Millennials in China are boosting global sales in the luxury and fashion industry.
Characteristics of Chinese millenials
The Chinese generation born in 80s 90s have their closet lined with luxury bags, shoes and dresses. They wouldn't think twice about spending thousands of renminbi on a pair of brand name shoes. This segment of China's consumer class that make up 71% of the country's luxury buyers in 2021. Commonly named "Generation Y", they purchased $115 billion worth of luxury goods, and this is only the beginning. By 2025, luxury sales in China are expected to reach $183 billion. Luxury brands that win over the hearts and minds of China's younger generations will be the ones that win in China. China's post 80s and 90s generations are the driving force of the country's appetite for luxury. They are willing to spend and spend big.
They were born into China's urban middle class and as members of the single child generation, they're often showered with not only affection, but financial support from their extended families. Hence, they can spend much more than what they actually earn. China's millennials are also well educated, exposed to Western culture, and grew up in a world surrounded by digital technology and social media.
Most of them are new to luxury. They didn't grow up surrounded by luxury goods. In fact, half of the 90s generation with the first luxury purchase just last year.
They want to stand out. They don't want to blend in with the crowd. Luxury makes them feel special and different. It also makes them feel connected to a new community of people who share their passion for luxury. Luxury makes young consumers feel confident, sophisticated and different. It is a very powerful form of social capital for them. It also helps them to connect and form a very close bond with their best friends when they talk about luxury. Where to buy, how to buy, what to buy. How to dress in their WeChat groups.
Overall, brands continue to have the biggest influence on consumers when it comes to luxury purchases. Younger consumer, however, value brand less than the older counterparts. European brands continue to dominate.
How do Chinese millenials choose their brands when shopping
What's interesting, though, is that some post 90s consumers, they would be willing to try Chinese luxury brands. The Chinese consumers are super beautifully and socially connected. They are also very engaged luxury and fashion consumers. They get information from a large variety of different sources, from online to offline, overseas to domestic, from earned, paid, free media. On average, they spend 35 hours per week reading about luxury and across around 16 different information sources. They also place special trust in peer to peer recommendation from key opinion leaders, influencers, friends and family to store associates.
Luxury consumers in China may find most of their information from online sources, but they still end up buying in brick and mortar stores. More than 90% of purchases are in fact made offline. Today, in-store sales assistants play a critical influencing role. Not only in the store but also through WeChat messaging. This doesn't mean that Chinese consumers are not ready to make the shift to digital. In fact, we expect luxury online sales to grow by two or three fold from what it is today by 2025.
How a fashion or luxury brand can drive sales in China
It's a very exciting time for global luxury brands in China. We see an enormous opportunity for brands with the right strategy to capture a bigger slice of this rapidly growing market. To tap into this opportunity, global luxury brands should aspire to become the leading form of luxury capital for the young Chinese consumers. To make this happen, luxury brands will need to transform their approach to product innovation and marketing and learn how to make better use of digital technology and data analytics to deliver the kind of brand and product experiences that China's young luxury consumers seek.