Chinese luxury spending is expected to double to 1.2 trillion renminbi by 2025, delivering 65 percent of growth in the market globally, according to a recent study.
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McKinsey & Company said in its report published in late April that China’s rich upper-middle class are set to become the drivers behind luxury spending.
Their purchases of high-end shoes, bags, fashion, jewellery and watches, also make them the target for the world’s designer brands.
Demographically, young Chinese consumers in particular are expected to lead luxury purchases in the next six year, as a means of “social advancement and self-differentiation.” These new luxury consumers—the post-’80s and post-’90s generations— power the Chinese market, said McKinsey.
“Young Chinese consumers are set to fuel the global luxury market but winning with this segment will require companies to respond quickly by adopting a savvy, consumer-first mentality,” said McKinsey report authors.
However, China’s most popular luxury brands are yet to establish a comprehensive presence across the digital ecosystem, one that younger Chinese consumers or millenials are fluent in and expect international brands to be also.
Consequently, the report went on to say there is opportunity for brands seeking to engage the attention of consumers in the world’s most lucrative and fastest-growing luxury market.
Luxury brands should promoting iconic brand-product combinations, said the report, including developing a Chinese nickname to increase the likelihood of going viral on social media.
Another consumer takeaway is the importance of omni-channel retailing. While online shopping and social media promotion is important for discovery, purchases are influenced and made in store, concluded the report.
“China’s young luxury consumers are more interested in aspiration than heritage, making it imperative for brands to modernize their stories, and launch limited-edition products to make young consumers feel they are brand VIPs,” said McKinsey.
“This includes fostering an atmosphere of exclusivity through an annual calendar of special events, particularly around art and fashion, while offering as many opportunities for personalized brand-consumer interaction as possible.”
Since the global financial crisis, China’s economy has been battling its sharpest economic slowdown, along with a decreased demand for discretionary items such as new cars and mobile phones.