October 2018 marked the 69th anniversary of the establishment of the People’s Republic of China. China has turned from a country that could barely feed its people to the second largest economy in the world. A strong indicator of the economy going uphill is that people have more buying power to fulfill their wants. Also, when the consumers for luxury products are getting younger, you will know that the country’s economy is doing well. That is the case in China, happening right now.
Millennials’ love of luxury products
According to the latest research by Boston Consulting Group and Tencent, the average age of a luxury consumer in China is 28, about 10 years younger than that of the rest of the world, and they are becoming the mainstay of global luxury consumption. In addition to the growth in luxury purchases, spending in other categories is on the rise as well. McKinsey reported that discretionary categories will show the strongest overall growth — 13.4% — between 2010 and 2020, as these goods become affordable to growing numbers of consumers. Spending on semi-necessities and necessities will grow 10.9% and 7.2%, respectively.
Taking advantage of the free information available online, millennial luxury consumers often do their research online before making a purchase. Due to the price difference and availability of styles, the majority of the young consumers buy luxury products through called Daigou, a group of people living overseas who buy products for Chinese consumers for a small fee.
Spending on overseas travel and tourism
Chinese are also taking their money overseas. According to statistics from the China National Tourism Administration, as Nielsen reported, “Chinese tourists traveled overseas on 131 million occasions in 2017, an increase of 7.0% from the previous year. Data from the International Association of Tour Managers shows that overseas travel spending by Chinese tourists reached USD 261.1 billion in 2016, an increase of 4.5% year-on-year, and ranking first worldwide.”
A distinctive difference between tourists from China and from other countries is that Chinese travelers spend significantly more on shopping than accommodations and dining, whereas non-Chinese tourists’ spending behaviors are the opposite.
Implications for foreign companies
Even though China is not the easiest market to enter and operate in, the enormous market is not only hard to say no to but also likely to be a key piece in achieving global success for any company. However, because of the vast size and uneven development across different regions in China, consumer needs may vary a lot. Foreign companies may want to further divide the big China market and tailor strategies for each segment to maximize business performance.
If you are interested in reaching the China market or delivering your online content at a faster speed, drop us a line and we are happy to help.