When it comes to the biggest spenders in luxury, you might be surprised to hear that luxury consumers in Taiwan have emerged as the highest per-capita spenders in East Asia, spending approximately USD342 per person.
This far exceeds the spending of both the Japanese (by nearly USD150) and American nationals (USD280, according to CNBC), making it one of the fastest-growing markets in the region and luxury brands wanting to tap into the opportunity should take note.
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And while the size of the market is considerably smaller than Mainland China, Japan and South Korea, those that do spend, spend much more, which is why it’s important for luxury companies not to overlook smaller markets in their global plans.
Behind that impressive growth are a variety of considerations that companies must take into account, from the personas that make up its consumers to their preferences and behaviours, all of which help make up its USD8.1 billion luxury market.
In researching this article, I spoke to luxury expert and former editor-in-chief of Prestige Taiwan, Monica Yang Shteinberg, and Don Lin, director of brand & fashion management at Fu Jen Catholic University.
Key Taiwan Luxury Consumer Personas
As with all luxury personas, Taiwan has young, middle-aged, and older generations. But there are also niche personas within Taiwan for brands to consider like 2nd Generation Affluents, who are the wealthy children of the business class who led Taiwan’s economic miracle from the 1970s to the 1990s. They are often known for their extravagant display of wealth.
They have been around luxury goods since a young age, resulting in a deep understanding of brands and their products. As a result, they tend to be more fashion-forward compared to other consumers, and they strive to align their personal style with their lifestyle.
Additionally, they have social obligations and are constantly found attending parties and exclusive events. Consequently, they may feel a sense of pressure to stay up-to-date with the latest trends and to continually prove their sense of taste to peers.
Silver-Haired Wealthy
Another niche persona to consider are the Silver-Haired Wealthy (SHW), who are pioneers of Taiwan’s golden economic age and the wealthiest consumers on the island. Many are retirees, meaning they have both ample time and financial resources. Price is not a concern for SHW, and they absolutely belong in the top global tier of luxury consumers.
A subset of this group consists of the Fu Tai Tai(富太太), the rich wives of wealthy businessmen. They often form high-society cliques that frequently attend social events and actively participate in philanthropic organisations and their events.
These women experience significant pressure to maintain their appearance and compete with their peers in society. Luxury purchases are often used as a preferred method to achieve this, making them a priority target for luxury brands, and many brands clamour to get them on the guest list for their events.
The most effective approach for brands to connect with SHW is through VIP events and gala dinners. Brands will often reach out to fashion media to access their customer lists for this purpose.
Where Do The Taiwanese Buy Luxury?
Physical retail (boutiques and department stores) is the most important luxury retail channel in Taiwan. Don Lin estimates that 85 percent of retail purchases in Taiwan occur in boutiques.
Wealthy customers in Taiwan highly value high-quality and personalised service. Sales advisors at luxury brands maintain close relationships with their VIP clients, who stay in constant contact with them through the messaging app Line. The customer journey for older consumers tends to be lengthy, and they require a significant amount of information and guidance before making purchases.
Luxury e-commerce is really only a consideration for the under-40’s, and when they do buy online, it is from domestic platforms such as IFCHIC. Import taxes are high in Taiwan, so cross-border luxury platforms like Farfetch don’t make sense price-wise for most shoppers. Local luxury e-commerce platform IFCHIC fares much better in Taiwan than overseas cross-border competitors.
It is also common for Taiwanese to go overseas for luxury shopping, with Japan being the favoured location, especially since the exchange rate is favourable at the moment and they can get a tax rebate.
Moreover, Japan leads Taiwan’s second-hand luxury market, especially for watches and high-ticket items such as Hermès bags. The Taiwanese (particularly in the case of older consumers) have a special relationship with Japan, and Japanese sellers are regarded as being trustworthy, honest, and giving impeccable advice.
The Taiwanese, in general are very risk-averse and worry about being cheated, and it can be said that they trust the Japanese even more than themselves. As well as traveling to Japan, they purchase from Japanese cross-border platforms, like watch specialists Jackroad, something they don’t often do.
How Do Consumers Research and Learn About Luxury?
Digitally savvy younger consumers learn and research luxury from magazines like Elle, Vogue, or local bloggers. Cross-border sites like Farfetch and Mytheresa are popular for researching products.
Influencers are becoming less effective as a marketing channel for luxury brands in Taiwan. According to Monica Yang, “Ten years ago, brands were eager to collaborate with influencers, but now they are less enthusiastic and believe that influencers won’t generate actual sales.” She added, “One reason is that luxury consumers don’t trust influencers in the same way now, apart from with cosmetics and beauty products, which are an outlier.”
Physical stores and relationships with sales advisors remain the primary channels through which older consumers learn about and engage with their favourite brands and products. Sales advisors need to possess excellent communication skills because Taiwanese consumers place great importance on factors such as politeness, attitude, and using the appropriate communication style.
How to Win Taiwanese Luxury Consumers
When trying to win over luxury consumers in Taiwan, I asked the interviewees what advice they would give to overseas brands who either have not entered the market or would like to expand their presence in Taiwan. The first point of advice was to tell a compelling story.
Taiwanese appreciate a good story, and it’s especially impactful when a brand develops a compelling narrative around its products or its mission. For instance, brands can highlight philanthropic efforts or contributions to Taiwanese society. Alternatively, they can showcase the history of their brand and how they maintain quality standards.
The second point is to give a perception of value. The bottom line is that the Taiwanese care a lot about price performance (CP值), no matter if they are buying a bowl of noodles or a Swiss timepiece. Consumers in Taiwan hate the feeling that they have overpaid or are not getting good value. They certainly have the means and inclination to splash on luxury products, but brands will do well in their messaging to focus on the excellent quality of their products and give consumers the perception that they are getting their money’s worth.
The third point to note is that they must be understated but special. Taiwan is a mature market, and consumers are very conscious about appearing gaudy or nouveau riche. Be understated, but at the same time, show respect by offering unique and special experiences and products.
And the final point is to find the right spokesperson.
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“Taiwan’s luxury retail is heavily personality-driven, and consumers respond very positively to brands that select a spokesperson they respect for their taste,” said Don Lin. “A recent example is the partnership between Dior and Johnny Depp, which greatly impressed local consumers, as Depp has long been wildly well-respected as a style icon.”
Ultimately, it is by taking the time to understand the intricacies of each market, that makes the difference between success and failure for brands.
This op-ed is authored by Matthew Ryan, founder, The Cloudberry Agency. He is based in Taiwan.