Chinese consumers have often been referred to as the future saviors of the global luxury industry. Rapid economic growth experienced in the country has meant that now a greater number of Chinese consumers have the purchasing power to buy luxury goods, which were not easily available to them before. They also spend a lot on shopping during their travels abroad, becoming the main contributors to luxury sales in famous tourist destinations around the world such as Tokyo, London, and Paris.
Another outcome of China’s economic growth is the increase in the number of High Net Worth Individuals (HNWIs). Currently, there are more than 1 million people in China with at least US$1 million in investable assets, while its estimated that there are more than 600 Chinese billionaires. While these are still very small numbers compared to the overall Chinese population (roughly 0.08 percent), it is crucial for brands to understand just how much they can contribute to overall luxury sales in this market.
Agility Research and Strategy, a Shanghai-based firm focused on luxury and the affluent consumer, estimates that Chinese millionaires collectively spent around US$9.5 billion in 2016 on luxury fashion, including clothing and accessories, and hard luxury, including jewelry and premium watches.
The research firm came up with the number through data analysis collected in their recent annual “Affluent Insights Millionaire Report,” a survey of 111 Chinese millionaires on their lifestyle, investment choices, and luxury consumption behaviors.
The interview answers illustrated that Chinese HNWIs spent an average of US$9,450 a year on luxury fashion products. While the figure seems low, the figure is an average—there are those millionaires who are savers and don’t spend much on fashion, and there are those who could spend tens of thousands on one purchase.”
Agility’s data team then multiplied US$9,450 with the number of millionaires in China (1 million), and came up with a total of US$9.5 billion, rounded up. Total revenue for personal luxury goods from Chinese consumers was valued at US$82 billion last year, but this number also includes fragrances and cosmetics. It can thus be predicted that about 12 percent of this revenue came from Chinese millionaires buying luxury fashion and hard luxury goods either in China or abroad. This is especially impressive considering they only make up 0.08 percent of the country’s population.
Furthermore, the report also revealed these millionaires’ perception of luxury brands, as well as which brands they aspire to buy in the next year. The top five brands for each category are shown in the table below.
The data shows that these consumers are still spending their money on major fashion brands, and this offers a tremendous opportunity for brands to learn more about Chinese millionaires and their future buying habits.
Amrita Banta is the managing director at Agility Research & Strategy.