Millennials lead spending on luxury
China’s millennial generation has brought strong momentum to the country’s luxury personal goods consumption, which grew by 20 percent in 2017.
“Chinese millennials have helped to accelerate luxury spending here, particularly in the last year,” said Bruno Lannes, partner in Bain Greater China office, at the launch of the 2017 China Luxury Report, which Lannes authored, on Wednesday.
According to the report, Chinese spending on personal luxury goods had experienced three years of deceleration until the third quarter of 2016, when it staged a comeback. In 2017, the domestic market outgrew overseas purchases and achieved 20 percent growth.
Although Lannes did not have specific data to illustrate the impact, he said he believes millennials, aged between 20 and 34, were major contributors to the strong growth last year.
Bain & Company conducted a survey on 1,170 Chinese consumers, learning that they start to purchase luxury goods at an earlier age, and buy more frequently. The consulting firm has 55 offices in 36 countries and began to release annual reports on China’s luxury market in 2009.
Lannes described China’s millennials as “digitally savvy, highly knowledgeable about luxury categories” and those who “live for the moment and want to enjoy immediately”. So, they have more impulsive behavior, prefer “fashion”, “street casual”, “new” and “in-season” products rather than getting a good bargain.
As a result, “Luxury brands are repositioning themselves to better reach this influential demographic group, particularly through digital media,” Lannes said. Almost all the luxury brands have launched or plan to launch official websites, increase budgets for marketing on digital platforms such as Tencent’s messaging app WeChat, speed up the pace of bringing out new products, and update their shop windows more frequently.
A growing number of local editorials and key opinion leaders have increasing influence over consumers’ behavior. Affluential Monitor, a Singapore-based luxury goods consultancy, found that “blogs, forums and review sites are becoming a more popular source of information on brands”. In the company’s projection for 2018, Affluential Monitor said, “It is increasingly important for brands to monitor what is being said about their brands on these platforms.”
The rise of China’s young luxury shoppers has prompted collaboration between luxury brands and young stars and celebrities, who are regularly assessed for their “commercial value”.
“China’s young consumers idolize their stars and rush to buy whatever item they wear,” said Gong Yan, who has worked with the promotion and advertising of luxury goods in China for more than a decade.
“Behind every street and airport snapshot of a celebrity, there are contracts with luxury brands, and these images immediately impact sales.”