The Mindset of the Chinese Luxury Consumer

on February 10 2014 | in Lifestyle Trends | by | with No Comments

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Foreign brands looking for success in the Chinese should “achieve a balance between local relevance and international aspiration,” one strategist says.

Tom Doctoroff, Asia-Pacific CEO of advertising agency JWT and the author of What Chinese Want, said that China’s strong Confucian and Daoist cultural roots have created a consumer mindset that is distinct from that of Western countries.

“The individual doesn’t define himself, but it’s about co-existence and regimentation and entrenched ambition. You have to pull yourself up by mastering convention, whereas in the West it’s about challenging it,” he said.

A good example is two Nike ads — one American, one Chinese. In the former, professional tennis players Andre Agassi and Pete Sampras play the sport in a busy New York intersection, a clear challenge to social conventions. The Chinese commercial, on the other hand, sends a message that one can yong yundong, or use sports to fit in, reinforcing the importance of adhering to convention instead of defying it.

According to the  2013 Julius Baer Wealth Report, affluent Chinese consumers see luxury goods and service as crucial to their lives. The report  stated that luxury purchases in China have expanded into wine, watches, and other product categories. This diversification of consumer taste seems to be rooted in the growing affluence of the country’s citizens; the percentage of consumers with annual household incomes of US$78,000 doubled between 2011 and 2012.

As consumers move up the social ladder, they use their luxury purchases to give their peers the impression of nuanced and sophisticated personal taste.

“Chinese leadership is different from Western leadership. Chinese leadership is more defensive, there is competition for your place both horizontally and vertically. So the ability to project a facility for managing and manipulating the system is really the mark of a man on top of a mountain, someone who has the wisdom to differentiate and discern. And that is how luxury brands are sold – not just based on pure status,” Doctoroff said.

The popularity of Apple products (particularly the iPhone 5S) in China reflects consumers’ need to “outwardly express their ambitions,” according to the South China Morning Post. Apple phones convey greater affluence than local brands like Xiaomi, which have a cheap image though they are 300 percent less expensive.

Although China’s luxury market is lucrative, luxury brands often lack effective marketing campaigns on the mainland. These failures to attract mainland attention are often the result of “culturally oriented or absolutist creative directors in different cities” — Chinese buyers’ vested interest in international brands does not cancel out cultural influence.

“They want to be seen as citizens of the world, absorbing foreign influences in a Chinese context,” Doctoroff said.

A McKinsey survey on Chinese luxury consumers seems to support this view. According to the report, half of luxury purchases are made outside of China, and a brand may lose sales “if its stores or image are not consistent across China and elsewhere.” It also states that while Chinese tastes are evolving, companies “risk diluting their brands” if they try to appeal to too wide a demographic.

Although President Xi Jinping’s recent austerity push has been deleterious to China’s luxury hotels and restaurants, the luxury market will continue to thrive, a belief echoed by the McKinsey report, which holds that by 2015 China’s share of global luxury spending will grow to over one-third.



image credit: apple

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