Chinese Luxury Consumers Beyond “Core Luxury Buyers”

on April 5 2011 | in Lifestyle Trends | by | with No Comments

Prada Hong Kong

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.

Fashion Fanatics

  • 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

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