China’s Millennials aged 20-34 are the primary driver of luxury purchase in China. Half of this audience has an income of at least RMB 300k per year. They purchase more impulsively (and return products more frequently) than in the past, and rely more on word of mouth when seeking new purchases. This is the new affluent Chinese consumer and the primary target for brands looking for a slice of China’s market for luxury and lifestyle products and services.
Most Chinese Make Their First Luxury Purchase at Age 20-34
Millennials are major contributors to luxury growth. They purchase luxury goods at an earlier age and buy luxury goods more frequently than other age groups.
Chinese Millennials Purchase the Most Luxury Products
In 2017, on average, Millennials have purchased more luxury products than all other age groups combined. They are the foundation of the luxury industry now and in the future.
Chinese Millennials Plan to Purchase More Luxury Products
93% of Millennials surveyed stated they would purchase more luxury goods in the next 3 years. Combined with other buying trends, Chinese Millennials will make up the bulk of purchases for the foreseeable future.
For China’s netizens seeking luxury brands, online accessed via mobile is the channel that provides both the first point of contact as well as a continued connection. The most important digital channel isn’t social media, but the brand’s own website. This is in part because there are so many fake brands and products in China that netizens are skeptical of most things they see on public channels.
First Point of Contact with Luxury Brands are Online
Online is the channel that first introduces netizens to a new product or service that they subsequently purchased. In-store is a distant second.
Netizens Use Mobile to Get Online
Netizens access the internet most by mobile phones. Campaigns and marketing communications need to focus on this channel, especially in China.
Brand Website is the Most Important Education Channel
Chinese netizens discover the latest information from brand websites, fashion websites and then social media.
Chinese consumers evolve fast. Since 2015, The primary driver of luxury spending has changed, from new luxury consumers making their first purchase, to sophisticated luxury consumers who have purchased many luxury products. With this familiarity with luxury purchases comes a desire for more authentic purchases that are not about showing off “bling bling”, but about the intrinsic benefits of feeling good about owning products of high quality. Greater sophistication leads to greater awareness and emphasis on ethics and sustainability. In many ways, the Chinese consumer consciousness is evolving right before our eyes.
Luxury Search Terms Becoming More Sophisticated
In the past year, Baidu has found Chinese consumers using increasingly sophisticated and discerning search terms, with an eye for industry knowledge.
Luxury Consumers Purchase Luxury Products for Themselves
Previously, purchasing a luxury product was about “showing off” or “bling bling”. This attitude is no longer prevalent. It is replaced by a respect for the products quality, and an increase in self-esteem related to the individual’s experience.
Willing to Pay a Premium for Sustainability and Ethics
Chinese consumers put a higher value on brand sustainability and ethics than other countries. This is a result of becoming more discerning about their luxury purchases and can be a result of how much research Chinese do before they buy.
Due to the proliferation of fake products and products of dubious quality, China’s netizens are wary of new products they aren’t familiar with. Therefore, brand loyalty among Chinese millennials is still high compared to other mature markets. As the Chinese market matures, product quality improves, product genuineness becomes common, and purchase options increase, fully capturing and keeping millennial brand loyalty will be increasingly critically important.
Brand Loyalty is High in China vs. Other Markets
As the Chinese market matures, we expect to see a shift away from brand loyalty, similar to the US, UK and Italian markets. Since the Chinese market goes so fast, brands should prepare early for this shift.
Chinese are Influenced More by Celebrities
Trusted celebrities and KOLs are indications of product credibility and remain an important channel of influence when netizens are deciding which brand and product to purchase. Continued investment in influencers is important.
Quality Products Tops the Reasons Why Chinese Buy
Quality products dominates, but as quality becomes a commodity, brands should also pay attention to Brand Story and the Brand Heritage as points of unique differentiation with competitors. Story shows netizens an aspirational lifestyle, and heritage shows credibility and trust.
Perhaps due to the One Child Policy creating many single child families, Millennials grew up with a lot of family support and attention. Pooling together all of the family’s resources make Millennials feel wealthier than they actually are, leading to more spending, without necessarily the same earnings as previous generations. Where do they go to spend their money? Digital is a large part of their buying process, with search and brand website being the top destinations.
Millennials Monthly Household Income is Lower
Millennials tend to make less income than non-millennials.
Millennials Spending Similar to Non-Millennials
Perhaps due to the fact many Millennials have family support, their disposable income is closer to that of non-millennials. The constant presence of things to buy via online channels could also contribute to Millennials spending more than their older counterparts.
Millennials Use Digital to Decide What to Buy
Search and brand website remains the most important entry point for Millennials when they first start learning about a brand. Much of Chinese Millennial buying behavior takes place online.
Ecommerce is big in China, but not nessessarily amnong luxury brands. This is perhaps mostly due to the nature of luxury brand products which are generally very expensive than the average ecommerce purchase, and difficult to fully appreciate from viewing pictures online. However, while investment and growth in ecommerce has been slower than other industries, luxury brands are steadily increasing their investment into ecommerce over time as the sheer size of China and the limited reach of retail stores demands new strategies for the modern marketplace.
Luxury Brands’ Slow But Steady Growth in Ecommerce
Growth in ecommerce for luxury brands has plateaued since 2015. However its projected to grow as competition and demand increases.
Luxury Brands Host Ecommerce on their Websites
Brand’s tend to use their own websites for ecommerce transactions. This is likely due to the number of fake products being sold in China. Customers can trust they’ve purchased real goods when buying from a luxury brand’s official website. Due to the popularity of WeChat, WeChat Shops have seen a recent huge jump in adoption. Though this is usually for sale of limited availability items during special campaigns, WeShops may eventually become more permantent ecommerce destinations for many brands.
Millennials in China have grown up during a very special time in China’s history. While they’ve definitely learned about China’s many troubles during the 20th century, China’s millennial’s themselves have only experienced the country’s massive prosperity boom. This makes the modern day Chinese consumer more optimistic than previous generations. Optimism has led to pride in Chinese culture and concern for national and environmental social issues.
Chinese Millennials More Optimistic Than Previous Generations
Millennials only know China as a prospering rising global power. Thus they are significantly more optimistic they do better than the previous generation than other millennials around the world.
Pride in Chinese Culture and Heritage
Age groups 18-25 and 26-40 have the highest levels of cultural consumption. China’s rising position on the global stage has led to an increase in pride and a newfound preference for Chinese cultural products that reflect China’s history and heritage.
Chinese Millennials Care About Social Issues
Climate change and Income Equality top the list of Millennial personal concerns. These concerns reflect a growing sophistication and awareness of a world beyond themselves.
Social media has only woven deeper into the fabric of how China’s netizens make purchase decisions online over time. As shown below social’s role as a medium of discovery and research has a considerable influence on how millennials purchase products. After purchase on e-commerce, millennials also come back to social media to publicly share feedback on their new products, thus completing one digital cycle and readied to begin another ad infinitum.
Social Media Heavily Influences Prospective Buyers
About 75% of netizens will have their planned purchases somehow influenced by content they see on social media in China, mostly on WeChat and Weibo, but also other platforms. Content seen on social media causes them to change their plans and buy different products, buy more of a planned product, or buy a product they didn’t consider to purchase before.
Tmall is King of E-commerce, but VIP.com Has Traction Among Millennials
Although Tmall has the lion’s share, and JD is a close second, millennials also seem to disproportionately prefer VIP.com than non-millennials. That’s an exciting trend and could suggest that VIP.com is catering better to millennials than China’s other e-commerce giants giving them an edge in the years to come.
Netizens Actively Provide Feedback on Products
After China’s netizens purchase products online, many will then post reviews on social media, completing the online consumer journey cycle. Channels where product commentary is published, include BBS, WeChat and Weibo, and Online Stores.
Greater China is top of mind for man of our clients. Recently we put together a few graphs comparing each of the markets digital opportunities. The key difference is China’s vast scale, which has yet to be fully optimized vs. HK and Taiwan’s already pretty mature digital markets. Below is a few slides that will take you through a quick overview of the difference between each market.
Scale of Digital Opportunity in CN TW HK
China has the largest population and therefore has the most people online, Taiwan consistently comes in second, and Hong Kong third. When seeing the differences in population so starkly, its clear why most brands target is the Chinese mainland; though of course the other Greater China markets are still very important.
Digital Market Expansion Ability CN TW HK
China has a lower penetration in internet and social media, suggesting that there is still more room to grow, and more customers still to reach. When coupled with the previous graph covering overall population, China can grow about 35 more “Taiwans” before it hits its maximum potential.
Where Consumers Discover New Products CN TW HK
Across each of the Greater China countries, online is the dominating channel where customers first come to know of new products and services and then subsequently purchase. However due to Taiwan and Hong Kong’s older infrastrucutre, awareness is more spread out that China.
Most Active Social Media Platforms in CN TW HK
While WeChat and Weibo are used across Greater China, their usage in HK and TW is more about keeping in contact with friends in China rather than as a primary social media platform. HK and TW are similar, except they swap Line (TW) and Whatsapp (HK) when it comes to chat.
Video an Important Part of Digital Content in CN TW HK
With the massive amount of content online, each of the Greater China countries favor video as the meduim to receive content. This makes sense as videos tend to be shorter, more interesting, and more to the point, which is a perfect antidote to an increasingly distracted audience.