The rise of the Affluent Chinese consumer
According to the 10th annual Hurun report, there were 2.7 million millionaires in China and this number has continuously grown since. Shanghai, Beijing, Guangzhou and Shenzhen are China’s four richest cities, however they only account for 30% of all wealthy consumers. There is a rise in wealthy consumers in the smaller second-tier cities, which may even spread to third-tier cities. This indicates that there is vital need for marketers to branch outside the larger cities and concentrate their efforts on targeting wealthy consumers in the smaller cities where there is less competition.
Though the luxury market is in a slight decline, in China there is still a demand for luxury products and a report by Fortune Character Institute stated that last year Chinese consumers spent $102 billion on luxury goods. The promise of China’s wealthy consumers buying luxury is appealing for premium brands, however, it is important for marketers to understand how these consumers approach buying their products. For some there is still an importance in showing off their products, using luxury brands to mark their status.
On the other hand, there are some who prefer less flashy, understated products. These consumers are generally from a younger generation and with the majority of China’s wealthy under the age of 45 there is a massive target audience here. Comparing this to their global counterparts where, according to McKinsey and Company, in the US 30% of luxury consumers are under the age of 45 and in Japan where the number is even smaller at 19%, this is an essential factor to take into account when marketing luxury products.
It is also necessary to understand the habits and behaviours of the affluent in China. The younger luxury consumers are well informed and use a range of social media to research their products before buying compared with their previous generation. P1, established in 2007, is a social network designed to target affluent individuals aged 20-40 years. P1 has combined aspects of other social networks whilst including ‘e-commerce, brand pages, events and a magazine’, according to the founder Sophia Pan. A mobile app has since been created and has 3 million users. These specific platforms have the ability to market luxury products to a niche audience who are most likely to buy their products. Social networks such as Weibo and WeChat are also available for the mass audience. These can be accessed through mobile phones, which is a principle point of entry for all Chinese consumers, regardless of age.
The number of affluent people in China is continuously growing and their interest in luxury brands is unfaltering. This has led them to become an excellent target for marketers of these premium brands. Compared to other countries, Chinese luxury consumers are of a different demographic and their shopping habits and behaviours are varied. With this understanding luxury brands would see a significant rise in their brand awareness and sales within China.