In 2018, the consumption of high-end products by the Chinese at home and abroad totted up to 770 billion Yuan, accounting for one-third of the total sales of luxury goods in the world. On average, each Chinese household spends nearly 80,000 Yuan on the luxury items, twice as much in French or Italian families. China has witnessed over half of the global luxury goods sales during 2012-2018 and by 2025, the Chinese are expected to lash out 1.2 trillion Yuan on the upmarket products, contributing about 65% of the global luxury consumption growth.
Based on the Hurun data, half of Louis Vuitton’s global sales are made among the Chinese buyers either inside or outside China. Richemont, the producer of Cartier jewellery and Montblanc pens, has completed a quarter of its sales in China and Hong Kong. The craze for overseas travel and using agents has made more people opt for buying high-end goods abroad. A survey conducted by Bain & Company has revealed the Chinese are ranked the world's No.1 luxury consumers and 60% of luxury goods were bought abroad. The buying agent, Bertrand Legar from Printemps Haussmann said there were more than 2,000 premium customers in their department store and nearly 70% of them were the Chinese.
So why are the Chinese people luxury goods buffs?
Over the past 30 years, China has completed a new round of wealth redistribution, following its economic reset and redevelopment. Back to one century ago, Shanghai, for example, was the largest cosmopolitan in the Far East, but because of the historical wars and policy changes, its wealth accumulated for years plummeted to nearly zero. China now has rapidly developed into the second largest economy in the world, but its social ideology as the poor is the mainstream.
The core concept for the poor is they need a designer label after transforming themselves into the middle-upper class, or to the rich from being poor. It shows a shortage of inner confidence and personal belief whereas expensive goods can help them ooze more confidence and carrying a branded hand bag and wearing a designer watch denotes they are successful and have steered away from poverty. In China, the value of luxury goods lies more in its social recognition and the Chinese people are as keen as mustard to be portrayed as the middle-upper class, being rich, academically knowledgeable, successful in career and highly respected by the society. As the luxury brands are established through decades or hundreds of years and very costly, when a person uses them, the others will link the user to possession of wealth, success and prestigious social status. In the book of the Chinese, the easiest way to boast about and prove their wealth and success, gaining high respect from the society is to consume the luxury brands. Therefore, conspicuous consumption of named brands was the key reason for the Chinese sparing no effort to splash out top whack money on branded items, like handbags, etc. This social recognition used to mislead young people to believe they should possess a designer label to gain acknowledgement and respect from the society. Years ago, you could often see some young girl carrying an expensive Gucci handbag with her savings of a year shove her way through onto a crowded bus.
But today, Chinese buyers become more judicious. The rising hunger for luxury purchase among them is the staggering number of the rich people in the country. Based on the 2019 Global Super-rich Survey Report, the number of the super-rich in mainland China in 2018 was 285, ranking second in the world, totalling the wealth of $996 billion. A consultant from Bain & Company said the Chinese had bought luxury goods to brag about their wealth and success in the past, whereas now they wanted to show they have good taste and enjoy the opulent products and quality service offered by the luxury brands.
Recently Ogilvy China released a White Paper on China's new generation of luxury brand consumption research - Make Luxury Brands More Meaningful. The report said Chinese millennials now have a walloping appetite for purchasing luxury goods, highlighting the total consumption share of them aged between 19 and 30 will rise to 53% in 2020 from 45% in 2016. The global luxury brands, from Prada to Louis Vuitton, are targeting the Chinese millennial generation. Goldman Sachs, the world's leading investment bank, said the Chinese millennials were the most important brand consumers in the world.
The generation aged at 20-34 in China usually comes from a family of an only child who was provided the best possible attention and financial resources in education and anything else, had an opportunity of receiving academic qualifications abroad, landed a dream job and will inherit their entire family wealth. More often than not, these young people started to use high-end products at their tender age, including jewellery, clothing, beauty products and handbags. In stark contrast to their Western peers, the Chinese millennials have stronger purchasing power because of two key perks. Their tuition fees induced from university are paid by parents and they bears no pressure of a mortgage as their parents take care of all cost again. The survey found 90% of the young Chinese had their own property, 80% of which were paid in full.
Unlike their parents’ generation, the Chinese millennials have an aversion to following suit in choosing luxury items. As they have an affluently brought-up background and are well educated with glittering career ahead and full of pizzazz, charisma and innovation, they demand tailor-made and exclusive high end products in order to outperform their peers and flaunt their personality and lavish lifestyle.