2nd May 2012
By understanding the different motivational of China's 'luxury buyers, brands can lead them on a journey that takes them from label to lifestyle as this market matures. So tells Loren Naish to Aurora magazine.
With luxury spend on the Chinese mainland eclipsing $1.59-billion last year alone and the number of Chinese US dollar billionaires leaping from 189 to 271 at last count – and counting – little wonder luxury brand houses the world over are looking East, eager to indulge this unabated appetite for fine accessories and lifestyles: Gucci for one now boasts some 42 stores (vs only six in 2006), with many more luxe brands planning expanding footprints across China in the near future.
Fortified by the Asian concept of ‘Face’, this love for luxe has its roots in both cultural and capital, but the Chinese Luxury consumer is by no means an homogenous group: we believe brand-buying behaviours can be distilled into two segments – Show luxury and Know luxury – posing different challenges for luxury brands. By understanding their market’s different motivational cues, luxury brands can tap into the needs and desires of both segments, capturing imaginations and Renminbi alike by leading their customer on a journey that takes them ‘from label to lifestyle’ as this market matures.
SHOW & tell:
Including both ‘Working Class Millionaires’ – the older, self-made entrepreneur seeking to reward himself with hard-earned signifiers of success – China’s ‘Show’ segment also refers to the ‘Little Emperors’ – 20-something privileged offspring of China’s one-child policy financed by two generations of elders. These nouveau riche seek to ‘wear’ their wealth, choosing brands as badges and are less concerned with a brand’s credentials themselves than endorsement from favourite celebrities. More important still is an emerging new subcategory that straddles both these groups within the Shows, the career-minded Power Women who arguably offer the biggest growth opportunity, having access to both their salaries and their husbands’.
With an already 90% share of the luxury pen market, Mont Blanc is one such brand who has turned its affections towards the female buyer with a coveted line of jeweled luxury pens within its Boheme range, while also giving attention to also improving store ambience.
With bejewelled opulence also front of mind, LongbroHummer is another such superbrand eager to pander to the palette of its hungry customers with modified supercars made to order: a mere £260,000 will buy you a custom-fit stretch Hummer H2 with its chrome logo picked out in diamonds, if you prefer.
With unprecedented confidence in their booming economy, the newfound monied are eager to clarify their social standing, turning to luxury product for prestige and, more importantly, turning their backs on counterfeit goods.
Understanding the lesser-known KNOWS:
For the Knows, the oft-overlooked but highly influential luxury consumer group, luxe is a habit. Whereas the Shows subscribe to the catalogue of the conspicuous, the Knows uphold an appreciation for quality, exclusivity and the rare, their sophisticated choices striving towards the individual as connoisseurs of class and good taste. Often second generational wealth, educated, well-traveled and internationally influenced, the Knows place emphasis on meaningful ownership over overt display, favouring understated elegance, authenticity and service.
Delivering on this desire for personalised experiences, luxury travel is trending towards tailor-made itineraries and custom concierge as the Knows seek partners to help them edit from the cacophony of conspicuous brands competing for a share of their Hermes purses; exclusive membership clubs connect the likes of the like-minded, be they sports or sports car societies.
With two distinct segments with markedly different motivators for luxe purchasing, how can brands respond? Should a brand favour one consumer set over the other, or can it satisfy both with the same approach? With more access to the internet, international travel and transparent price parity, the Chinese luxury consumer is becoming more discerning and increasingly savvy of the options available to them.
From acquisitive to inquisitive:
In understanding their potential market’s motivators, brands can respond accordingly with the right access points for both groups.
1. Resonate across the tiers: create levels of experience designed to speak to the preferred form of self-reward for the two target groups: a Fashion watch range for the Emerging brand and style conscious; a Fine watches range that appeals to the New Affluent; a limited edition Watchmakers’ Watch that celebrates the innate heritage of design excellence and craftsmanship captured in the brand for the Luxury Connoisseur looking for that heirloom or investment.
2. Celebrate heritage: educate your consumers on the intricacies and complexities of its build and elevate the brand’s role in influencing or leading style through story-telling. Fine French leather goods maker Hermes’ eight-story home in Toyko includes an exclusive brand museum and a gallery of local Japanese art, engaging their visitors’ senses with a memorable and distinct experience.
3. Service is essential: Show consumers crave ‘face’ factors and want to be treated like a VIP; Know consumers want recognition as discerning, intelligent connoisseurs with the finer details explained, the processes demonstrated.
4. Individual expression: enable heightened self expression through personalising the product and partnering consumer with brand to create an individual keepsake.
5. Look to local: with Hong Kong still considered ‘the great mall of China’, accounting for more than half of overseas Chinese luxury spend (including Macau), the well travelled savvy affluent are finding value for money abroad through the increasing appreciation of the Renminbi. But a new generation of local Chinese luxury brands are tapping into a patriotic pride in China’s success, spawning a new breed of consumer who seeks to celebrate their own heritage. Backed by fine French leather-goods Hermes, Shang Xia is one such brand: “We are looking to revive the timeless aesthetic that China had before in Ming furniture, Song porcelain and Han-dynasty dress” – Jiang Qiong Er, Chief Executive, Shang Xia.
Today’s Shows, tomorrow’s Knows?
While the Shows currently represent the biggest growth area, other mature Luxury markets suggest that within five years, a significant proportion of these buyers will have moved along the continuum of Luxury Buyer from Show to Know, seeking out quality, service and experience from their investment purchases. For luxury brand houses there rests the opportunity to prepare your customers in taking this step, educating them in your brand credentials to entrench an appreciation for true value.
This article was written by Loren Naish and first published in Aurora Magazine March – April 2012. It has been republished with their kind permission.