What does China’s luxury market look like in 2020?

Based on a report jointly released by Ruder Finn and Consumer Search Group, 44% of mainland Chinese respondents and 32% of Hong Kong respondents are planning to spend more during the next 12 months while another 10% and 20%, respectively, say that they plan to spend less during the same period.

The reduction in spend is attributed to factors such as China's economic slowdown, international trade frictions, and regional events. Plus, the unforeseen COVID-19 epidemic that hit the region at the start of the year will also severely challenge the market, Gao Ming, SVP of Ruder Finn and managing director of Greater China, told press at a launch of the report.

Likely to take a hit in the luxury sector are automobiles, handbags, watches, and electronics. Luxury clothing and jewellery remained stable with 60% of Hong Kong respondents and 70% of mainland Chinese saying they had purchased luxury clothing and jewellery in the past 12 months. It’s worth noting that Hong Kong consumers are more willing to spend money on luxury experiences than their mainland counterparts, and are more willing to swipe their cards for fine dining and travel.

Over the past 12 months, mainland Chinese consumers spent an average of RMB330,400 (US$46,917) on luxury items, while Hong Kong consumers surveyed spent around HKD167,400 (US$21,473). Interestingly, consumers in third- and lower-tier cities spent about RMB393,900 (US$55,934) last year, more than the RMB344,100 (US$48,862) spent among those living in first-tier cities. The report showed that lower-tier cities enjoy strong purchasing power and will therefore provide opportunities for the development of China's luxury market.

Also found in the report is that those in Hong Kong and China are making their first luxury purchases at a younger age than before. On average, Gen Z consumers between the ages of 21 and 25 were shown to have bought their first luxury item when they were no older than 20. And overall, Hong Kong consumers purchase their first luxury item at a younger age than those in mainland China, with 9% of respondents saying their first purchase was before the age of 18.

When asked about why they purchase luxury items, mainland consumers have shifted from flaunting wealth to seeking more “discreet” goals such as improving personal quality of life. At the same time, the report shows that mainland consumers allocated 35% of their fashion spend to Chinese brands over the past year, with more than half 56% saying they would spend more on local brands this year.

Brands should also take note that official brand sites were accessed by almost half of survey respondents, representing the top channel through which consumers in both regions obtain brand information. Among brand-owned social media platforms, official Facebook pages are the top picks among Hong Kong consumers, capturing 62% of the respondents. Most mainland China consumers prefer official Weibo accounts, which attracted 45% of the respondents, followed by official WeChat accounts, which drew 32%.

Friend-sharing, print-media ads and TV commercials are the main channels influencing purchase decisions among Hong Kong consumers, while ads on social media and TV commercials are the key influencers for mainland China consumers. Nearly 80% of mainland respondents believe the influence of celebrities and KOLs are becoming increasingly important, especially for those in lower- and third-tier cities.