Ruder Finn and Consumer Search Group Jointly Announce The COVID-19 Mainland China Survey
March 20, 2020, Shanghai, China – Since the joint-release of The China Luxury Forecast 2020, the leading global integrated communications consultancy Ruder Finn and one of Asia’s most prominent leading market research groups Consumer Search Group (CSG) have been closely following the development of the COVID-19 outbreak. Follow-up survey on luxury consumers in the Chinese Mainland was conducted to study consumption behaviors and trends during this special period so as to assess the impact of the pandemic on this market segment.
The follow-up research looked at 800 consumers with similar profile as those surveyed in last December for The China Luxury Forecast 2020. The respondents, aged 37.3 on average, live in 1st-tier, 2nd-tier cities and 3rd-and-lower-tier cities with the average household income of RMB 1,303,560. The survey was conducted in mid-March, 2020.
The survey shows that 82% of the respondents believe that the COVID-19 outbreak has had a negative impact on China’s economy. Specifically, 88% of the people aged between 36 to 45 years hold this view, the highest among all age groups surveyed. People of this age group that live in 2nd-tier cities and 3rd-and-lower-tier cities hold even more negative view, the percentages reach 100% and 95% from these regions respectively. When asked about how much they plan to spend on luxury items in the next 12 months, the respondents showed a decline in consumption confidence, compared with the survey results of last December. 36% of them indicated that they would spend more, an 8% down from three months ago; the proportion of people who plan to spend less increases from 10% to 19%, almost doubling in size. All age groups have seen noticeable increase in the share of people who plan to spend less, with the most significant rise happening in the 36-45 age group, reaching 23%.
“The challenge facing the Chinese luxury market is bigger than expected due to the shock of COVID-19,” says Simon Tye, Executive Director of CSG. “Besides giving consumers what they want, brands also need to find appropriate ways to resonate with them and help alleviate negative emotions caused by the pandemic during this special period.”
Compared with the survey figures three months ago, there is a clear drop in the share of respondents planning to spend more on jewelry, handbags, beauty & cosmetics and automobiles in the next 12 months (from 48% to 35% for jewelry, 43% to 29% for handbags, 57% to 44% for beauty & cosmetics and 33% to 26% for automobiles). Other categories with the exception of watches have also shown different levels of decline. On the other hand, the proportion of respondents planning to spend less has increased for all categories except electronics, with more respondents expecting spending less on leisure travel (from 8% up to 25%), fine dining (from 9% up to 20%) and high-end leather goods (from 10% up to 21%).
During the survey, 23% of the respondents expressed desires to engage in “retaliatory consumption” when the pandemic ends, accounting for 33% of the 21-25 year olds and 34% of the 26-35 year olds in 1st-tier cities and 35% of the 46 and older age group in 2nd-tier cities respectively. More people chose to shop more for luxury clothing, shoes, jewelry and beauty & cosmetics, followed closely by leisure travel, fine dining, watches and fine wines, liquor & spirits.
“The unleashing of the thirst for consumption post pandemic will happen to specific luxury categories, but it will not become a mainstream phenomenon as suggested by the findings,” says Gao Ming, Senior Vice President and Managing Director, Luxury Practice Greater China, Ruder Finn Group. “The bigger challenge facing brands is the increase in share of people who expect to spend less. Brands should plan ahead and start thinking about how to establish a stronger bonding with their consumers first thing after the pandemic.”
In terms of leisure travel, more than half of the respondents will consider planning more trips after the pandemic is over. 85% of respondents aged 21-25 and 79% of respondents aged 26-35 in 1st-tier cities will do so and the proportions in the same age groups in 2nd-tier cities were 64% and 56% respectively. In 3rd-and-lower- tier cities, the “YES” votes were mostly concentrated in the 36-45 age group, at 56%.