How young Chinese consumers are reshaping global luxury
Global brands face new opportunities as luxury represents a powerful form of social capital for young Chinese consumers.
Set to be the engine of global spending on high-end shoes, bags, fashion, jewelry, and watches, China’s affluent upper-middle class presents an enticing prospect for the world’s designer brands. In fact, Chinese luxury spending is expected to double to 1.2 trillion renminbi by 2025, delivering 65 percent of growth in the market globally (Exhibit 1).
Imbued with the confidence to spend, underpinned by a lifetime watching new skyscrapers rise in tandem with their family incomes, young Chinese consumers in particular are eager to tap luxury as a means of social advancement and self-differentiation. This is so even in the context of the sharpest slowdown in China’s economy since the financial crisis, along with decreased demand for discretionary items such as new cars and mobile phones.
At the high end, negative impacts are evident in Hong Kong, where jewelry sales and imports of Swiss watches have slowed, but even in these categories demand remains relatively strong from mainland consumers. Indeed, the luxury segment remains robust, amid a continuation of a trend in premiumization that has seen sales of premium cars and prestige cosmetics, outperform the wider market.
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Young Chinese consumers view ownership and affiliation with designer brands as a form of social capital, not just something to wear, but a lifestyle choice that marks them as part of a distinct and exclusive community. That community is constantly being refreshed via a glittering stream of online content, keeping pace with which demands consumers are “always on,” immersed and engaged in a digital world that is nothing short of a way of life.
Research for the China luxury report 2019 shows that the majority of these young consumers are fresh to market (Exhibit 2), presenting both a tantalizing opportunity and an implicit imperative for brands to stay current, or risk losing out to more digitally savvy rivals.
What’s more, while some fashion houses excel at various aspects of online marketing and commerce, even China’s most popular luxury brands have yet to establish a comprehensive presence across the digital ecosystem. Consequently, opportunity abounds as brands seek to engage the attention of consumers in the world’s most lucrative and fastest-growing luxury market. In this report, we focus on five takeaways for brands to consider.
1. Chinese consumers are set to contribute almost two-thirds of global growth in luxury spending.
2. The new luxury consumers—the post-’80s and post-’90s generations—power the Chinese market.
3. Promoting iconic brand-product combinations is key, including developing a Chinese nickname to increase the likelihood of going viral on social media.
4. Everything is media. Social is everywhere.
5. While discovery is omnichannel, purchases are influenced and made in store.
The imperative for global brands is to become the leading form of social capital for China’s luxury consumers and stay there. This demands an “always on” approach driven by a rapid cycle of newness: refreshed product and collaboration launches that intimately intertwine with ready-to-go viral media, including “sticky” nicknames and creative digital campaigns.Play VideoVideoGetting to know young Chinese luxury consumersLuxury represents a powerful form of social capital for this segment of consumers.
China’s young luxury consumers are more interested in aspiration than heritage, making it imperative for brands to modernize their stories, and launch limited-edition products to make young consumers feel they are brand VIPs. This includes fostering an atmosphere of exclusivity through an annual calendar of special events, particularly around art and fashion, while offering as many opportunities for personalized brand-consumer interaction as possible.
Savvy brands should design a go-to-market strategy that understands young Chinese consumers’ appetite for consuming media at every available touchpoint: entrusting their digital marketing teams to make quickfire decisions and encouraging them to experiment with local, emergent media favored by young consumers; balancing “media” spend beyond earned, paid, and owned marketing channels to include stores and e-commerce; offering a seamless shopping journey from overseas and domestic stores to e-commerce with distinct channel roles.
Young Chinese consumers are set to fuel the global luxury market but winning with this segment will require companies to respond quickly by adopting a savvy, consumer-first mentality.
Download China luxury report 2019: How young Chinese consumers are reshaping global luxury, the full report on which this article is based (PDF–2MB).
About the author(s)
Lan Luan is a partner in McKinsey’s Shanghai office, Aimee Kim is a senior partner in the Seoul office, and Daniel Zipser is a senior partner in the Shenzhen office.