The Meaning of “Luxury” for Chinese Consumers
Spiegel Institut has conducted plenty of market and consumer researches for premium manufacturers all over the world. Before we go more into detail about premium products or brand image during interviews, we always ask the study participants one definition question: What does “luxury” mean to you? Here we noticed clear differences between the answers of the European and Chinese consumers.
European consumers' responses suggest that they are more “self-centered”, as they focus on the usage for themselves and self-pleasure. They consider a product not only as a thing but as an experience. When asked what luxury means, European consumers most frequently answered “enjoying a walk in the nature”, “having time to read a book”, “clothes in very good quality”, or “products that last long”.
In contrast, for Chinese consumers, who are more “collectivism-driven”, luxury is mostly associated with a product. They pay attention to the interaction with others, such as through showing (off) a brand, or gifting luxury products as a way of bonding. Chinese consumers most frequently described luxury as “expensive (others can’t afford)”, as a “well-known brand with a limited customer group“ and clarified that luxury “can be recognized as premium at the first glance, such as real leather, very good design/craftmanship”.
To highlight the different views regarding luxury, I would like to share my personal experience here.
In Germany, I often noticed that the model description of certain premium car brands were removed, so I was told: “Germans don’t want to be seen driving an expensive model from a premium car brand.” Since I do not understand this procedure my reaction is always: “When they remove the model description, I will automatically assume that it is an expensive model.
I have a few wealthy friends in China and they enjoy posting their daily life on social media. They are “new rich”, meaning: their parents have had a very normal life, but at some point, due to economic changes or political changes, they suddenly got a great amount of money. One thing I often notice is that when they post pictures of their premium products, they also show the invoice with the exact amount of money they spent, so your are overwhelmed by the zeros.
This leads back to the aspects we mentioned earlier: expensive, well-known brands and which can be recognized at the first glance. There is always some kind of comparison in it. Chinese consumers are always faced with comparing – directly or indirectly and the group of new rich people in China want to show “I live a better, desirable and luxurious life”. These observations lead to the insights of the article:
The first very important feature of luxury: Can be used as a status symbol
This aspect is very important for the “new riches” in China.
To understand the meaning of the term “new rich” better we need to take a closer look on Chinese history. In the turbulent 1980s, those who were rich either left mainland China or had their assets taken away completely. Everyone was “the same poor” back then. After the 1990s, some Chinese seized the opportunity of China's economic development and accumulated their first fortune. They wanted to show others what they have achieved and be recognized – which is a traditional Chinese mindset that can be tracked on books from 94 BC: “Getting rich but not returning to your homeland (to show off) is like walking in a dark night in glamorous clothes.”
Cars, bags with big logos, clothes with big logos, watches with distinct logos from famous premium brands are perfect for this purpose. A few pioneering premium and luxury brands from Europe and the US came to China in the 1990s with a large number of marketing campaigns and they educated Chinese consumers about what is premium and luxury. The idea “if you use products from these brands, you are successful” is sunk into the brain of every Chinese consumer.
Another very important feature of luxury: Can be used as a gift to earn Mian Zi (面子)
Mian Zi means the value: the amount of money of a gift represents how much you can afford (your status) and how much you care about the one you endow (their value to you).
As a result of the agricultural society that the Chinese have had for thousands of years, China is now a a network society. Taking care of the network is an important task for the business and daily life. Offering a gift from a famous premium brand is very efficient in this case, as other people can quickly position your value (financial status) and their value in your perception (how important he/she is for you).
For business life: Having a good network is one of the most important factors for winning an order. For private life: The family of a woman and a woman herself often evaluate a man’s “true heart” by judging how expensive his gifts are. Scarfs, belts, bags, stationery, watches and jewelery are the most relevant products for this purpose. The one who gets the gift has to know the brand so that the value of it is properly transferred. Thus, famous brands are preferred as they are “a safe choice”.
The incoming trends: Famous is not important anymore, the inner beauty of the brand counts
We have mainly talked about the “new riches” so far, but we noticed the “old riches” are coming back to mainland China to do their business as the market is very attractive right now. Consumers from the “old rich” families prefer luxury brands with a low profile. They don’t care if others have never heard of one brand, it is more important that they can identify themselves with it. They pay great attention to the craftsmanship, technique, history, and culture of the brand. This is now also observed among the younger generations (<40 years) whose parents belong to the new riches.
- There are two types of consumers: the new riches and the old riches and the growth of both groups is very dynamic.
- It is meaningful to target the two groups with different philosophies and business strategies.
- To reach the new riches: Make your brand even more famous, so that all friends of the new riches get to know you.
- To reach the old riches: Find the right touchpoints and tell them your story and inner beauty.
Spiegel Institut conducts market and consumer research studies all over the world, we do not only offer the results but also explain the cultural differences for a better understanding of the results. Thus, our clients are able to develop a meta understanding of a culture and society.
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Author: Yue Liu, Spiegel Institut Mannheim