Luxury goods: young people and Chinese consumers dominate market
In 2017, the world luxury goods market was worth €915 billion, and 30% of total expenditure was made by 18 million consumers, equivalent to 4% of total luxury goods consumers (424 million). The majority of people in the top section of the consumer pyramid are Millennials and/or Chinese.
Millennials, i.e. people aged between 18 and 34, will account for 50% of the market in 2024, when it will be worth €1.260 trillion. Chinese consumers will grow from being 32% of the market now to 40% in 2024, according to estimates published by the Boston Consulting Group (BCG) on Tuesday 20th February in Milan, at the conference on high-end retail and consumption organised by Altagamma, the association of Italian luxury goods companies.
A closer look at the behaviour of these consumer segments confirms the main trends which emerged in the last few years. Beginning with the growing success of casual wear, even among older consumers, who wish to always look young.
In the opinion of the more than 10,000 consumers interviewed for the survey, quality; craftsmanship and exclusivity still top the ranking of the criteria they look for in luxury products, though new elements, acting as additional purchase drivers, are also cropping up: a style that is "amusing and extravagant", or "cool and sexy." Two sets of values which are closer to the preferences of Millennials.
Another interesting finding concerns the importance of collaborations for brands. "Whether with artists, designers or other brands, collaborations are well-known to everyone. All the people we interviewed knew which labels had launched collaborative collections. They give labels a cooler, more amusing feel, as well as making collections more exclusive, and they stimulate purchases," said Nicola Pianon of the Boston Consulting Group.
According to the BCG study, it seems Millennials are particularly fond of collaborations between luxury and streetwear labels. And contrary to preconceived ideas, they are quite loyal to brands. More than a third of them buy several product categories from the same brand. More than half of them (54%) are however keen on mixing and matching, combining branded products with high-end labels, fast fashion and increasingly with niche brands, which allow them to stand out from the crowd even more.
Young people cannot however be regarded as a single, homogeneous cluster. "Rather, they are a galaxy of consumers, who behave in very different ways." According to the study, four consumer profiles are particularly distinctive: the 'Rich Upstarter', the 'Megacitier', the 'Little Prince' and the 'Absolute Luxurer'.
Of these profiles, the first two in particular feature prominently among Chinese consumers. "Consumers defined as 'Rich Upstarters' are aged between 28 and 29, they have amassed their wealth quickly, have a great appetite for luxury but are not very discerning; 'Megacitiers' are a cross-sectional segment, to be found in all of the major metropolises," said Angela Wang, who co-authored the BCG study.
"In addition to them there are the fashionistas. This category isn't especially significant in consumption terms, but its representatives are highly influential, with up to 10,000-15,000 followers between family, friends and friends of friends. Fashionistas are role models which small communities, little informed on fashion and trends, are able to follow," said Wang.
Indeed, social media, word of mouth and influencers are the three top information sources for Chinese consumers, who spend a long time on the array of websites linked to the country's two digital leviathans, Alibaba and Tencent. Hence the importance for luxury labels of boosting their ability to catch consumer attention on one or the other of these sprawling digital eco-systems.
"[Alibaba and Tencent] control market access, and have considerable weight in terms of influencer marketing. Though less so where e-commerce is concerned, since the fear of fake products is still widespread in China," said Nicola Pianon. This is why a multi-channel approach remains crucial in China.
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