Won The Chinese Market? Who Is Supporting Luxury Consumption?

"Get the Chinese market is the world" is still the rule of luxury brands in the near future to maintain growth.

According to McKinsey's latest report this week, China's luxury report 2019 social fission: China's "post-80s" and "post-90s" expedites the global luxury new track. In 2025, Chinese consumers will account for 40% of global luxury consumption, and will become the main contributor to the growth of the industry in the next 6 years.

In 2018, the total expenditure of Chinese consumers to buy luxury goods at home and abroad was 770 billion yuan, and the average household cost of consuming luxury goods was 80 thousand yuan. The increase was mainly due to the surge in the number of upper middle class families, and their expenditure would increase nearly to 1 trillion and 200 billion yuan by 2025.

This data is basically consistent with the recent findings of other advisory bodies.

As of 2018, luxury consumers will reach 425 million and spend about 920 billion euros, according to the global luxury consumer research report released by Boston consumer consultation and consumer insight conference. By 2025, the market value of luxury goods will reach 1 trillion and 300 billion euros per year at a rate of 4.6%. At that time, Chinese consumers will occupy 40% of the consumption of luxury goods.

In addition, the advisory body Bain published the 2018 China luxury market research report that the Chinese luxury market as a whole is mainly benefited from the millennial generation and female consumers, and it is estimated that by 2025, the consumption of luxury goods outside China and within the country will be flat, which means that the brand should focus on the development of the mainland market.

The strategic position of Chinese market for luxury goods industry has become a global consensus. At the same time, with the gradual deepening of the market's understanding of Chinese consumers, the portrait and demand of Chinese luxury consumers are becoming clearer.

After nearly 30 years of precipitation in China's luxury goods market, China's luxury consumers have shown a clear stratification. "After 80" and "after 90" take the post "65 after" and "70 later" become the main consumer. The younger generation represented by "80 generation" and "90 generation" accounted for 43% and 28% of the total number of luxury goods buyers respectively, contributing 56% and 23% of the total consumption of luxury goods in China respectively. In terms of per capita expenditure, the "post-80" luxury consumers spend 41 thousand yuan on annual purchases of luxury goods, and the "post-90s" luxury consumers are 25 thousand yuan per year.

In 2018, the "after 90" per capita spent 25 thousand yuan to purchase luxury goods, the amount has been compared with the "65" and "70" parents.

More importantly, the "post-80" and "post-90s" also show different consumption patterns because of their completely different living conditions. No matter from the scale of consumers or the total amount of consumption, the post-80s are the main force of luxury consumption. Born in China after the reform and opening up, the "post-80s" has obvious characteristics of the times. It is the first generation who has not experienced the recession and has experienced the economic development upward. It benefits from the prosperity and prosperity of the country. At present, they are at the peak stage of personal career and income, explaining the success of their career through consuming luxury goods. Unlike the previous generation, "post-80s" have entered the global wave and are keen on global tourism.

China's "post-90s" has injected new vitality into the Chinese luxury market in the past few years because of the low tide caused by anti-corruption and honesty. In the future, they will take the Post 80's as the main consumer of luxury goods. Although it has not yet entered the peak period of income, in 2018, "after 90" per capita spent 25 thousand yuan to purchase luxury goods, the amount has been compared with the "65" and "70" parents.

Unlike the "post-80s" purchase of luxury goods by means of their own financial resources, the "post-90s" purchase of luxury goods by middle and high income families is still ahead of time consumption. Their family economic conditions are generally superior, most of them do not have the habit of saving money, and because they are the only child in their families, they often get much help from their parents, and many families support their children to buy luxury goods.

An interesting statistic is that the results of the McKinsey Global Institute estimates that parents of middle-income families in China will at least subsidize their "post-90s" children at 4000 yuan a month, almost half of their personal income. 2/3 of the respondents said their parents would pay for their luxury consumption. The financial support from parents provided a great boost to the consumption intention of "post-90s", especially the purchase of expensive luxuries.

Due to the different growth environment and living background, different generations of consumers also show significant differences in luxury consumption habits.

Since 1990s, "90's" have been well educated, the way of thinking is in line with the world, and they are open to new things and experiences. For example, 10% of the "post-90s" claim to consider domestic luxury brands. Compared with "post-90s", "after 80" is more loyal to luxury brands. 54% of the "post-80s" specializes in buying five luxury brands, while 52% of the "post-90s" occasionally buy non preferred brands, and are more willing to try new ones.

Compared with the "post-90s", "post-80s" is more loyal to luxury brands.

Nearly 70% of the "post-90s" said that the purchase of luxury goods is to "feel unique and manifest themselves rather than vanish". Buying luxury goods has become a way of life and a carrier of sharing experience and conveying values.

Research shows that 68% of the "post-90s" admit that they first consider brand when they buy luxury goods. They also focus on design, fabric and production technology, while the brand value is as high as 94% after "65" and "after 70". This shows that the "post-90s" consumers' demands for luxury goods are more personalized and three-dimensional. Besides symbolic value, they pay more attention to aesthetic needs.

Besides brand, the "post-90s" will also focus on design, fabric and production technology.

However, on the whole, the young generation of China is not long enough to enjoy luxury goods, whether they are "post-80s" or "post-90s". There is a lack of understanding of the cultural heritage that brands attach importance to. The intergenerational spanmission of luxury goods is relatively weak, and luxury related knowledge is mainly dependent on self learning and interpersonal communication through the Internet. Only 13% of the "80" and "90" luxury buyers said they grew up in a familiarity with luxury goods.

Whether the "80 generation" or "post-90s" Chinese young generation is not long enough to get access to luxury goods, there is a lack of understanding of the cultural heritage that brands always attach importance to.

Half of the "post-90s" and 31% of the "post-80s" luxury consumers began buying the first luxury in life in the past year. Even for many "after 65" and "70 after", luxury goods are new things. Nearly half of them have started buying designer brands in the past three years.

90%'s "post-90s" and more than 2/3 of the "post-80s" consumers have only begun to reach luxury goods in the past three years, which explains the fanatical effect of Chinese consumers on luxury goods in recent years, which is different from the mature markets in Europe and the United States. Chinese consumers have yet to enter the rational stage for luxury goods.

The emerging Chinese luxury consumers lack awareness of the brand's inheritance for hundreds of years, and more are influenced by modern brand stories and brand current marketing. McKinsey analysis shows that this has left enough room for the brand to tell the story of brand inheritance in modern ways, and it is easier to break the stereotype of luxury brands and integrate them into the lives of young people.

As the beneficiaries of the Internet era, the "post-1980s" and "post-90s" are very sensitive to digitalization compared with their predecessors. This plays a key role in the communication mode and channel layout of luxury brands in China and young consumers.

For young Chinese consumers, they have developed from the "search shopping" era to "discovery shopping", exposing themselves to KOL channels, word of mouth marketing, traditional advertising, digital advertising, e-commerce, brand official channels and other channels of information, and "meet by chance" with their own luxury goods.

For luxury brands, it is necessary to rely on effective full channel strategy to improve the participation of consumers online and offline. Brand needs to launch new content with high frequency, catch the attention of consumers, and interact with consumers through various channels.

In terms of specific purchase decisions, "post-80" and "post-90s" are more dependent on comments on the e-commerce platform. 54% of respondents said they would refer to buyers' comments, while only 1/3 of "65" and "70" would do so. In the small red book platform, young users share new knowledge just by releasing the open box assessment, recommending purchase strategy and drying various interesting things.

However, despite the fact that Chinese young consumers are keen to reach out to luxury goods through digital new media, they still prefer shopping in online stores. 90% of young people say that the good experience of brand stores has played a key role. 2/3 of the respondents said that store experience played a decisive role in their purchase. The same proportion of respondents said that this experience helps to improve aesthetic taste. 62% of respondents believe that luxury consumption is not only about products, but also about quality service and experience.

Since April 1st this year, the domestic value-added tax rate has been cut down completely, of which 16% of the original applicable tax rate has been adjusted to 13%, and the corresponding cross border value-added tax has also declined. LouisVuitton, Gucci, Prada and other brands have already lowered the price of the products by about 3%. In addition, the first electricity business law of our country has been implemented since January 1, 2019. It severely cracked down on the grey occupation "purchasing agent" which emerged at the expense of luxury goods at home and abroad, and the brand reclaimed pricing power, prompting more consumer behavior to take place in China.

There is a slight difference between the interest orientation of Post-80 and 90's on fashion art activities.

McKinsey believes that offline sales will continue to dominate luxury sales in the future, and the compound annual growth rate will be around 6% in the next few years.

Influenced by social media, younger consumers make decisions more quickly. 60% of the "post-80" and "post-90" decisions took less than 1 weeks, compared with only 33% of the "65" and "70 after". The younger generation of consumers is more independent about product cognition and decision making. Most of them have already done a survey online. Half of the post-80 and 90 respondents said they knew their products very well before they arrived at the store.

In all kinds of offline channels, the intergenerational consumers also showed different preferences. "Post-90s" are very fond of duty free shops, because they prefer luxury goods that are priced at the expense of the people, and the frequency of traveling abroad is higher than that of other age groups. The "post-80" favorite stores are brand stores. "65 after" and "after 70" prefer high-grade shopping centers.

Because the Chinese market prefers to leave the country to buy luxury goods, consumers are labeled with price sensitive stereotypes, but the latest research shows that Chinese consumers will balance the price gap and store experience. Most Chinese consumers can abandon domestic stores only when they have a price difference of more than 500 yuan, and turn to purchasing or overseas entities. Almost all Chinese consumers are willing to do so when the price difference reaches or exceeds 1000 yuan. This shows that consumers are willing to pay for quality shopping experience instead of simply pursuing the lowest price purchase.

Correspondingly, consumers still tend to buy standardized and low priced daily necessities online, and save more time to enjoy personalized shopping experience. Only 1% of the post-80s respondents said that the most recent luxury purchases were online purchases. 29% of the 80's said they would be willing to try a luxury e-commerce channel in the coming year. "90%" has an open attitude towards online shopping luxury goods, but only 18% of respondents have bought online recently, while 1/3 of respondents claimed that it is possible to purchase luxury goods online in the next 12 months. Obviously, the development space of luxury brands on China's online channels is still huge.

It is noteworthy that the younger generation of consumers is no longer satisfied with "consumption". They have shown strong interest in luxury brands and fashion culture, and love social and fashion art activities. Offline activity is an important means for luxury brands to interact with users and create brand image. Chinese young consumers are expecting higher and higher expectations.

Research shows that fashion shows are 3/4 of the offline fashion activities of Post-80 and 90 respondents. They are interested in art related offline activities. For example, LouisVuitton's "flying sailing Tour - Louis Vuitton" exhibition held in Shanghai not only provides consumers with multiple experience of luxury and historical culture, but also promotes the interaction with consumers through WeChat's small program to get through the marketing and promotion of appointments and exhibitions.

There is also a slight difference between the interest orientation of Post-80 and 90's on fashion art activities. "Post-80s" are more interested in traditional forms such as fashion shows and art shows, while "post-90s" show more enthusiasm and interaction with cocktail parties, afternoon tea, brand culture lectures and parties.

From the above data and analysis, we can see that in the future, luxury brands in China will shift to fine management for different intergenerational customers, and marketing and channel layout should be based on the different consumption needs of "80" and "90" consumer groups.

It is worth emphasizing that the layout strategy of luxury brands must focus on the psychological needs of the younger generation of consumers for luxury brands. McKinsey thinks, "luxury has become the social capital of the younger generation. Luxury goods can help them improve their identities and voice rights online and offline. Luxury has become a currency that can be circulated in social media. This has also become the social and psychological basis for the younger generation to invest in luxury goods and the prerequisite for the sustainable development of China's luxury goods industry.

In the final analysis, "how to win the Chinese market" is how to win the confidence of "post-80s" and optimistic "90s".