China’s Secret Purchasing Powerhouse: Women

Female Luxury Shoppers Powering Growth Of Luxury Brands Throughout Country, From First To Third-Tier Cities

Shaun Rein sees the female demographic as one of the major drivers of luxury spending in China over the long term

Shaun Rein sees the female demographic as one of the major drivers of luxury spending in China over the long term

Shaun Rein, founder and managing director of the China Market Research Group, writes an interesting feature today for Forbes, focusing on female Chinese shoppers, and the continued growth that this demographic has shown in the face of the global recession. Although female luxury customers have largely cut back in traditional luxury markets like Japan and North America, spending remains strong in emerging markets like China, where luxury brands are still new to some second- or third-tier cities — where much of China’s sustained growth will center in coming years, as we have written before.

As Rein sees it, the urban female demographic shows great sustained potential because of the speed at which they have become choosy — rather than simply profligate — spenders. Chinese shoppers are increasingly purchasing luxury goods because they like them, and have developed stronger brand loyalty based on style or quality, rather than simply spending for spending’s sake. This is a good thing for major brands, many of which take unique advertising or marketing strategies for the Chinese market to carve out loyal niches. Obviously, this strategy is working, as Rein notes, “Women [in China] are becoming less price sensitive and more sophisticated about the brands and products that they finally buy.” Unlike many male shoppers in the Chinese market, who are less apt to shop around or develop strong brand loyalty — mainly choosing based on status (for automobiles, mainly) or price (see success of Ferragamo and other high-end men’s luxury apparel brands) — women are more likely to become brand “connoisseurs.”

Rein does an excellent job of breaking down the cultural aspects of why some brands “reach” Chinese women and others completely fail to make the connection. Much of it comes down to market research, deeper historical or social insight, dedicated localization efforts, and value for price. Chinese shoppers — aside, perhaps, for the super-rich — are not willing to plunk down their hard-earned cash unless the product speaks to them in some way. While this is not unique by any means in terms of global luxury consumers, it is important because many luxury brands feel their status alone is enough to make them popular in China. As the light-speed sophistication of the Chinese luxury market has shown in the last 20 years, this is no longer the case, if it ever really was.

Rein goes on to illustrate the opportunity, and the particularities, present in the Chinese female luxury demographic:

Traditionally companies double-down during recessions and focus on their core target markets. This is no longer enough; they need to look for growth in developing markets like India and China, whose economies have remained buoyant. They should look especially to the women of China.

That one consumer segment has defied the analysts and kept on spending like it’s 2007. China’s overall retail sales rose 15% in the first half of this year, and that growth was driven in large part by women under the age of 35, buoyed by China’s $586 billion stimulus package and a stock market that has risen around 80% since January. My firm, the China Market Research Group, recently surveyed female consumers in China, and 80% of them said they expected to spend more in the next six months than in the last six.

Women have become a major driving force behind China’s economic growth–yet they remain little understood in the West as an influence on household budgets. Not only are they exerting influence on decision-making in their own homes; they’re also making purchase decisions for their parents when they live in the same house or neighborhood.

While their peers in the U.S. have cut back on spending in the recession, Chinese women are spending more than ever before, but they have also shifted their habits to become less frivolous and impulsive. Understanding how they think and what they buy will be critical for foreign firms trying to sell to them.

A Chinese woman might typically spend $100 in a shopping outing, as before, but now she’ll buy not 10 items but six more expensive ones. She’ll look for products like a handbag she can use daily instead of a shirt to wear once a month. She wants cosmetics that last longer. She is cutting back on impulse purchases, spending more time before entering a store to do research online on what she wants to buy, consulting blogs and search engines and Web sites like Sina and Baidu.

Companies that want to tap into Chinese women’s optimism need to recognize this trend toward value. Women are becoming less price sensitive and more sophisticated about the brands and products that they finally buy. Companies can no longer rely solely on price and discounts to sell to women. They need to connect emotionally and forge a strong brand position.

Women are also extremely influential in big-ticket family purchases such as homes and even televisions that traditionally have been up to men. Men might make the final purchase decision on a car or a TV, but our research suggests that women have equal say. The vast majority of men told us that their wives must approve all purchases that affect how the home looks or are above a certain price level. In Shanghai, we found that many women control their households’ finances. They keep the bank accounts in their own names and give their husbands a weekly allowance.

Chinese women are emerging as one of the most confident bodies of consumers in the world. And they have the money to keep on spending. To be successful selling to them, you have to cater to their emotions and concerns more than ever before, even when selling products that men traditionally buy. As Chinese women work harder, raise children at the same time, and pay for their parents, they want to spoil themselves and relax a little. They are willing to pay a premium for safe and healthy quality products that let them do so.

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