The Evolving Chinese Luxury Consumer

Chinese who travel frequently or have lived abroad will shape the perception and understanding of luxury consumption going forward

This article is republished with permission from Perspectives@SMU, the online business journal of Singapore Management University. You may access the original article here.

In its “China Luxury Report 2019”, McKinsey & Company wrote that young Chinese “see luxury as a form of social capital that helps mark them apart, and achieve personal and social goals”, and that China’s “young luxury consumers are more interested in aspiration than heritage”. As such, “[the] imperative for global brands is to become the leading form of social capital” for these consumers.

“Over the past 20 years, we observed that the value drivers of luxury consumption and buying luxury product have already evolved from a mirror of their social status to an indication of fashion and taste and expertise,” observes Gu Xiaolei, Innovation Director, Asia, at innovation agency Fabernovel. “In the meantime, we are also seeing a growing number of luxury consumers that are driving value in luxury towards self-realisation and even value creation. They are usually the ones we define as the global Chinese traveller.

“And last but not least, in my personal opinion these global Chinese consumers are trendsetters and change agents that drive changes to the Chinese society.”

Travelling Changes Everything

Gu made those observations at the recent LVMH-SMU Luxury Conference 2021: The Future of Luxury in Asia. Rane Xue, Moët Hennessy’s Senior Vice President, Chinese Consumer, elaborated that these global Chinese consumers are those who travel frequently (“Frequent outbound travellers”) as well as the segment of the population who have lived, worked, or studied overseas for a number of years (“Nomadic overseas Chinese”).

Xue believes that once COVID-19 restrictions are lifted, these will be the first Chinese back in the air.

“This is not only because of their economic power, it is mainly because of their motivation and a quest for experiences and things that they could not buy or experience within China itself,” notes Xue. “They are very much Chinese by heart, but they are international by footprint and have a global mindset.”

The importance of these groups of Chinese consumers to the luxury industry go beyond purchasing power—they also bring back to China points of view that change the social conversation.

“I think we can all agree travel is very powerful,” muses Gu, who had lived in America and Europe. “Travel can very profoundly change or impact our personal as well as professional development while challenging us to see the world through a different lens.

“After I relocated back to Shanghai and stayed with my family a little bit more…my mom finally understood why a pair of Lululemon yoga pants are set at such a high price point like that. This is a milestone for my mom’s generation, and she actually started to buy Lululemon yoga pants herself.

“And this impact also happened beyond consumption. I’m very proud of the influence that I can bring to my family as they start to embrace some of the unconventional choices that my generation is making. They start to build understanding of unconventional groups of people like the LGBTQ community and understand their rights.”

She concludes: “So, once we manage to capture this group of global Chinese consumers, I think they will create halo effects [in their social circles]. And we believe if we want to understand the future of luxury in China, it is extremely critical for us to understand this group of global Chinese consumers, because they are setting the trend.”

The focus on diversity and inclusion, Xue stresses, is becoming core to the luxury industry in China. She says: “In the Western context we talk a lot about the gender, ethnicity, colour, and subcultures. Sometimes we ask ourselves as a Chinese, as we seem to have such a unified culture and even physiques, how do we talk about diversity?“

Citing Shanghai lingerie brand NEIWAI’s “No Body is Nobody” ad campaign that featured women of different body shapes that do not exemplify the usual underwear model’s, Xue believes it represents a shift in the consumer’s mindset and conception of individuality.

“This campaign [bestowed] real beauty to all the different shapes and forms of Chinese women,” Xue explains. “So obviously this is really growing more and more at the heart of the luxury brand building. And in our point of view, true diversity and inclusion is also about embracing multiple perspectives, embracing different ideas and possibilities because we believe this is how the collective intelligence will work together.

“It will be fair enough to say only people who have travelled and seen enough and interacted with different cultures and mindsets will be able to develop such diversity or such inclusion attitudes.”

WeChat, We Connect

To capitalise on these trends, luxury brands must get their digital strategy right, urges Xue.

“We all know [Chinese consumers are] very specific in our digital behavior, we are very sticky and super engaged with platforms such as WeChat, which remains quite open in terms of data capturing. But this is not only about having a holistic WeChat ecosystem. It is more about also having organisational teams to work transversely and cross-functionally and putting the consumer at the heart so that we are able to follow them whether they are in China or whether they’re on the road or whether they’re overseas.”

She concludes: “The global Chinese consumer is not only a concept. It is really a concrete, tangible, and real group of consumers that we can identify and try to engage. This requires the business and organisation to think and organise a bit differently [and] figure out what are the specific ways that we can really reach out to them, powered by data and better insights into the Chinese digital ecosystem.”