Those With A Taste For Luxury Goods In Emerging Markets Less Willing To Cut Back, HK Study Finds
One of the more surprising features of the global economic downturn, to some commentators, has been the relative health of the Asian consumer market throughout the crisis. Although developed markets like Japan and Korea have certainly been hit hard — as their high-tech and automotive export markets have declined substantially — emerging markets like Greater China and, to a lesser extent, India, where income gaps are still quite large and wealthy consumers have developed a taste for luxury goods are doing comparatively well.
This is not to say China hasn’t been hit by the slowdown — it has, as low-tech manufacturers and mass producers have, in many parts of the country, been forced to shut down or lay off thousands of workers. However, we are seeing that the specific class of Chinese luxury consumer is continuing to spend through the global recession, perhaps as a sort of badge of wealth, perhaps because these consumers just want to keep buying. There are plenty of theories why Chinese luxury consumers, unlike those in Japan and North America, aren’t waiting to buy their next handbag or car — however, one Hong Kong study in particular caught my eye:
Despite the economic slowdown, people in Greater China are unwilling to give up the ‘good life’, according to a Publicis Hong Kong study.
Research shows that an average of 70 per cent of consumers feel confident when it comes to income stability, employment and standard of living. Taiwan has the lowest confidence at 50 per cent, behind Hong Kong on 62 per cent and China on 75 per cent.
These numbers fascinated me, because of the high confidence in the Mainland. Are Hong Kong and Taiwan consumers just more “plugged in” to the global economic worries? Or does the luxury-purchasing enthusiasm in the Mainland stem mainly from the fact that these products haven’t been available in the Mainland as long as they have elsewhere in Greater China — meaning there is a sort of “luxury fatigue” in HK and Taiwan?
The study seems to equate Mainland luxury shopping with escapism, an interesting argument:
Many consumers are unwilling to give up their luxury or big-ticket items – in Hong Kong 46 per cent are cutting back on luxury purchases, compared to an average of 53 per cent across Greater China. For big-ticket durables, 42 per cent in China are cutting back, compared with 51 per cent in Hong Kong and 55 per cent in Taiwan.
“Brand loyalty is more than a financial decision. Consumers in Greater China are not eager to define themselves as a ‘cheaper me’,” said Publicis CEO, Greater China, Laurie Kwong. An interesting finding showed that people are cutting back on the basic day-to-day purchases in order to enjoy branded items and eating out. The research concludes with three discoveries: ‘in’ essentials (such as an iPod) are the new basics, favourite brands are the last to go, and stress is being released through escapism.
Escapism relates to the younger generation’s willingness to spend on experiences and values rather than short-term satisfaction. Thus, the travel industry has seen an increase in business and the self-improvement category for books has gone up despite overall sales of books dropping.
Finally, this study concludes that Mainland consumers are more likely to cut back on essentials in order to splash out on an expensive luxury item.
In terms of cutting back on everyday essentials, 23 per cent in China said they were doing this, ahead of 13 per cent in Hong Kong but behind the 38 per cent in Taiwan.
What conclusion can we take from this study, then? It appears that Mainland consumers, who have rapidly developed a taste for luxury goods — and are willing to sacrifice essentials to buy them — are combining their apparent enjoyment of escapism (who doesn’t?) with high confidence. The result? Luxury brands are converging quickly on China, spreading into second- and third-tier cities, where growth is expected to be more sustainable as luxury consumers in the “big cities,” Beijing, Shanghai, Guangzhou et al., start to “take them for granted.”