury items outside of her budget like handbags, using Huabei (the consumer loan service run by Alipay) to buy them and pay later.
Lower-tier teens#
This group also receives luxury products from their parents as presents. Unlike the last group, though, they buy luxury products as a reward, which also sets them apart from their peers. They are mostly located in lower-tier cities, where brand stores or department stores are not usually readily available. They predominantly receive information about luxury brands and products via digital channels. As such, they tend to go online and read brand or product reviews before making purchasing decisions.
Sample Profile
Name: Zixuan (子轩)
City: Zhengzhou, Henan
Short bio: Zixuan is an 18-year-old high school student who just completed his college entrance examination (高考), and his parents promised to buy him a nice present as a reward. He has seen a luxury brand promoting luxury sneakers with creative digital campaigns before and is excited to purchase them as his first luxury purchase. He is more style-driven than brand-driven and does not think international brands are necessarily better than local brands.
How businesses should proceed in 2021#
Businesses need to embrace digital and e-commerce platforms, but enhancing digital assets such as brand websites or social media handles is only the first step. They should also consider establishing partnerships with reputable e-tailers to increase their consumer reach outside of first-tier cities. They need to engage with tier-2 and tier-3 consumers, as they are often underserved but are becoming an increasingly important driving consumption force in China.
Brands should also consider implementing these three points into their 2021 strategies:
Guochao (国潮) is the way to go: This is true for all the previously mentioned consumer groups. The halo effect of international luxury brands has become much weaker over the years, and the sense of appreciation for Chinese nationalism and local designers is at a new high. Brands can appeal to local market needs by launching Guochao-inspired collabs that support Chinese culture.
Nurture brand fanatics & advocates: Chinese consumers are very social and can influence each other’s spending. Therefore, brands should acknowledge and interact with social mentions or offer exclusive VIP access to foster strong relationships with their consumers.
Create personalized experiences: Brands should deliver intimate and personalized experiences that make customers feel special and valued — both offline and online. Providing virtual try-on services, suggestions powered by AI, and semi-personalized in-store sales services are some of the top ways to improve conversions.