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Global Luxury Market's Biggest Driving Force, Yet Most Overlooked Consumers - Chinese Women

Global Luxury Market's Biggest Driving Force, Yet Most Overlooked Consumers - Chinese Women

If you take a broad look at today's luxury market and pinpoint the most critical trends in the industry, the following words appear on the horizon: Chinese luxury consumption, millennials and Gen Z, and the digital revolution (e-commerce and social media). Two recent social phenomena have swept the industry: diversity and inclusion, and sustainability challenges.

The consensus is that almost all these areas have been dealt with in-depth research through meticulous marketing analysis and targeted campaigns by various business and social entities, experts, and brands on multiple platforms among the luxury and fashion industry, media, and society to a broader extent.

It seems, however, there is one crucial segment which is yet to be understood thoroughly, and is thus yet to meet and satisfy the market's ongoing demand. Apparently, it is the global luxury market's most significant clientele and, no doubt, the most tremendous growth and driving force: Chinese luxury consumers - in particular, Chinese women.

Various industry reports indicate that - despite the recent slowdown of economic growth in major markets, including China, the Eurozone, and the U.S., and the heated U.S.-China trade war - the luxury goods market looks positive and continues to grow, led by Chinese luxury consumers' consumption both at home and abroad.

[Related: The Perfect Storm For Womenomics]

Spending by Chinese consumers overall makes up a third of the global luxury shopping sector. U.S. consumption of luxury goods ranks a distant second at 22%. According to Bain & Company estimates (the later 2019 McKinsey report also confirmed), in 2018 Chinese consumers at home and abroad spent $115 billion on luxury items – equivalent to one-third of the global spend (mainland China's luxury goods market saw 20% growth for its second straight year, driven by rising demand) - contributing almost two-thirds of global increase in luxury spending.

By 2025, Chinese luxury spending (both at home and abroad) is forecast to account for 46% of the worldwide consumption of all personal luxury goods purchases. Some even predict 65% of the world's additional spending – more than Americans, Europeans, Southeast Asians, and the Japanese combined, thanks to China's rising and the sheer size of the middle class (China's middle class is expected to increase from 430 to 780 million by the mid-2020s).

In the above-mentioned report, McKinsey is confident about the pivotal role that Chinese luxury consumers will continue to play in the global luxury market going forward, despite the slowing global economic growth. To give a further example, the likes of LVMH, the world’s largest luxury group, and Switzerland’s Richemont, owner of Cartier, reported their China sales accelerated in the final quarter of 2019.

A recent example of Chinese luxury consumers’ tremendous purchasing power: The venerable London-based department store Harrods followed Galeries Lafayette's lead by chasing Chinese shoppers into China, and is now opening its first permanent store in mainland China. The new location is their first outside of the U.K.

This demography weighs at such a high level of significance in the world of luxury markets that it is worth a closer look. The Swiss Bank Julius Baer 2018 Annual Report reveals that, behind the vast Chinese luxury consumers, it's the women who hold the spending power. Precisely, Chinese women account for the lion's share of luxury spending worldwide and are playing an integral role in luxury spending behavior.

The bank report points out that female buyers comprise most of the Chinese luxury spending, as they believe such goods help them to advance socially and professionally. Women in the region are increasingly becoming self-made millionaires and are more and more employed at senior levels.

At least 31% of top management positions in the region were held by women in 2017. The same report also reveals that out of 184 self-made female billionaires in the world, 78% are from China. The composition of China’s high-end spending has changed over the past five years from being male-dominated to female-centric.

With the rise in spending power, women are also spending more on products that were traditionally viewed as masculine domains. Cars, which are increasingly seen by females as a status symbol, constitute the highest proportion of spending among affluent females in China. The other top luxury expenditure items include travel experiences, jewelry, fashion clothing, and premium watches.

Stats and commentary demonstrate Chinese women are driven to work in high-powered jobs. They push forward industries such as luxury cars, and according to a 2017 Mafengwo consumption report, are responsible for 4.6 times as many travel retail purchases as male travelers.

Contrary to the above demographic composition of global luxury consumption, the kind of imagery and storytelling of portrayed clientele we see out in the world in print, social media, TV, and films featured by international brands and Western media are still majority associated with and about Western figures in the Western-dominated fashion world.

Over the last few years, the fashion industry and the luxury marketing campaigns have slowly embraced the social movement on diversity in various forms (gender, beauty, size), but it has yet to find fertile ground successfully targeting and connecting with Chinese/Asian women, i.e., luxury industry's most significant consumers.

A broad search found that one brand, American luxury fashion brand Calvin Klein, embraced diversity in March 2019 with a first-ever Asia-initiated advertising campaign called "My Statement #MyCalvin" to pay tribute to female power in Asia and to empower Asian women to challenge gender norms. The campaign aimed to push cultural boundaries and empower Asian women to make their own personal statements.

Marketers soon after learned that challenging gender norms in the Asian cultural system is not an easy task. While the entire Western world has experienced the disruptive force of the #MeToo movement, the spirit of #MeToo is spreading in a very delicate and subtle way in Asia.

[Related: Living in China: What I Have Learned]

If we start looking at the basics, both marketers and the public understand the power of visual imagery to convey emotions and feelings. However, we haven’t yet seen enough sufficient and successful visual materials and messages focusing on Chinese/Asian women, given their essential share in the global luxury consumption.

While doing research for this article, I noticed that almost all images associated with relevant articles meant for Chinese consumers are product/brand based, or with a genetic crowd as a background: i.e., without featuring or highlighting this particular demography, even when the subject matter is about Asian (female) consumers.

On the other hand, in the past, there were cases that the captured image showed a lineup of Western faces for the occasion of Chinese Lunar New Year. And other times, the featured Chinese model which brands chose to use in their commercials was considered by most - if not all - Chinese consumers as not being representative of them. It makes one wonder, who is the Chinese female consumer? What are her dreams, passion, and needs?

There were further real cases in the marketplace in the last two years or so. Unfortunately, missteps for Western luxury brands over cultural and political insensitivity toward the Chinese clientele, in many cases, appear insulting and disrespectful to the mass Chinese consumers. It started with Dolce & Gabbana’s disastrous social media campaign featuring a young Chinese woman eating spaghetti with chopsticks, then Burberry's "horror" ad for Chinese New Year...and then dozens of Western brands, including Versace, Coach, and Givenchy, lined up to apologize to its Chinese customers for the T-shirt controversy episode.

All these cases undoubtedly make one conclude that Western marketers don't really understand Chinese consumers (and the basic facts associated with them, such as that Hong Kong has been a part of China since 1997, after the U.K.'s handover), not to mention any particular demography within that segment, so inevitably clichés and misrepresentations are common.

Indeed, Western brands have much homework to do to tackle and connect better with their biggest clientele. The good news for the sector is that China's luxury spending sees no sign of cooling down in the coming years, despite their slowing economy. The country's rising upper-middle-class households are the backbone of growth. For marketers, the key is to understand this unique market segment and know how to connect and engage them effectively by offering the right products and services to meet their needs and desires.

In the past, I have come to hear from some Western marketers to argue that their brand has a separate team in China or based in a city in Asia to market to Chinese/Asian consumers. Launching and designing an exclusive product offering in China has become a common practice for Western luxury brands, especially in the recent cases where the Western brand made culturally or politically insensitive mistakes in product offering.

But this approach should not replace or downplay the necessary knowledge base and understanding of vast Chinese middle-class luxury consumers. A stark contrast from 30 years ago, Chinese consumers nowadays are global travelers and mostly digitally-savvy. In the global travel and tourism industry, Chinese consumers are now the biggest spenders on luxury items.

According to real estate services provider Savills, more than three-quarters of Chinese consumers' spending on luxury goods is done while traveling abroad. This phenomenon tells that the marketing message targeting Chinese consumers should be kept consistent across geographic boundaries, whether customers are home or travel abroad.

Another easy mistake by marketers is to treat Chinese vast middle-class consumers as a whole and static group. China is home to over 600 cities that are classified as tier-3 or below. Iconic Chinese cities like Beijing and Shanghai have become focal points for luxury brands hoping to reach Chinese consumers. But as the market continues to mature, China’s lesser-known cities are becoming fashion epicenters in their own right and are now meriting closer attention.

On top of that, "China's relatively new middle-class consists of a rapidly shifting, diverse population," as emphasized by China Business Review. So, to adopt a "one-message-fits-all" approach to the vast Chinese middle-class across geography and different purchasing behavior clearly won't work.

For luxury industries to cope with ongoing industry developments and maintain their status among fierce competition, they must understand how China's affluent consumers differ from conventional luxury consumers around the world. On the other hand, they must also know how to distinguish from the country's various types of wealthy consumers. Furthermore, Chinese purchasing trends are shifting quickly among generations, meaning brands must be even more up-to-date and dynamic in their marketing efforts.

The management consulting firm McKinsey and Company has been closely monitoring Chinese luxury consumption habits for almost a decade, and concludes that, besides differing from other countries' wealthy consumers, China's affluent consumers differ enormously in terms of both internal factors (psychological purchasing habits and motivation) and external factors (life satisfaction and demographics).

For Western brands targeting Chinese middle-class women consumers, at the foremost, they might learn that Chinese women's understanding and attitudes on "gender norms," "girl/woman power," "feminine," and "beauty and aesthetic" are different from Western women. And Chinese women differ from each other based on their generational, psychological, and purchasing habits and geographic locations.

Given that the Chinese middle-class drives luxury spending for the unforeseeable future - thanks to the vast and rising Chinese middle-class population - a significant first step for any brand seeking success in a particular market is to know that market. It's imperative for the Western brands to not only understand and familiarize themselves with the basics and dynamics of various demographics within the entity, but also to better connect and engage with them.

Clearly, a population of hundreds of millions of middle-class is a varied group; therefore, marketers need to use personalized strategies for each subgroup to truly connect and engage them emotionally. Western brands now face a new reality where modern luxury’s century-old proposition is no longer enough to sell to twenty-first century Chinese luxury shoppers.

To succeed in this market over the next ten years will require a whole new playbook. To remain relevant and relatable to Chinese luxury consumers and to better communicate the brand’s values to this unique demographic, Western brands have to have more authentic storytelling and narratives. Their customers nowadays are the most digitally savvy and brand-obsessed with highest expectations.

In conclusion: Dear luxury brands, don’t disappoint the army of Chinese luxury consumers. You ignited their hopes and dreams, and they have not walked away from you yet. You can still get this right!

[Related: 10 Lessons I Learned After Moving to China]

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Caterina Han is the founder and creator of #NewAsianWoman. She is the first Asian Impact Influencer, a representation advocate, and upcoming author.


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