Chinese luxury market is evolving quickly and marketers are trying to keep pace.
In the latest McKinsey study, the consulting firm identified Chinese luxury consumers based on their luxury spending priority as a percentage of household income to gauge the importance of luxury.
More than half of the luxury consumers are considered “core luxury buyers” which consist of affluent households that spend between 12% and 20% of their income on luxury goods or a total of RMB 20,000-60,000 (US$3,000 – 9,000) on luxury goods a year.
But interestingly, two emerging groups are expected to play a more significant role going forward, including shaping fashion trends. “Luxury role models” and “fashion fanatics” are projected to account for a third of China’s luxury market by 2015.
Luxury role models
- Rich, young and fashionable, mostly self- employed or corporate executives, living in Beijing or Shanghai;
- Consist of 1% of luxury consumers, but account for 24% of spending by 2015;
- Buy to indulge themselves and seek to feel unique rather than to show off wealth;
- Spend more than RMB 150,000 annually on luxury goods, or about 10% of their disposable income;
- Buy spontaneously, snapping up an item if it strikes their fancy;
- Good customer service important and they reward good service with a return visit.
- Middle class, typically in junior or mid- level positions; includes some housewives;
- Earn about RMB 100,000 to 200,000, or US$ 15,000 – 30,000;
- Consist of only 3% of luxury consumers, but spend up to 40% of their income on luxury products;
- Being on the cutting edge of the latest trends is important;
- Spend much of their free time researching and learning about the latest fashion trends and reviewing seasonal offerings;
- Stronger “enjoy now” mindset, willing to buy on credit;
- Exert a strong influence on other consumers, sharing their luxury purchases and opinions in social circles and online;
- Don’t seek flashy products, but like to be noticed by friends for a new purchase;
- Less concerned with store service. Product purchases are more influenced by a recommendation or by celebrities.
A third group, “middle-class aspirants,” account for 51% of luxury consumers but only spend 9% of their household income (RMB 5,000 to 15,000 per year (US$750 - 2,250)) on luxury goods. However, that is expected to rise to 16% by 2015. They tend to live in Tier2/3 cities, have more conservative spending habits – allowing for occasional splurges – and they buy luxury goods to satisfy social aspirations, but are less knowledgeable about luxury brands. They are also more inclined toward Chinese brands.
image credit: robert s. donovan