Luxury Brand Summit 2016: The Evolution of the Chinese Luxury Consumer

JOLC

Luxury Brand Summit 2016: The Evolution of the Chinese Luxury Consumer

News / Wednesday, 12 October 2016 - 18:00

Albatross CX was delighted to partner with the Luxury Brand Research Center at Shanghai Jiaotong University’s Antai College of Economics and Management to host the 2016 Luxury Brand Summit. The half day event featured the first presentation of Albatross’s 2016 Journey of the Luxury Consumer seminar, as well as lectures from Professor Li Jie, Director of the Luxury Brand Research Center; and Michael Mingshan Peng, Vice President of Aston Martin Lagonda China. Together, the presentations explored many different facets of the rapidly-evolving luxury market in China.

One new aspect of this evolution, which was revealed in the Journey of the Luxury Consumer research, is that Chinese luxury consumers are increasingly starting to feel that there is a “sameness” to luxury brands within China. As one of the many consumers Albatross spoke to for the research put it:

Products look almost the same to me in terms of their styles and design; they all have good quality and similar prices. Boutiques all look the same, too. The service is more or less similar and we know they all have a standard selling process.”

For several years now, we have seen the rise of a more sophisticated and discerning Chinese luxury consumer, but in 2016 this type of consumer has become more salient as millennials join its ranks, and they are clearly unsatisfied with the luxury shopping experience in their own country. Once these consumers preferred to shop overseas because the prices were lower than at home, but this year we have seen price fall to fourth place on the list reasons Chinese luxury prefer to purchase abroad.  Even after many luxury brands have adjusted their price points to reduce international differentials, affluent Chinese still prefer to shop abroad because they find a wider product selection and better in-store experiences.  They do not only want a luxury brand item; they want to find the item perfectly suited to their lifestyle and have a memorable experience while buying it.

In his lecture, Professor Li drew attention to the increasing gap between the actual Chinese luxury consumer and the image of them held by many international luxury brands. The explosion of wealth in the Chinese economy in the new millennium, he said, created a “crazy” market for luxury goods, filled with nouveau riche buyers willing to pay any amount for products that symbolized their new elite status. These consumers did not demand a meaningful in-store experience or a wide and nuanced product selection, and luxury brands accordingly did not prioritize the customer experience in China.

But Chinese consumers have changed, none more rapidly than the most affluent. The Chinese luxury consumer in 2016 is a digital native and a world traveler with a deep understanding of luxury goods and brands. They have internalized a sense of luxury that is complex and nuanced, and do not appreciate the kind of sales tactics that still persist in many mainland boutiques. The result is experiences like this one, shared by another participant in the Journey of the Luxury Consumer study:

“This is a story I tell others about… It was approaching closing time and the Sales Associates were in a rush to close the sale. I was surrounded by three of them trying to push me to purchase a product and I felt so pushed!  After that visit, the sense of tension comes back again every time I walk past that store.”

There is a clear disconnect here between what the customer expects from the experience and what the sales associates want. The sales associates are entirely focused on the transaction; on making the sale. Conversely, the customer has no interest in making her purchase hastily. She wants to take her time with the products and with the store experience, even if it means coming back another day. The contradiction between the two perspectives is so acute that the consumer not only will not come back, but in fact feels a lingering emotional discomfort even being near the store. By viewing the customer as a transaction to be completed rather than a person to be understood, they have not only lost the sale they wanted so badly, but created a brand detractor.

Luxury boutiques cannot thrive in the China of the future unless they transition their in-store experience from a transactional model to a relationship-building model. The goal should never be to sell one particular item, but rather to bring the consumer into the brand’s world. In his talk, Aston Martin Lagonda China President Peng emphasized that their brand is about the love of beauty, about living life in a beautiful way, relishing the aesthetic pleasure not only of the products but of the lifestyle that surrounds them. There is no way that a transaction-focused sales advisor can communicate that idea to customers in an emotionally powerful way. When sales associates only care about the transaction, they might unintentionally betray the brand’s promise, reducing the enjoyment of a beautiful life to the handing over of a credit card.

Ten years ago, Chinese consumers turned to luxury brands to prove their status. Now they are secure in their status, and it is up to luxury brands to prove their worth to the Chinese consumer.

We would like to thank Dean Zhou Lin of the Antai College of Economics and Management and Professor Li Jie, Director of the Luxury Brand Research Center for hosting and participating in this event. It was a pleasure and a privilege to collaborate with them.