March 30, 2019, Shanghai, China -  They Are Wearing: Shanghai Fashion Week.

LONDON — Luxury brands play an important role in helping China’s rising post-Nineties middle class’s desire to “become a better self,” according to a report by the New York-based global advertising, marketing, and public relations agency Ogilvy.

In the next six to seven years, 70 percent of luxury growth will come from China. Chinese luxury consumers will account for 40 percent of global luxury purchases by value, equivalent to 162 billion euros, or 1.266 trillion renminbi, in 2024, up from 32 percent in 2017. Two-thirds, or 68 percent, of luxury consumers will be aged 18 to 30, or born after the Nineties, said in the report, titled “Making luxury brands matter to the new generation of Chinese middle-class consumers.”

The report is based on research the company conducted between July and October 2018, analyzing these young consumers’ values.

It also said the generation born between 1990 and 1999, which makes up 12 percent of the Chinese population, grew up in a more open and wealthier China, with digital accessibility as a given. Many of them are single children and focused on personal needs and self-expression more than any previous generation.

According to the research, there are six elements to “becoming a better self,” which cut across different city tiers, genders, and household incomes. Those elements can be summarized as “proud to be me;” “beauty is power;” “talent is everything;” “loneliness has a cure;” “passion is worth it,” and “my future is my own.”

The research found this group is also very knowledgeable about brands. For example, “a post-Nineties consumer from a third-tier city wrote down 30 brands, on an unaided basis, across cosmetics, cars, handbags, and watches,” the report said.

The consumers’ journey is different as well, the research found. “Almost all of our respondents had bought one or more luxury items abroad. Some of them bought products through WeChat mini-programs.” (These programs are apps within WeChat that allow customers to navigate different functions quickly without leaving WeChat).

Compared with their parents, the post-Nineties’ vision is more global, their taste is more personalized, and their media usage is 100 percent online.

Annie Hou, the co-author of the report and vice president of strategy at Ogilvy Beijing, said in an exclusive interview: “This report provides insightful understanding of these core values through first-hand observations and interviews of the post-Nineties [generation], and also provides references on what luxury brands should do to make themselves matter to this generation of Chinese middle-class consumers.”

She continued: “Luxury brands are part of this group’s lives, or blended into their culture. They have more international exposure. A lot of their knowledge of luxury brands comes from their global traveling. The luxury brands are no longer something people worship, but a part of their life and culture.

“Riding on the findings, we recommend brands to rethink their brand/product portfolio and their marketing strategy, such as how to recruit young consumers into the category and build loyalty over time. Also, [they need to rethink] their CRM purpose and strategy, and build capabilities in social commerce and the social shopping experience.”

The report added that: “If a luxury brand does not make itself relevant to this new generation of consumers now, it will become even more difficult to do so in the future. The growth of luxury goods among those under-35-year-olds are twice as those 35+.”

The agency found six shifts, which dovetail with the trends mentioned above, that luxury brands can make in order to stay relevant to this new generation of middle-class consumers.

There is a shift from “a badge of status” to “a badge of me;” from “showing money” to “showing talent;” from “an unapologetic mentality” to a “companion mentality;” from “scarcity” to “virtual rarity;” from “offline” to “omnichannel customer experience;” and from “a lifetime achievement” to “a lifetime recruitment,” meaning that luxury goods are no longer seen as a reward, but things to be accumulated, from an early age, over a lifetime.

According to the report, luxury brands are very important to this generation in shaping their unique, personal image, rather than a pure status symbol. When it comes to purchasing luxury goods, 64 percent of interviewees said they will not be influenced by others and will “make my own decision.”

The report added that “brands need to have an attitude. The product portfolio needs to reflect a variety of consumer tastes and styles.” The report showed that about 80 percent of young consumers would like to pay more for customized luxury goods because this makes them feel unique.

Also, young people don’t like the feeling of being perceived as “rich.” They want to be perceived as “an interesting person” and “a talented person.” For them, “status is less about material items or financial status, and more about having a wealth of experience or knowledge,” the report said.

“Young Chinese consumers prefer to exhibit their affluence in a subtle way, as the post-Nineties rediscover the traditional Chinese value of modesty. In marketing communications, luxury brands should focus more on how their products can help young consumers display their knowledge or showcase a unique experience.”

Luxury brands need to switch from an unapologetic mentality to a companion mentality. “A cold, distant, unapologetic mentality will only hurt the brand,” the report said. “Luxury brands should think holistically about how they interact with this generation, including how to address their sales representatives, how to present their products, what sales channels to use, or what image the brands want to build in customers’ minds.”

Brands should aim for creating a kind of “virtual rarity” as true scarcity will limit growth. “One way to create virtual rarity is regularly launching limited edition or collections that are related to post-Nineties different hobbies, interests, or passions. Personalization or customization can create virtual rarity as well as communication and memory,” the report said.

Lancôme, for example, has launched limited editions of lipstick colors and encouraged girls to collect them and show off their collections on social media. YSL Beauté marketed its personalized lipstick products during Chinese Valentine’s Day through social media. The “likes” of the social campaign were 280 percent higher than the industry average and the comments were eight times the industry average.

“Among all the luxury products that young Chinese shoppers purchased, 37 percent are cosmetics. In addition to the lipstick, another successful entry-level product is perfume. According to Chanel’s financial reports, one of the main growth drivers for its 2017 $9.62 billion revenue, was the sales of the new perfume Gabrielle, priced at 899 renminbi,” or $120, the study said.

Finally, brands need to work on the omnichannel customer experience. Over the next few years, Ogilvy said it expects to see more growth coming from online channels and more “social” and “shopping” happening together, online.

The popularity of WeChat mini-programs has made social commerce possible. On Chinese Valentine’s Day 2018, many luxury brands, such as Burberry, Dior and YSL, launched limited editions through their brands’ own mini-programs on WeChat. According to a joint study by Alibaba and Ogilvy, six out of 10 people who purchased luxury goods from Alibaba are post-Nineties.

 

load comments
blog comments powered by Disqus