* Consumer appetite remains optimistic amid market uncertainty
* Clothing and Jewelry performs well
* New opportunities emerge in select consumer segments
* Digital retailing increasingly influential
January 14, 2019, Shanghai, China – The 2019 China Luxury Forecast was jointly released today in Shanghai by Ruder Finn, one of the world’s largest independent public relations firms, and Consumer Search Group (CSG), one of Asia’s leading market research companies. This eighth edition of the report offers key performance indicators for the luxury product markets in Mainland China and Hong Kong. The report also provides insight into the latest industry trends by analyzing consumer behavior and preferences.
Based on a survey of 1,385 consumers across Mainland China and Hong Kong, the 2019 China Luxury Forecast presents an in-depth analysis of luxury market activity in Greater China. Survey respondents included 1,075 consumers in over 130 cities in China as well as 310 consumers in the Hong Kong Special Administrative Region. Among those surveyed, the average annual household income is RMB 1,400,930 in Mainland China and HKD 975,286 in Hong Kong.
“The year 2019 marks the 10th anniversary of the China Luxury Forecast, through which we have kept a close eye on the vicissitudes of China’s luxury goods market. What has remained unchanged over the past 10 years is that China and Chinese consumers are on an overall upward trajectory,” said Gao Ming, Senior Vice President, General Manager Luxury Practice China, Ruder Finn Asia.
“We have observed several phenomena lately including a transformation of communications and marketing brought by digitalization, a massive increase in purchasing power among the region’s younger generation, and changes in brand popularity in various product categories. Against the backdrop of this market volatility, brands cannot rely on a one-size-fits-all approach. Rather, companies must fully tap the wide variety of consumer market opportunities in order to successfully engage with the changing face of Chinese luxury consumers.”
Consumer Appetite for Luxury Remains Optimistic; Purchases to Improve Life Quality
Despite global economic uncertainty and the impact of escalating Sino-US trade tensions in 2018, consumers are continuing to display a healthy appetite for luxury items in 2019. This appetite remains optimistic both in Hong Kong and in Mainland China, according to the survey, with 46% of Mainland China respondents and 32% of Hong Kong respondents, respectively, saying they plan to spend more in the next 12 months.
More than 40% of Hong Kong consumers are likely to spend more on luxury electronics, according to the survey. And more than 50% of Mainland China consumers are most likely to spend more on luxury electronics, beauty and cosmetic products, and clothing. Over the past 12 months, Mainland China consumers spent an annual average of about RMB 240,000 on luxury items, while Hong Kong consumers spent around HKD 176,000. It is particularly interesting to note that Hong Kong’s Generation Z consumers aged 21 to 25 expressed the most positive sentiments about luxury shopping over the next 12 months, while Mainland Chinese consumers aged 46 and above offered the most positive consumption sentiments concerning their activity in next 12 months.
When asked about their reasons for purchasing luxury goods, Hong Kong consumers surveyed said they buy luxury in order to improve their life quality while for Mainland China consumers reflecting taste and improving life quality are both important. Compared to the last edition of the report, the purchasing attitude of Mainland China luxury consumers have shifted from a ‘show-off to outsider’ towards a ‘improve life quality for oneself’, underscoring the fact that the personal tastes of Mainland China luxury consumers are increasingly sophisticated.
Clothing and Jewelry Perform Well; Markets Move Beyond Millennials
The 2019 China Luxury Forecast highlights the fact that most Mainland China luxury goods consumers buy luxury clothing and jewelry. This behavior affects on average 70% of these Mainland China consumers. Clothing and jewelry products are also at the top of their overseas shopping lists. Clothing is also a top purchase item for online shopping among Mainland China consumers. In addition, 50% of Mainland China and 37% of Hong Kong consumers surveyed plan to spend more on clothing in the next 12 months.
Millennials have been the key consumer target group for almost every luxury brand over the past two to three years. The 2019 report shows that total spending on luxury goods was on average higher among Millennials between ages 26 and 35 over the past 12 months in both Hong Kong and Mainland China. However, consumers aged 46 and above generally spent more on majority of luxury items in Hong Kong, while Generation Z consumers ages 21 to 25 generally spent more on each luxury item in Mainland China (except watches, automobiles and travel), underscoring a very different consumer profile for each of these two regions. In Hong Kong, consumers aged 46 and above generally are the most affluent segment of the population, hence exerting the biggest influence on luxury spending. Meanwhile, the massive spending power of Generation Z in Mainland China reaffirms the fact that China luxury consumers are much younger compared to their international counterparts, and that post-1995-born Generation Z consumers are willing to spend the most.
Shopping the Most Important Factor for Travel Destinations; Japan and Hong Kong Preferred Destinations
On average, Hong Kong consumers surveyed made 3.3 overseas trips over the past 12 months, while Mainland China consumers made 2.8 international trips over the same period. Among both Hong Kong and Mainland China consumers, shopping options are the most important factor for travel destination preferences. Hong Kong consumers allocate similar budgets on hotels, food and beverages, flight tickets and shopping, while Mainland China consumers put a heavier focus on shopping, allocating nearly 30% of their total travel budget to this activity.
Hong Kong outbound travelers prefer Japan as a travel destination as well as an overseas shopping destination. Mainland China consumers prefer Hong Kong as both an outbound travel destination and overseas shopping destination. These overlapping results for outbound travel destinations and regions for luxury product purchases provide proof that shopping options are the most important factors affecting travel destination decisions.
Among Hong Kong consumers, lower prices are the main reason for choosing to purchase luxury products outside Hong Kong. The price factor was mentioned by 50% of Hong Kong consumers surveyed. Mainland China consumers, on the other hand, said they make purchases abroad because the products are famous in China and are of better quality than what’s available at home. These findings should remind luxury brand companies that good communication with Mainland China consumers is essential for their global sales. Interestingly, the price factor was mentioned by only 23% of Mainland China consumers surveyed.
Digital Retailing Rises but Traditional Media Still Matters
Millennials between ages 26 and 35 are the most willing to shop online in both Mainland China and Hong Kong. Mainland Chinese consumers purchased a larger amount of clothing, shoes and beauty products while Hong Kong consumers concentrated on handbags, clothing and electronics. Mainland China consumers are more comfortable with making online purchases than Hong Kong consumers, with over 70% saying they would be willing to buy any luxury item, except automobiles, online. In addition, Hong Kong consumers think buying online is a less expensive option while Mainland China consumers find it easier to browse through luxury brand collections online. Hong Kong consumers prefer purchasing luxury goods from the websites of official brands while Mainland China consumers prefer purchasing goods from the Chinese e-commerce behemoths JD.com and Tmall.
Digital retailing exerts a heavy influence on luxury purchases. The frequency of Look Up Online and Purchase Online (LOPO), Look Up Online and Purchase in Physical Stores (LOPP), Look Up in Physical Stores and Purchase Online (LPPO) activity is over 68% in Mainland China and 61% in Hong Kong, respectively. LOPP is the most preferred method for both groups. Most Chinese consumers conduct extensive online research before making purchases. Research includes browsing through product specifications, reading product reviews and recommendations, and comparing prices.
Luxury goods consumers mainly use digital channels to obtain brand and product information. Digital channels are dominant in Mainland China, as four of the nation’s leading information channels are all digital. In Hong Kong, official brand websites and Facebook pages are the top channels for obtaining luxury brand and product information, while magazines and newspapers are still often used as well. However, when it comes to information channel affecting purchasing decision, word of mouth and magazines are very important among Hong Kong consumers. Traditional media is still important in Mainland China, with advertisements on TV and in print ranked as the top information channels for affecting purchasing decisions.
Winning Brands in 2018
Against the backdrop of intensifying competition, many have asked: What are the ingredients for a winning brand? Mr. Simon Tye, Executive Director of CSG Hong Kong, offered this explanation: “As digitalization now offers consumers full access to information, brands need to stay constantly innovative in product development and marketing initiatives in order to be effective trend leaders. In addition, a brand must ensure uniqueness in every detail, especially through a consistent, omnichannel consumer experience.”
The 2019 China Luxury Forecast delineates winning brands for various luxury goods categories in Mainland China and in Hong Kong in terms of brand awareness and purchases.
Rolex, Cartier and Omega are the top three watch brands that receive the highest awareness in both Hong Kong and China. Rolex is leading in Hong Kong. However, Rolex and Cartier are competing neck-to-neck while Longines is almost tie to Omega in Mainland China. Around half of Hong Kong luxury shoppers surveyed have purchased a Rolex in the past 12 months. For Mainland China, Rolex and Cartier are competing neck-to-neck in purchase. It is worth noting that among millennials and generation Z aged less than 35 years old surveyed, they purchased more of Cartier.
Cartier, Tiffany & Co and Chanel are the three top of mind jewelry brands in Hong Kong while Cartier, Dior and Chanel are leaders in Mainland China. Cartier, Tiffany & Co, Dior and Chanel are the top brands surveyed consumers purchased in the past 12 months in both Hong Kong and Mainland China, with Cartier the overwhelmingly leader and undoubtedly ‘the king of jewelry’.
In Hong Kong, Chanel, Gucci, Dior and Louis Vuitton are the top 4 fashion brands with highest brand awareness. But in Mainland China, Hermes enjoys the lead position, followed by Gucci, Dior and Chanel. In both Hong Kong and Mainland China, Chanel, Gucci and Dior are the top 3 brands that consumers surveyed like to purchase in the past 12 months.
Handbags & Leather Goods
Gucci, Louis Vuitton and Chanel are the top three best-known luxury leather goods brands in Hong Kong. In Mainland China, Hermes, Gucci and Coach top the list. In both Hong Kong and Mainland China, Gucci, Louis Vuitton and Hermes are the top three brands that surveyed consumers purchased in the past 12 months.
Beauty & Cosmetics
Hong Kong consumers are aware of Chanel the most while Mainland China consumers are aware of Estee Lauder the most. SKII, Chanel and Shiseido are the top three brands that Hong Kong surveyed consumers purchased while Estee Lauder, Chanel and Lancome are the top three brands for Mainland China consumers surveyed in the past 12 months. Estee Lauder tops the list for the first time in both brand awareness and purchases in Mainland China.
Wine & Spirits
Hong Kong consumers are most familiar with Hennessy, while Mainland China consumers are most familiar with Remy Martin. Hong Kong consumers surveyed like purchasing Red Wine and Whiskey while Mainland China consumers surveyed like purchasing Red Wine, White Wine and Whiskey, showing that Wine and Whiskey are most widely accepted by Chinese luxury consumers.