3 Trends in Chinese Luxury Spending To Keep Watch On

Luxury buying is a convenient way for the Chinese to establish social status, and not as a way to differentiate themselves but rather a way to conform and keep up with their society’s common interest in luxury goods.  It is a way to for them develop self-worth, importance and a sense of belongingness.

Despite the trends of global luxury spending in 2015 and 2016 indicating that luxury spending had experienced a decrease (just a mere 1%) from the Chinese buyers, the outlook for global luxury spending remains optimistic over the long term as their overseas’ purchasing power remains highly significant in many countries, and due in part to its continually growing middle class with more disposable income.

According to Bain & Company, they account for 30% of global luxury purchases and do about 80% of their shopping outside mainland China. 

As we start the year off, here are my predictions for 2017 on the top 3 trends in Chinese luxury spending:


Trend Prediction #1: Chinese millennials will be an important sector in overseas luxury spending

Luxury spending projection is largely speculated based on travel trends which is more predictable and stable as a trend.  With the continual increase in global travels by the Chinese, it is forecasted that by 2020, Chinese travelers will increase from just over 110 million today to 200 million.

An important distinction between China’s wealthy consumer demographic compared to other countries is that 80% of them are under the age of 45. An article by the McKinsey and Company compared that number from China against the United States at 30% and 19% in Japan. 

This has created significant marketing implications by the luxury brands to appeal to a demographic that is younger has a much larger and longer life time value as they continue to grow their wealth into the many decades ahead. 

McKinsey and Company indicated is that 52% of wealthy Chinese consumers trusted foreign brands, compared with only 11% of mainstream ones; a further indication that the trend of oversea shopping on their travels will remain relatively stable.

Also to highlight is the demand for medical tourism. The China Travel News indicates that according to Ctrip’s annual medial travel report, “the number of Chinese travelers traveling for medical services such as physical examination in 2016 increased 400% against the year before”


Trend Prediction #2: Continual increase in growth on foreign branded premium goods and services focused on health and wellness

Deteriorating environmental conditions and disgruntlement with food and health issues in China is an encouraging force to the middle-class affluent sector to spend more on improving and preserve their health. 

As one of the worst countries for air pollution, Chinese buyers have flocked to a product website of a company in Canada that sells bottled fresh mountain air, priced as high as $30cdn per bottle.  Loyal affluent customers are more than happy to make buying fresh air from another country a regular expenditure, being able to make purchases online conveniently.

“Fake food” is also a problem that hasn’t gone away in China, where devious individuals and underground companies misrepresent the quality grade, or the actual product altogether. Some of the most notorious fake food like honey, meat, rice, and baby powder formula has raised serious concerns for the Chinese.  Their level of distrust has resulted in the preference and desire for foreign goods, in particular premium brands that are known to uphold a high level of internationally acceptable standards in safety and regulation.

China is also leading the way for the dietary supplement and health food sector, with the biggest platform in cross-border sales, and just like bottled air, affluent consumers are buying them in bulk online.


Trend Prediction #3:   Luxury e-commerce on WeChat will be a focal point in massive growth for mobile purchases in China

According to an article by McKinsey & Company, “China’s online retail market is the world’s largest, and e-commerce now accounts for more than 13 percent of the country’s total retail sales of consumer goods.”

As the number one most used app in China, users spend an average of 90 minutes on WeChat to handle their day to day errands, entertainment, purchases, and more with the app’s seamless integration of a huge array of services.

With 768 million active users, the WeChat Stores have undoubtedly been a huge contributor of boosting mobile purchases.  WeChat’s continual addition of customizable functions and interface which allow businesses to tailor their appeals to their prospects will continue to skyrocket the growth on WeChat e-commerce. 

McKinsey & Company further indicates that Chinese buyers are becoming more selective with their purchases, and are spending more of their income on experiences and lifestyle services.

“Chinese consumers are also increasingly trading up from mass products to premium products: we found that 50 percent now seek the best and most expensive offering, a significant increase over previous years. It’s no surprise that the growth of premium segments is outpacing that of the mass and value segments, and foreign brands still hold a leadership position in that premium market. What’s more, a rising proportion of Chinese consumers focus on a few brands, and some are becoming loyal to single brands. The number of consumers willing to switch to a brand outside their “short list” dropped sharply. In apparel, for instance, the number of consumers willing to consider a brand they hadn’t before dropped from about 40 percent in 2012 to just below 30 percent in 2015.”

Some of the notable luxury brands who have doubled down on WeChat are Burberry, Coach and Chanel, amongst many others have experienced massive success. These luxury brands have carefully strategize their presence on WeChat, everything from creating the best possible customized experience through their marketing campaigns, to carefully curated content and services to make their users feel extra special like VIP and timely exclusive members services; and hence deepening their followers’ sense of brand loyalty.

Does your business have any of your own predictions for Chinese luxury spending in 2017?  

Author – Victoria Mui

Chief Marketing Strategist / B2B Sales Expert