A major new report predicts that positive consumer dynamics will maintain Chinese shoppers’ status as the world’s number one luxury consumer.

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This is the key finding within the sixth edition of the 2015 China Luxury Forecast produced jointly by the Beijing office of well-known public relations company Ruder Finn and the IPSOS Group – ‘the world’s third largest market research company’.

Both companies claim that the new study provides analysis of key trends in the luxury sector in Mainland China and Hong Kong, with its bottom line conclusion that overall market dynamics are expected to remain unchanged, with consumer confidence still high in China. At the same time, it attributes the slowdown observed by many luxury brands in the market to ‘a shift in spending patterns’ amongst Chinese luxury shoppers.

The authors say: “Travel is now the number one category of luxury for Chinese consumers and spending by Chinese travellers is expected to drive more growth in luxury markets outside China. The rise of e-commerce represents both the next major challenge and opportunity for luxury brands.

“Surveying 1,933 consumers across Mainland China and Hong Kong, the 2015 China Luxury Forecast covers Greater China in depth, with 1,616 consumers from over 14 major mainland Chinese cities and 317 consumers from the Hong Kong Special Administrative Region.”

Thirty per cent of the Mainland consumers surveyed were from first-tier cities, 38% from second tier and 32% from third-tier cities. The average annual household income of those interviewed on the Mainland was RMB.774,876 ($124,697) and HK$983,300 ($126,812) across those interviewed in Hong Kong.

[Right: China Duty Free Group’s Haitang Bay Duty Free store – the world’s biggest to date].

REPORT SAYS CONSUMER CONFIDENCE REMAINS POSITIVE

The report says that consumer confidence and intent to spend ‘will maintain ongoing momentum’, with further growth expected in the coming years, despite the slowdown observed by many luxury brands in China: “A large majority of Mainland consumers said they would spend more, or at least the same, on luxury in the next year,” says the report, with between 18% to 38% of Hong Kong consumers also planning to spend more on luxury in the next year – while between 52% to 62% said they would spend the same.

Commenting on the findings, Simon Tye, Executive Director of Ipsos said: “In Mainland China we are seeing that demand for luxury remains strong – particularly in first tier cities – and we predict that the market momentum will remain relatively unchanged. Hong Kong luxury consumers continue to pursue innovative products and design.

“They seek new perspective from brands and are ready to embrace new offers that incorporate strong creative and empathetic services. There is continued strong demand for unique and customized products that retain the heritage of the brand.”

Interestingly, the research notes that consumption patterns of Chinese luxury shoppers now indicate that these consumers are primarily looking to spend on luxury goods and services for themselves and their families. The number one category of luxury on which consumers from both the mainland (50%) and Hong Kong (38%) plan to spend more is travel.

With the growth of outbound travel, the report predicts that Chinese consumers will continue to drive growth in overseas luxury markets and it notes that duty free shopping is ‘becoming’ a leading distribution channel for luxury goods, with 53% of mainland consumers shopping at duty free stores in the past year.

It is also notable that the research reveals that the vast majority of consumers are dissatisfied with luxury retail services in Mainland China, with only 19% of Mainland Chinese consumers and 10% of consumers in Hong Kong [from the research samples-Ed] saying they were very ‘satisfied’ with luxury retail services at home. The report says: “Consequently, when shopping overseas, these consumers expect high service standards and understanding of their needs, as well as a broader product selection.”

DFS Group’s T Galleria by DFS in Hong Kong’s Canton Road.

BIG LUXURY BRAND CHALLENGES

Anne Geronimi, Vice President, Lifestyle & Luxury Practice at Ruder Finn Shanghai said: “Despite the impact of the anti-corruption campaign on the luxury industry in China, consumer maturity has grown since last year, with shoppers looking to spend more on rewarding experiences than products,” said  “The challenge today for luxury brands is maintaining the brand loyalty established in China, as consumers travel and purchase high-end goods overseas.”

The report also acknowledges a growing consumer willingness to purchase luxury goods online. The authors say that shoppers in both Mainland China (57%) and Hong Kong (54%) reported greater confidence in purchasing luxury online over the past year, but both groups still raised concerns over service, trust, and overall professionalism of the website when asked about the credibility of online stores.

The majority of Chinese online shoppers (81% in Hong Kong and 78% in Mainland China) said they still preferred to visit physical stores before deciding to purchase to seek further product information and check product attributes.

Not surprisingly, social media continues to be a well-established channel of communication for consumers in Greater China, particularly in the mainland, where over 90% of Tier 1 consumers affirmed the relevance of social media to everyday life. Across Greater China, news about products, promotions and discounts generated the most discussion on social media.

Gao Ming, Senior Vice-President and General Manager of Ruder Finn Shanghai said: “E-commerce is both the next big opportunity and challenge for luxury brands. To fully tap the potential of the luxury online market, brands need to consider two options: either creating their own platforms or riding on existing ones. The solution lies in striking the right balance between online product offering, customer experience, and customer service, both online and offline. Focusing on optimizing the online customer experience is more crucial to success than ever before.”

[The 2015 China Luxury Forecast is produced by Ruder Finn and the IPSOS Group and is priced at US$9,800. All orders are delivered in both hardcopy (book) and soft copy (pdf) formats. For more information please contact Antoine MONOD|, Vice-President, Activation, Ruder Finn Asia, 1 Coleman St., #08-11 The Adelphi, Singapore 179803. T: +65-62354495 | F: +65-62357796. Email: [email protected]]

TOP IMAGE: The Louis Vuitton store at the DFS Macau operation at the Four Seasons Hotel.