The Luxuries Of Global 1/3 Have Been Bought By Chinese People.

In 2018, Chinese consumers spent 770 billion yuan on the global 1/3 luxury.

In April 26th, McKinsey China released the 2019 report on luxury consumption in China, which shows that in the context of China's economic slowdown, the growth of the luxury market in 2018 is stronger.

According to Bain's "2018 China luxury market research", the overall sales of China's luxury goods market in 2018 continued to record a record growth in 2017, and the growth rate reached 20% in two consecutive years.

In fact, not only last year, 2012-2018 years, more than half of the global luxury market growth came from China. Such a strong purchasing power and high-speed growth trend, the Chinese market has become a major brand competition.

Chinese consumers coming from behind

According to the 2019 report on China's luxury goods consumption, after 80, the half of China's luxury market has been propped up.

In 2018, about 23 million 900 thousand Chinese consumers bought luxury goods, of which 43% accounted for 56% of the total consumption of post-80s consumers. From the perspective of per capita expenditure, 80% of those who are at the peak of their careers and incomes spend on luxury goods every year. Four point one Ten thousand yuan.

The consumption power of the post-90s should not be underestimated. In 2018, 28% of China's luxury consumers accounted for 23% of the total consumption.

Nowadays, the luxury market in China can be seen as the most prosperous one. No one will think of it. Twenty years ago, luxury goods for Chinese consumers were only a few of the rich.

The luxury consumption potential of ordinary consumers in China was released only in twenty-first Century.

Before the 90s of the last century, the international luxury market grew at an annual rate of 10%-20%, and the global market share of the heyday was over 250 billion US dollars (about 17190 yuan).

But after 2000, the development momentum of the world luxury market was obviously insufficient. Especially in 2000~2003, the demand for luxury goods in Europe and the United States decreased year by year, and the sales volume of the world luxury goods market plummeted from 170 billion US dollars (about 11725 billion yuan) to 65 billion US dollars (about 448 billion 300 million yuan), a drop of 62%.

To add insult to injury, after a series of events such as the "911" incident, the Afghan War (2001), the SARS (2002) and the Iraq War (2003), the number of tourists from the world began to decrease significantly, and the number of luxury consumption transnational consumers shrinks.

But at that time, China, Brazil, India, Russia and other emerging markets, due to the growth of local economy and the increase of residents' consumption desire, the demand for luxury goods is increasing year by year, which seems to be the trend of luxury consumption centers.

It was also at this time that the center of the international luxury market began to shift from developed countries such as Europe and the United States to developing countries such as Asia and Latin America.

At that time, the rapid development of China's economy has greatly increased the national income level, and a large number of high-income and wealthy people have emerged. The consumption power of Chinese consumers is gradually emerging.

According to Bain's luxury survey report, the luxury market has declined by 8% in the 2008-2009 years of the global financial crisis and the dramatic decline in consumption. However, the luxury market in China has been growing by 16%.

Now, over the past decade, China's luxury consumer market is still a blue ocean, and the momentum of development has only increased. This is mainly due to the advantages of the right place, the right place and the right people.

Bain believes that the Chinese government has lowered the import tariffs on luxury goods, the regulatory authorities have strengthened the control of the gray market, and the major luxury brands continue to adjust the price gap between the domestic and foreign markets, which are three important factors to promote the rapid growth of the domestic luxury market. More and more Chinese consumers choose to buy luxury goods in the mainland market instead of going abroad as they used to buy cheaper products.

Geographically, the Chinese consumer's luxury consumption position has shifted from abroad to China, and there has been a trend of consumer reflux. In the purchase channel, because of the emergence of e-commerce, showing a downward trend in the line.

According to Bain global luxury report data, luxury sales in online channels increased by 27% in 2018, accounting for 10% of the total sales of luxury goods, but this growth was mainly driven by cosmetics category, while online penetration of other categories was still low.

There are four types of online channels in the luxury market in China. Brand official website, flagship store of third party business platform (such as brand Tmall flagship store), shopping platform (such as Jingdong Toplife, Tmall luxury Channel), name discount network (such as temple Library).

In 2018, more and more brands chose to cooperate with the leading e-commerce platform to expand online business coverage. According to the 2019 China luxury goods consumption report, it is estimated that the global luxury market will grow by 65% in 2025.

What makes Chinese consumers so enthusiastic and obsessive about luxury goods?

Looking for a sense of existence of young people and quality middle class

Seeking identity recognition is the biggest incentive for many young people to buy luxury goods.

According to the 2019 report on China's luxury goods consumption, young Chinese consumers do not understand the cultural heritage of their brands. Only 13% of young luxury goods buyers say they have grown up in a family that is familiar with luxury goods. Most young people are attracted by "brand + explosive money".

These young people are not loyal to the brand itself, will not buy a variety of products of the same brand, but will buy multiple brands that are popular and highly recognizable.

Nearly 70% of the 90's purchase of luxury goods is to "feel unique and self evident". More young white-collar workers believe that luxury can reflect their taste, make themselves more confident and even more respected in the workplace. The younger the consumer, the stronger the mentality.

"When I graduated from college, I felt that I had changed from a student to a social person. This transformation of identity requires a luxury package to make myself more confident." 89 years ago, the white-collar worker recalled his experience of buying the first luxury bag. He laughed at the fact that he was young and a little childish. At that time, he felt that he had a luxury bag and his social attributes were different.

Yi Han studied abroad before. When classmates often carried luxury bags, she planted grass in her heart. After graduation, she spent three and a half months of part-time income, buying the first luxury bag in her life.

"When buying a bag on the sofa is not satisfying, it is more important than buying a nice bag home." In the eyes of that time, luxury bags were symbols, and they were some kind of certification for her social identity.

"Eating with different friends will make different kinds of dressing with different bags. Sometimes it's just to make yourself look good, sometimes I don't want to be compared with others, and I feel like others have some." Yi Han frankly said.

Luxury has become a kind of invisible symbol. It is a kind of social capital that can not only manifest individuality, but also help to integrate into certain circles and enhance identity recognition.

The class attributes represented by luxury goods seem to be broken in the younger generation.

Especially now, with the improvement of social media and e-commerce channels, everything in the world is within reach. Buying luxury goods is becoming easier and easier, without crossing the sea or even going out.

In the Internet age, where KOL culture is prevalent and social media dominates, young people can easily be influenced by popular culture. Under the repeated attack of all kinds of information, the younger consumers make the purchase decision faster, and the stronger the desire for consumption.

Compared with the self display of young people, the concept of consumption after 80 is more rational and mature.

"Now buying luxury goods pays more attention to improving their quality of life, so they are more concerned about product quality." Yi said, "after all, luxury goods are not just needed, they are not impulse spending."

"Within the budget, in addition to considering brands, priority will be given to styles." After 80, the fashion blogger pear Wei buys luxury goods every one or two months, and the budget of the single consumption is 1-3 yuan. The main factor that attracts her is the new product advertisement. But she only buys her own brand and doesn't make extra money on other brands.

Yi Han and Li Wei are the representatives of the new middle class. They have economic strength, rational consumption and clear demand. They have certain research and understanding of the brand and have their own judgement and persistence. They will be the main force of luxury consumption in China for a long time in the future.

Some people say that the consumption habits of Chinese consumers have changed, but in fact, they have not changed their habits, but the main force of consumption has changed. The previous generation was more willing to save money, and the consumption concept was relatively conservative. This generation preferred to try something new.

The major brands have already known the consumption habits of Chinese consumers of different ages. In order to cater to Chinese consumers, they have done all they can: to jointly launch the limited edition of the young wave brand, the special fund of China, and cooperate with the popular opinion leaders or stars to launch products with Chinese elements on special festivals in China, and constantly in the electricity suppliers, stores, official websites and social media. And so on many contact brands.

In order to seize the market, brand is very good for Chinese consumers, but Chinese consumers are not buying everything.

A discerning consumer, a polarized market.

According to the latest report released by Bain, despite the strong growth of China's luxury market as a whole, the survival state of different brands is obviously different.

With the continuous growth of income, Chinese consumers are spending more and more on luxury goods, but the demand is higher and higher.

In 2019, China's luxury consumption report shows that, compared with the previous generation, the younger generation also focuses on the design, fabric and production technology of luxury consumers in pursuit of brand names.

Source: McKinsey China luxury consumption report 2019

Some brands are better at meeting the needs of consumers than other brands, and there is a natural polarization between the performance of different brands.

According to Bain's "2018 China luxury market research", the number of leading brands is over 25%, while the slightly slower brands are below 10%. In 2018, among the top 20 of fashion luxury brands, the growth rate was over 25%, and the ratio of brands less than 10% was close to 1:2.

Successful brands tend to be better at digital marketing and KOL marketing, and more often through social media advertising to attract younger generation. How to do digital marketing directly affects the success of the brand to a large extent.

Since 2015, the digital marketing budget of China's TOP40 luxury brands has almost doubled, of which 40% - 70% for WeChat. The brand recognizes and locks target customers through WeChat, and then promotes and sells products. For example, some brands choose to advertise information flow in the circle of friends.

Secondly, on the basis of enough brand exposure, the renewal speed of new and shop windows will also affect the frequency of shopping. In addition, with the increase of operating costs year by year, the scale advantages of large brands are gradually highlighted.

Some people in the domestic market are happy and worried, and the foreign market is also not good.

Recently, the Italy luxury goods trade association (Altagamma) and Paris BNP Pariba (Exane BNP) jointly released a report on the retail industry's retail transformation. The report pointed out that the luxury industry is facing the risk of shrinking profit margins.

Luca Solca analysis, a luxury industry analyst, said that because of user habits and changes in the inherent mode of the market, brands had to adjust their strategies to cope with the market, but the consequent increase in costs was inevitable. Even if some brands can make up for the extra cost expenditure due to market changes through strong income, their ROI will plummet in five years.

The study found that between 2013 and 2018, 80% of the world's newly opened luxury goods stores were light luxury brands, including SMCP group (Sandro, Maje, etc.), Coach, Michael Kors and Tory Burch. But this strategy of light extravagance is also experiencing the test of "new and old" in the market. Affected by factors such as cost increase and light luxury grabbing the market, the ROI of some traditional brands, such as Prada, Salvatore Ferragamo and Tod's, has been reduced by 1/3.

Armando Branchini, vice president of Altagamma, said in 2014 that the importance of user loyalty to luxury brands in the future is much higher than that of conquering more markets.

Now it seems that the analysis and prediction have been fulfilled.