Think China's Luxury Consumers Are All The Same? Think Again.

    China's oft-mentioned "luxury market" actually consists of two very distinct groups, argues columnist Nick Cakebread.
    The Plaza 66 shopping center in Shanghai. (theplaz/Flickr)
    Nick CakebreadAuthor
      Published   in Retail

    Brands Should Avoid "One-Size-Fits-All" Approach With China Market#

    The Plaza 66 shopping center in Shanghai. (theplaz/Flickr)

    Much has been written about the rising power of China’s luxury consumers. The most recent studies state that they have now surpassed their U.S. counterparts as the world’s top luxury shoppers.

    Yet too often, this much-valued segment is touted as relatively homogenous. But in reality, today’s Chinese luxury consumers are a diverse and dynamic group, with vastly different spending power, needs, and life philosophies. Significantly, luxury is no longer the sole preserve of high-net-worth individuals.

    Two important yet distinct groups are powering luxury spending in China: the "Urban Middle-Class Aspirants" and the “New Nobility.” Together, these two consumer segments account for a large proportion of mainland luxury spending and are the focus of many luxury brands.

    Who are they?

    The Urban Middle-Class Aspirants#

    have the impression that the future belongs to them. They are upbeat and positive about tomorrow and are spending accordingly. Compared to their counterparts in the West, who are tightening their purse strings, China’s middle classes are hedging their consumption today against their earning prospects of the future.

    While much has been written about China’s luxury consumers using "bling" to showcase their status, today’s urban middle classes are increasingly sophisticated, particularly in first-tier coastal cities. Increasingly, they buy

    luxury products to express their individuality and imagination and to broaden their knowledge of fashion. This is evident in the rise of niche luxury brands. In China, the market has moved beyond the frantic consumption of luxury bags and is now rapidly educating itself by immersion in the luxury sphere.

    Luxury shoppers in China.

    However, men and women are not on an equal footing when it comes to luxury consumption. In a country where the single-child policy has encouraged the birth of boys, and where there are likely to be 40 million single men aged 15-34 by 2020, young men are under growing social pressure to spend more conspicuously in order to be seen as a good catch. Case in point: the luxury watch as signal of alpha-male status.

    But women are another factor driving this pressure among middle-class men. As women have become more empowered and are approaching equal footing with respect to numbers in the workforce -- and nearly a quarter are earning more than their partners -- men are feeling increasingly insecure.

    The New Nobility#

    are another story. At the top end of the luxury market, this category of consumers forms a more discreet, less ostentatious social class.

    These ultra-high-net-worth individuals have typically had more time with wealth as compared to China’s nouveau riche. They are the business, industrial, and Party elite, and as a segment they constitute a “new nobility,” imbued with conventional codes and values. On the whole, they prefer to remain in polite society rather than showing off at flashy events. This segment sets the tone for good taste. They are connoisseurs of the luxury lifestyle, enjoying the best wine and luxury bespoke holidays, as well as the highest quality in clothing and accessories.

    This group is difficult to reach, as they move in tightly-knit peer circles, preferring to socialize at home or in the privacy of exclusive clubs. Brands have to be very careful when engaging with this group: the new nobility is profoundly nationalistic, and increasingly attracted to domestic luxury brands. And in light of the recent anti-corruption campaigns, brands that make use of subtle luxury cues as opposed to ostentatious displays of wealth are likely to gain increasing favor among those consumers with strong links with the Party.

    Luxury brands looking to capture both middle-class aspirants and new nobility need to address the dynamic that cuts across both groups: the “upgrade” mindset. Brand desire created among the “top of the pyramid” will radiate out to the broader, middle-class group. No matter their purchasing power, people aspire to the best that life can offer, be it luxury product or personalized service.

    Nick Cakebread is Managing Director of integrated communications agency BBDO/Proximity Live, which helps brands engage with China’s growing group of high affluent consumers. The agency has worked with some of the world’s leading luxury brands including Tag Heuer, Fendi, Ralph Lauren, Corneliani and Loro Piana.

    Originally from London, Nick has worked in China for more than six years and within the Asia-Pacific region for more than eight.

    (Opinions expressed by columnists do not necessarily reflect the views of the Jing Daily editorial team.)

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