Six Reasons Why Chinese Buy Luxury Goods

on January 26 2015 | in Retail Trends | by | with No Comments

china luxury consumers

In China, a country with sales of luxury goods of 22 billion euros in 2014 and still increasing, it is important for international luxury brands to understand the main purchase motivations of different Chinese consumers for successful branding strategy and marketing sales. So why do Chinese consumers purchase luxury goods?

chinese luxury consumers

We observe six purchase motivations for both Chinese men and women consumers in different tier cities in China.

In 2008, 70% of the Chinese consumers saw luxury brands as a means to demonstrate their status and success. However today still both Chinese men and women consumers buy luxury items to impress their peers as these products make them feel special and increase their confidence. Aware about “losing face”, they also want to confer a feeling of success among their family members and friends.

Consumers tend to have planned purchases by buying popular luxurious products that are known and appreciated by the minority. Why is boasting such an important purchase motivation? Chinese consumers consciously think that the more famous the brand is, the more social and financial acknowledgement they will earn. They are also not frightened to publicly display social climbing through material.

While in the past showing-off was a very important purchase motive, this purchase reason has become less significant for consumers in big cities like Beijing and Shanghai. The present luxury retail market in China is more refined where many are appreciating the heritage and image of international luxury brands as perceived through the store design or advertisements that are in line with their personal aesthetics and values.

In the last years, we have been observing an increase of Chinese consumers spending more money on self-indulgence as well as self-enjoyment in search for luxury experiences and these numbers are still on the rise today. A recent survey from KPMG showed that 53% of the respondents want to enjoy the high quality through luxury experience. These consumers pamper their success by purchasing luxury goods for their own contentment. They are willing to experience luxury by purchasing items that are emotionally meaningful to them such as cars, hotels and resort stays, restaurant visits and spa treatments. These modern Chinese consumers are seen to have more hedonistic tendencies, which were only in the past linked to western culture. Consumers motivated by self-reward tend to have planned purchases as well as impulse buys however marketers need to deliver on emotive attributes too when it comes to touching this segment of consumers.

Chinese consumers are now more aware of different niche and uncommon luxurious brands; 90% of modern Chinese women bought niche luxury brands on their last trips abroad. These Chinese consumers use these items as a way to reflect their personality and express their individuality. These trendsetters who mix and match different luxury brands are very fashion-forward, young, knowledgeable and work as white-collars. Consumers who are self-aware have a certain snobbism when it comes to luxury goods, meaning that they planned to spend less on product that the majority of consumers are buying. They are searching for unique, limited editions and curated pieces from popular luxury brands as well as less famous products.

Many consumers in China believe that buying luxury goods is an investment for the future, as its value will increase; this is true for watches, wines, jewelries, antiques and arts. The luxury market in China is growing in sophistication where more local consumers, around 29% in 2013 by KPMG research, are able to appreciate the heritage and history of a luxury brand. Moreover collecting unique luxurious items is also a way to reflect personal taste. These purchases are mostly planned as finding and collecting distinctive artifacts requiring a considerable amount of time and expertise.

Gifting in China has been identified as an important motive in purchasing luxury goods and accounted for more than 20% of luxury consumption in 2011 according to Bain & Company. The motivation of buying luxury goods for special occasions or holidays is a planned purchase. Besides wealthy consumers purchasing luxury goods for family members, gifting to employees, colleagues, superiors, business partners and friends, promotes harmonious business relationship in China.

Below you can find the top 15 luxury brands that are chosen as gifts by women and men in 2014 in China.

chinese luxury consumers

chinese luxury consumers

In a recent research by McKinsey, Chinese luxury consumers show the highest tendency to make impulse buys against their global peers, around 40% of the people purchased luxury goods within one day of wanting it. Women consumers generally buy luxury goods out of an emotional reason, while men seldom make emotional impulse purchases. These spontaneous consumptions are desires that need to be satisfied directly. Retail therapy is a way for them to lift negative feedback such as depression, sadness or anger. After encountering a stressful experience that challenges their self-image, these consumers tend to distract themselves by purchasing luxury goods in order to regain positive emotions. However many consumers also use luxury products to protect themselves against potential danger to their self-image. They become selective in what they would like to purchase prior to future challenges. For example, a woman would buy an expensive bag out of stress of feeling perceived as unsuccessful when meeting old friends.
In summary, we are observing that Chinese consumers in different tier cites are getting more emotional, a huge factor that motivates many consumers in self-reward, gifting and self-expression. In order to touch consumers on emotive attributes it is important for brands to create campaigns that convey a certain feeling or personality when owning luxury items, a store design that is appealing to their targeted audience, VIP events for loyal customers as well as training store teams in being meticulous to support consumers at the point of sale.

Consumers in China are not homogeneous in their motives for buying luxury brands. Whatever the motives are, luxury takes different forms for different people.

Barbara Seidelmann is based in China since 2005 and has been working with different luxury brands. At 5 Star Plus Retail Design she advises on the Chinese luxury retail market, setup of stores and visual identity.

Note: Opinions expressed by contributors do not necessarily reflect the opinions of the Red Luxury editorial team.
image credit: gabriel jorby, kpmg

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