The Rise of Chinese Millennial Shoppers
Who are Chinese millennials, and how do they shop for luxury goods?
Age: 21-35 years old (born between 1983-1997)
Population: 415 million consumers, comprising approximately 31% of China’s population
Significance: Most influential consumer segment reshaping China’sretail sector
(Source: Goldman Sachs & Fung Business Intelligence)
Whether their parents fund their luxury shopping or whether they purchase luxury goods with their own money, Chinese millennials have revived the luxury retail shopping scene. And they’re not going anywhere: According to the World Luxury Association, the average age of Chinese luxury shoppers has dropped from 35 to 25.
Many factors contribute to the rise of Chinese millennial shoppers
1. Economic Growth
China’s economic growth began at the birth of the Chinese millennial generation in the early 80s. Since the early 90s, the government has made reforms to lift millions of Chinese out of poverty. This economic boom is evident in the increase of the per capita GDP, which started out as few hundred US dollars per capita in the early 90s to more than US$8,500 per capita in 2017 (source: CNBC and The World Bank).
(Source: The World Bank)
With the opening of foreign trade investments in China, the Chinese are increasingly westernised, educated, and globally aware. Tending towards the westerners’ open-mindedness and positive thinking,Chinese are now more receptive to foreign brands. This is especially sofor luxury products, which are perceived to be superior to local goods.
3. One-Child Policy
Because of China’s one-child policy, many Chinese millennials are only children. As such, they receive more financial and emotional support from the elders in their families. This reduces the financial burden on many Chinese millennials so they are better positioned for luxury spending.
Growing up in the digital age, the highly tech-savvy millennials are exposed to a constant flow of information online. They grow up as highly discerning shoppers who perform extensive research on multiple social media platforms before purchasing a product.
This is evidenced by the ever-increasing internet penetration in China. The latest figures show 771,980,000 netizens, which represent a 55.8% internet penetration rate in China.
Local, Online, Overseas, and Second-Hand Shopping
To encourage consumers to shop locally, the Chinese government reduced import duties for consumer goodsin July 2018.
However, while Chinese millennials have a strong desire to purchase luxury goods, they don’t purchase impulsively, and they don’t purchase locally. Why do they hesitate to buy in China?
- They think it’s not worthwhile: “I spend less money to get luxury items overseas than in China.”
- They fear it’s not authentic: “If it’s real, why does it cost half the price on Taobao?” And, “It’s fake. Cucci is not Gucci.”
- They know it’s not the latest: “The store updates are too slow.” And, “Stores only have old designs. Where can I buy the latest trends that celebrities are wearing?”
So, millennials want more availability and greater value when purchasing luxury products in China. How can we meet this demand?
- Hold more brand promotion and fashion events in China
- Create casual and practical designs tailored for a younger demographic
- Interact more with Chinese customers
While Chinese consumers perform a ton of product research online (from reading reviews to trendspotting), they tend to make purchases in-store because they like to touch and feel the product. This reduces the chances of receiving fake goods, especially from less controlled online shopping platforms.
However, this trend is slowly shifting. Many international and domestic online luxury retailers have been developing their online shopping ecosystems.
Below are case studies of how three major brands adapted to China’s online shopping environment.
Case Study 1: JD.com
Last year, JD.com, China’s biggest online and offline retailer, launched JD Luxury Express—a special delivery service for consumers who purchase high-value luxury items on JD.com. This helps consumers feel as if they’re still shopping in a high-end boutique.
(Photo: Reuters/Jason Lee)
Case Study 2: Audemars Piguet
In early June, a luxury timepiece collector was paid a surprise visit by François-Henry Bennahmias, the CEO of Swiss luxury watchmaker AudemarsPiguet, and Richard Liu, founder of JD.com. The pair hand-delivered an online order to the lucky collector who bought the Audemars Piguet watch through the brand’s WeChat store, which is supported technically by JD.com. This move shows how brands are adapting to the growing Chinese luxury landscape, and it also champions the notion that consumers can still receive authentic luxury products despite purchasing them online.
Case Study 3: Louis Vuitton
It’s no wonder that Louis Vuitton has jumped on the bandwagon by lowering its prices in mainland China to boost luxury spending locally. Louis Vuitton has been at the forefront of appealing to Chinese millennial shoppers. The average age of customers on Louis Vuitton’s .cn site is five years younger than on its other flagship websites worldwide. And LV’s social presence spans across WeChat, Weibo, and Youku. Being early adopters, LV was the first luxury brand to open a WeChat Official Account in 2012. LV has now extended its e-commerce delivery to all cities in China. In partnership with InStyle, Louis Vuitton launched a WeChat campaign on Chinese Valentine’s Day.
(Source: Jing Daily)
As international luxury brands break into China’s online shopping sphere, not only do they need the basics in place, such as mobile payment methods like WeChat Pay, but they also need to be ahead of the digital game to win the hearts of Chinese millennials.
To satiate the everchanging shopping habits of Chinese millennials, online retailers can:
- Set up official brand digital and social platforms
- Release Chinese-limited collections to align with Chinese festivals and cultural elements
- Offer direct delivery from the brand
Chinese tourists are the biggest spenders in the world. Last year, their tourism receipts totalled US$258 billion, almost twice that of runner-up USA.
There is an economic boom of Chinese travellers globally. Because Chinese goods generally cost 21% more than the global average in 2017, international mobility allows Chinese travellers to make their purchases abroad.
According to a study by Bain, the Chinese account for 32% of all spending on personal luxury goods. However, for many years, they have done most of their buying outside of China (Source: Quartz Media).
(Source: Quartz Media;Exane)
Brands with a physical presence outside of China looking to entice Chinese travellers can tap into the ‘uniqueness’ of the Chinese millennial and market intangible factors, such as ‘the story it tells’ (Source: Jing Daily).
Additionally, to appeal to the huge market of Chinese travellers, international companies can:
- Create easy payment methods for Chinese tourists
- Customize brand trips for customers
- Award VIP Chinese customers who get products and discounts before the general public
While Chinese millennials are the biggest spenders in the luxury goods sector, they are also cautious shoppers. And there has been a shift in how they spend. Quality now matters more than brand alone. Chinese millennials lack luxury brand loyalty and are increasingly willing to buy second-hand luxury goods.
With an alternative platform for consumers to buy and sell their used luxury goods at a lower cost, consumers are freer with their luxury budget. They are less particular about brands and place greater emphasis on quality.
This shift also creates opportunities for less-visible fashion segments, such as casual, streetwear, and sportswear.
The Future of Luxury
The luxury demands of Chinese millennials will evolve as the Chinese economy continues to boom and digital platforms continue to proliferate.
To win Chinese consumers, mature brands must evolve their marketing strategies across all channels, for example by improving brand story and experience, to take luxury shopping to the next level.
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