Hong Kong – Ruder Finn, one of the world’s largest independent public relations firms, and Consumer Search Group (CSG), a leading market research company in Asia, have released the seventh edition of the China Luxury Forecast, providing analysis of key trends in the luxury sector in mainland China and Hong Kong.
The 2016 Forecast reveals that while consumer confidence in Mainland China has remained steady with further growth expected, it has seen another drop’ in Hong Kong. 42% of consumers in Mainland China are looking to spend more on luxury items across all categories, but in Hong Kong this figure has fallen to just 25%, a drop’ from 2015’s figure of 30%, further reinforcing last year’s conservative approach by consumers in the SAR.
Growing wealth has led to consumers broadening their international horizons, with spend on travel remaining the number one category of luxury for both Mainland Chinese and Hong Kong consumers. In an encouraging sign for the travel industry in Mainland China, 53% say they intend to spend more on luxury travel in the coming year, up from last year’s figure of 50%. Consequently, spending by Chinese travelers is expected to drive more growth in luxury markets outside China, but in Hong Kong the luxury travel picture has again seen a decrease in purchase intention, down by 5% when compared to 2015.
Meanwhile, e-commerce continues to represent a major opportunity for luxury brands, in which online amounts to 26% and 20% of luxury spending by Mainland Chinese and Hong Kong customers respectively.
Surveying 1,341 consumers across mainland China and Hong Kong, the 2016 China Luxury Forecast covers Greater China in depth, with 1,040 consumers from over 120 cities in China and 301 consumers from the Hong Kong Special Administrative Region. 300 of mainland consumers were from first tier cities, 400 from second tier cities, and 340 from third tier cities. Average annual household income was RMB 833,509 in the mainland, and HKD 957,006 in Hong Kong.
Growing Opportunities for Luxury Brands Online, Social Media
When it comes to online purchases, accessories and beauty are the favoured products, with official brand websites the most preferred digital channels. Customers have also indicated higher confidence in spending online without having visited physical stores before purchasing, with an average number of two visits, down from 2.3 and 2.6 visits in China and Hong Kong respectively in 2015. When it comes to social media, word of mouth is the key influencer, surpassing celebrities, luxury communities and key opinion leaders.
Made for China
Hong Kong and China customers also value ‘Chinese’ elements differently when it comes to purchasing products or services. A majority 58% of Mainland China respondents said that ‘embedded Chinese elements’ were ‘extremely or very important’, compared to sentiment in Hong Kong which barely reached double figures at just 11%.
Diving deeper into Chinese elements in luxury products, a majority 55% of Chinese consumers said they appreciated “elements symbolising good luck,’ compared to only 25% of Hong Kong consumers. Meanwhile, the Chinese element most often valued by Hong Kong consumers (44% of respondents) was the reflection of Chinese heritage, which was also the second most appreciated element among Chinese consumers (52% of respondents).
Travel motivation and cultural familiarity
The China luxury travel market continues to grow year-on-year, with Chinese luxury consumers taking 4 domestic and 3 international trips, while in Hong Kong luxury consumers take 3.7 international trips annually. Japan, Taiwan and China are the top three destinations for Hong Kong consumers, while Hong Kong tops the list for Mainland Chinese luxury travelers, followed by France and Japan.
A number of questions in the 2016 survey revealed the specific motivations behind travel and consumer expectations and activities when abroad. Interestingly, for Mainland China consumers ‘culture and history’ was the top factor when deciding travel destinations at 63%, while Hong Kong consumers most valued ‘transportation convenience at 50%. The second most identified factor in both market was ‘shopping options’, with 46% and 47% in China and Hong Kong respectively.
Once abroad, ‘spa and wellness’ trump other favorite activities for both Hong Kong and Mainland China respondents, beating ‘cuisine’ into second place. A sense of familiarity is important to Chinese travelers when considering hotels abroad, with 49% saying Chinese-speaking staff were a must-have, compared to just 25% of those in Hong Kong.
Brand Loyalty – not ‘money no object’
The majority of luxury consumers in both Hong Kong and Mainland China still have a budget in mind for shopping when travelling abroad. As far as specific brands are concerned, as much as 57% of Chinese consumers and 46% of Hong Kong consumers know in advance what brands they will buy, even if they are open about the specific product.
Simon Tye, Executive Director of CSG Hong Kong said, “While demand for luxury remains strong in mainland China, Hong Kong luxury consumers are showing lesser intent in luxury purchase. Hong Kong customers are still interested in discovering new luxury brands and experiences. They are very discerning customers who know and appreciate good quality products.”
“Consumers are again focusing on the experiential this year, with travel and beauty showing the most significant growth,” said Gao Ming, SVP, General Manager Luxury Practice China, Ruder Finn Asia. “With increasing foreign travel comes increasing foreign purchases, made by a demographic with clear motivations and strategies when it comes to their luxury lifestyle. It’s also clear that optimising the online customer experience remains more crucial to success than ever.”