The Herman Trend Alert
October 4, 2017
Chinese Luxury Consumers
In spite of the slowing growth in the Chinese economy, the huge and classy group of luxury shoppers in China is becoming more global and more demanding. According to McKinsey and Company, to keep these consumers interested in their brands, marketers will need to take a new approach.
Evolving Chinese consumers
For more than eight years, McKinsey has been monitoring Chinese luxury consumers and their increasing influence on the global luxury-goods market. Their latest research focused on understanding the fundamental attitudes and behaviors of Chinese luxury consumers.
A trillion renminbi* opportunity
This Herman Trend Alert covers a few of their most recent findings. We look at how their buying behaviors have evolved, and their shopping patterns. Finally, we will look at some of what the luxury players will need to do to capitalize on this market.
A huge and growing luxury market
By 2018, the number of Chinese millionaires is expected to surpass that of any other nation, and by 2021, China is expected to have more affluent households than any other country on the planet. Moreover, their annual spending, represents almost a third of the entire global luxury market. In the eight years following the Beijing Olympics, McKinsey estimates that more than 75 percent of the total growth in global luxury spending, could be attributed to purchases made by Chinese consumers.
Two recent shifts in Chinese luxury
Because Chinese consumers are no longer making their first purchases, luxury marketers need to invest more in building loyalty among these existing customers, rather than recruiting new ones---a move from customer recruitment to customer retention. Second, McKinsey has observed an increasing importance of super wealthy Chinese consumers, due to the fact that they represent more of the market.
What Chinese consumers are looking for
Wealthy Chinese consumers are looking for global product and price consistency, a high level of customer service, including being recognized as return customers, and "locally tailored products that [can] serve as luxury souvenirs".
Looking forward: even more spending coming
Moreover, unlike average Chinese consumers, wealthy Chinese consumers expect to spend more in 2017. By 2025, McKinsey forecasts the value of the global luxury-goods market to climb to RMB 2.7 trillion or USD$410 billion. As they have in the past, Chinese consumers will account for a majority of this growth, and by 2025 will account for 44 percent of the total global market. Luxury brands that ignore the luxury Chinese do so at their own peril.
* The renminbi is the monetary currency of China.
To read this entire very detailed report, visit https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/chinese-luxury-consumers-more-global-more-demanding-still-spending
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