Brands, behaviours and backgrounds: understanding luxury customers in China

Featuring more than 3,000 responses from four age groups – baby boomers (age 55 to 73), Generation X (39 to 54), Millennials (25 to 38) and Generation Z (aged under 24) – we reveal what they share and what they don’t when it comes to luxury purchases.

We find that Millennials are China’s main consumers of luxury goods today, with Gen Z following closely in second place and with the highest proportion of high-frequency consumers. And while baby boomers and Gen X have established financial security, their childhood experiences have largely led to frugal spending habits. Though the two latter groups show a lower demand for luxury, they still account for a considerable part of the luxury consumption in China (50% of baby boomers buy luxury goods and 67% of Gen X.)

What customers want

Chinese consumers’ definition of luxury goods is evolving with provenance no longer the dominant attribute. According to respondents, the top five features of luxury goods are: high price point, brand history, distinctive design, sophisticated lifestyle and craftsmanship.

Interestingly, Chinese consumers are increasingly attentive to the values of a luxury brand, especially the three younger generations. The luxury market in first- and second-tier cities is more mature, and consumers pay more attention to a brand’s history, its story and its values. First-tier cities have a GDP of more than $US300 billion and a population greater than 15 million, while second-tier cities have three to 15 million inhabitants and a GDP between US$68 billion and US$299 billion. In third-tier cities (populations of 150,000 to three million and a GDP between US$18 billion and US$67 billion), luxury customers focus on extrinsic factors such as the price or the reflection of a high-end lifestyle.

Our survey reveals four key criteria stand out when customers decide to buy a particular item: good quality, high brand notability, strong sense of design and alignment with personal taste. This indicates that the luxury purchasing behaviour is becoming more rational and mature, as consumers no longer take brand recognition as the sole factor. Moreover, each generation has its preferences: baby boomers focus on quality, Gen X wants brand culture and quality, Millennials value brand culture, and Gen Z cares most about product design.

Pursuing pleasure or meeting needs?

In a chapter about the psychology behind purchases, we reveal how Chinese consumers buy luxury goods primarily to reward themselves, followed by personal satisfaction and to show off their taste – indicators that luxury consumption serves personal pleasure.

While baby boomers and Gen X buy luxury goods for their needs, Millennials buy luxury goods to meet social expectations, and Gen Z is focused on pleasing themselves. Consumers in third-tier cities, interestingly, do not show a desire to reflect their values through luxury goods.

The most frequently purchased product categories by Chinese consumers, according to our findings, are personal luxury items. The most sought after are clothing, shoes and hats; perfumes and cosmetics; bags and leather goods; and jewellery and watches. Meanwhile, outdoor sporting goods, high-end hotels, furniture and other more experience-oriented luxury consumption are still gaining traction.

Online vs offline channels

Even in the digital era, brick and mortar stores are still the preferred purchasing channel for Chinese luxury consumers. A long-lasting concern for counterfeits explains why 68% of respondents choose offline stores and 66% opt for brands’ official online channels. Online shopping is growing and ranks second, with purchasing agents coming in third (44%), who source goods from overseas channels for customers. Gen Z is more willing to buy without seeing the product and are more guided by price.

Some 72% of Millennials – the main consumers of luxury goods in China – buy luxury goods from offline stores, followed by Gen X (68%), Gen Z (64%) and baby boomers (63%). We find that the primary factor influencing the decision to buy luxury goods offline is product quality, followed by service-related factors, such as the attitude of service personnel and their professionalism.

Preferred country of origin

French luxury brands enjoy the highest popularity among Chinese consumers of all ages. The two older generations have different preferences to the younger ones: Baby Boomers and Gen X are drawn to Swiss and Italian brands after French ones, while Millennials and Gen Z rank highly American and Japanese brands.

Understanding the Chinese luxury market

China's luxury market is complex, with different values, economic backgrounds and generations driving decision-making. Where brands started is no longer their biggest attraction in the eyes of customers – but where they are going will determine their success. Brands, over the coming years, will have to create immersive experiences – online and offline – if they want to build their reputations and secure customer loyalty, while facing fierce competition locally and internationally.

To get the full picture on the Chinese luxury market and its consumer trends, download our full study here.