Mainland Chinese luxury market showing signs of maturity as gap narrows between mainland and Hong Kong consumers
The 2014 China Luxury Forecast was released today by Ruder Finn, one of the world's largest independent public relations firms, and IPSOS Group, the third largest market research company in the world. According to the study, consumers in mainland China and Hong Kong report the stabilization of the luxury goods consumption over the course of 2014. An increased consumer sophistication is a prevailing trend as Chinese seek more unique products, beyond the logos; expect professional services such as product knowledge from sales advisors and also empathy towards their needs. We also see the Chinese making more luxury purchases abroad as outbound tourism continues its rapid growth; and seek out new channels as confidence in e-commerce is on the rise.
The 2014 China Luxury Forecast is in its fifth year and provides an annual analysis of key trends in the luxury sector in mainland China and Hong Kong. Surveying 1,800 luxury consumers from Hong Kong and mainland China, the report covers China in depth, with 25% of mainland Chinese respondents from first tier cities, 32% from second tier cities, and 27% from third tier cities. On the mainland, participants' household income averages were RMB 290,000 annually, and on average HK$ 970,000 in Hong Kong.
The Mainland China luxury market is maturing and closing the gap with Hong Kong
This year, the report found that mainland Chinese consumers are willing to spend more on fashion and beauty. Consumption for watches, bags, jewelry, shoes and fine wine will remain the same as in 2013. In Hong Kong, local demand for all categories of luxury goods remains stable.
Simon Tye, Executive Director of Ipsos said, "The luxury market in Hong Kong continues to be a challenge because the consumption intention in 2014 remains the same as in 2013. The Hong Kong consumer continues to challenge the retailer in providing value when shopping for luxury. Whereas in China, the demand for luxury is still strong, particularly in fashion and beauty. There is an increasing sophistication amongst Chinese consumers where we see a growing demand for uniqueness and offers to meet their broadened knowledge of luxury brands and products."
Lower service quality on the mainland remains key motivation driving overseas purchases
The 2014 China Luxury Forecast identified a stronger preference in shopping for watches and wine in Europe. Similarly, we see a strong preference for buying jewelry, handbags and beauty products in Hong Kong. Chinese consumers primarily attributed their decisions to shop overseas due to experiences with poorer customer service and staff knowledge in their home country. Ninety-two percent of consumers from China indicated that they were dissatisfied with brands' services at home.
Elan Shou, Managing Director and Senior Vice-President of Ruder Finn China, said, "The change we see here is not surprising. As the market matures, Chinese consumers are becoming more and more knowledgeable about the different luxury categories and offerings, and are looking for experiences that truly reflect their discerning expectations. For now, they are finding these luxurious shopping experiences overseas."
Trust is key to unlocking the true potential of e-commerce in China
Although brand boutiques remain the most popular channel of purchase for mainland Chinese and Hong Kong consumers, both groups now show greater confidence in making luxury purchases online. Thirty-six percent of mainland Chinese and 34 percent of Hong Kong respondents indicated that they preferred to shop for luxury online - a 22 percent and 24 percent increase respectively, compared to 2012. Trust is one of the most important factors that contribute to the credibility of an online shopping website. For mainland Chinese consumers, social content (52%) is the most important element in building trust, while 31 percent of Hong Kong consumers indicated that third person certification of vendor authenticity would engender trust. Other elements that are crucial to contributing to the success of online luxury shopping include after-sales support (81 percent of mainland Chinese consumers) and ease of access to the products (88 percent of Hong Kong consumers).
Chinese consumers are getting information on luxury brands from mobile apps. In mainland China, 43 percent of respondents have downloaded brand apps, and 80 percent were willing to receive push notifications from brands via mobile platforms. The engagement with mobile apps in Hong Kong is different. Hong Kong consumers are more selective. They are only willing to receive push notifications from brands to which they are loyal (43 percent). Confirming the industry-wide trend among marketers toward developing mobile platforms with increasingly broad functionality beyond brand education, the shift confirms the rising relevance too for utilizing the channel for luxury brands hoping to open direct lines of communication with their consumers.
"Young consumers today are driving the growth of online shopping for luxury goods. In order to build on this momentum and realize the full potential of luxury e-commerce, brands have to earn their customers' trust through carrying out continuous online communications constantly adapted to the rapid pace of and changes in their customers' lifestyles," said Gao Ming, Senior Vice-President and General Manager of Ruder Finn Shanghai.
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