Over 70 per cent of Chinese consumers plan to head overseas once the country’s quarantine policy is lifted, new research from KPMG shows.
The rapid urbanization and economic development of mainland China has led to a booming luxury market, and purchasing habits of consumers have become more complex than ever, a report released this week by KPMG reveals.
According to the report, Chinese consumers are eager to purchase luxury goods as a means of social advancement and self-differentiation. They are also highly accustomed to shopping during their travels, with over 70 per cent of Chinese consumers planning to travel overseas after mainland China's quarantine requirements are lifted.
The 2023 KPMG and DLG report on China Luxury Redefined: Building trust with Chinese consumers through authenticity and integrity, is based on a survey of 2,653 consumers living in mainland China and Hong Kong.
In the study, KPMG identified key takeaways for luxury brands to consider in targeting the evolving Chinese consumer, including being purpose-driven, respecting local culture, leveraging digitalization, understanding the new luxury concept and capitalizing on Gen Z growth.
The report also draws upon insights from in-depth interviews with executives from the luxury industry to supplement the findings.
Willi Sun, head of advisory, consumer and retail, KPMG China, said: “Given the rapid development of the country throughout the years, Chinese consumers are evolving fast and have developed a global perspective within a relatively short period of time compared with other mature economies. The definition of luxury among Chinese consumers may not always be the same as how the West views luxury.”
Purchasing power is a critical factor in the ability to buy luxury items and drives the development of consumer mentality, KPMG said in a statement.
According to the survey, Chinese consumers were found to have the confidence to spend, with increased income and economic development allowing for greater purchasing power and thus a growing appetite for luxury goods.
They are eager to purchase luxury items as a means of social advancement and the expression of personality, and are highly influenced by media content in their purchasing decisions.
Gen Z is rapidly becoming the largest consumer base for luxury brands, and their propensity to consume is quite strong, KPMG added. Based on the survey, 21 per cent of Gen Z survey respondents are willing to spend more than 16 per cent of their income on luxuries – a relatively large proportion for individuals who have just completed their first degree or recently entered the job market. Their preferred channels for purchasing are key e-commerce platforms and brand official channels.
Following nearly three years in relative isolation, massive shifts in the global luxury market are to be expected once leisure travel for Chinese shoppers resumes as well, KPMG continued.
A couple of phases can be expected during this reopening process, the firm said. The first phase will be a period of transition where actual travel might be slow to pick up, and a second phase is expected to kick in when travel truly resumes. Covid-19 has irrevocably impacted the shopping patterns of Chinese consumers, and an immediate rebound in spending and return to old habits is unlikely.
However, an adjustment in the proportion of domestic and international luxury spending can be expected. At the same time, when international travel resumes for Chinese shoppers, additional questions related to consumer data collection and the reactivation of these shoppers when they return to China will also resurface.
While WeChat has been the most appealing platform in China for CRM because of its advanced data collection capabilities which allow for better consumer segmentation and more effective life cycle communications, international brands in the market do not always have the right infrastructure in place.