The Top 4 Reasons Chinese Shoppers Buy Western Brands
China now is the number one luxury spender worldwide. Over two-thirds of luxury spending by Mainland Chinese consumers was done overseas in 2013, making up 29 percent of total global luxury spend, according to the China Luxury Market Study from consultancy firm Bain & Company released in December 2013. This year, the numbers continue to grow as more and more Chinese travel abroad.
Retail brands worldwide see golden opportunities in the rise of China’s outbound tourism, but the competition is tough. What they need, first and foremost, is to understand top factors that influence the purchase decision of Chinese shoppers so that they can capitalize on China’s big overseas spending spree. Now, the Attract China research team reveals you the reasons why wealthy Chinese tourists spend more money on certain brands.
1. Brand Reputation
Brand reputation is a decisive factor in the perception of Chinese consumers. In China, the ability of traveling abroad and wearing Western brands often enhance the person’s social status. Chinese consumers are driven by social status and are highly brand-aware. Due to the Chinese government’s ongoing anti-corruption campaign, however, today’s Chinese luxury shoppers prefer understated logos rather than big ones. However, they are still buying big brands. European high-end brands with top-notch reputation, such as Louis Vuitton, Gucci, and Prada, attract a record number of wealthy Chinese each year. Walk into any Louis Vuitton store in the US, you will find Mandarin-speaking associates introducing products to Chinese shoppers.
In recent years, “Made in USA” brands, including Tory Burch, Kate Spade, and Michael Kors, become increasingly popular in China, especially among young middle-class consumers. Known as “affordable luxury” brands, they are less expensive than the high-end brands listed above and are often more flexible in style. However, this doesn’t mean that brand reputation is less important for Chinese, but that brand reputation is not all about being expensive. Young Chinese consumers are more likely to buy based on uniqueness rather than as a show of wealth. “Affordable luxury” for them is like the fresh air, and is quickly building up a reputation as a part of a new lifestyle. Many brands now realize that “affordable luxury” is where a large portion of growth is going to be.
Many Chinese consumers believe that Western brands have better quality than Chinese brands, so it’s not hard for a Western brand to create a good reputation in China. However, without cultural awareness and sensitivity in marketing, the established reputation can be destroyed overnight.
2. Brand Story
Whether it’s an ultra luxury bag or a daily facial cream, Chinese consumers want to feel different when they use what they have get from the West. A brand story that appeals to Chinese consumers contributes considerably to the Chinese consumers’ emotional brand attachment.
Chanel’s foray into brand storytelling is a good example of how luxury brands should advertise. The company’s founder, Coco Chanel, is the woman behind the legend. She had a complicated life: a miserable childhood that she ran from; a series of men in her life, each different from the others but none of them made her happy in a lasting way. Eventually, she gained confidence and courage to challenge tradition and celebrate being herself. At a time when the fashion world was dominated by constricting corsets, Chanel revolutionized the rules by introducing comfortable, casual clothing that borrowed fabrics and attitudes from men’s fashion, which resonated so much with young women in that era. It’s more than apparel; it’s a way of living and a way of thinking.
“Luxury must be comfortable, otherwise it is not luxury,” said Coco Chanel.
Chinese consumers are very social media savvy, and a powerful brand story like Chanel’s can quickly go viral online. Spread your brand story, and ensure Chinese people forget about it. Remember that successful brand stories are not exclusive to big luxury brands. Some brands we see in our everyday lives, such as Apple, Toms, and Starbucks, also mastered story telling in China and achieved great success.
3. Star Products
Nothing is more important to a brand than its products. Stars products of a brand can be its best sellers, award-winning products, or the most popular products. In the collectivistic culture of China, an individual’s purchase decision is easily influenced by others, and consumers tend to buy products widely talked about.
Skincare brands are adept at knowing how a star product can make a brand. For example, Clinique 3-Step System Kit, which includes three products to cleanse, tone, and moisturize the facial skin, has been very popular in China for years. “Three steps, three minutes” offers users a simple but effective way of daily skin care, which has helped Clinique to achieve great revenue and long-lasting fame in China. Some sought-after skincare products have nicknames by their Chinese buyers. For example, Lancôme ‘Advanced Génifique’ Youth Activating Concentrate is known as the “little black bottle” in China, and Erno Laszlo ‘Phelityl’ Night Cream is “tofu cream”.
“We have many Chinese customers every day,” said a Mandarin-speaking associate at Clinique. “Most of them know what they want when they come here. They love our best sellers and they buy a lot.”
Star products also play a significant role in clothing & footwear brands. Stuart Weitzman has won the favor of Chinese spenders thanks to its 5050 boots. This iconic up-to-the-knee boot has a uniquely stylish design of half micro stretch and leather, which is comfy and makes your calves look slim. So, Chinese women who try everything to loose weight and stay slim are crazy about the boot. To attract more Chinese buyers, Stuart Weitzman carries the boots in small sizes like 4 and 5.
So, the popularity of a certain product may bring a huge success to the brand. Once a product becomes popular, it will be much easier to promote other products from the same brand.
4. Product Exclusivity
The main reason for Chinese shop for luxury items abroad is to avoid high tariffs. But another reason that should not be neglected is that some collections and items are exclusively sold overseas. There is an old Chinese saying that goes: value comes from scarcity. So, in addition to saving money, Chinese consumers who shop abroad also look for exclusive products that can differentiate them from buyers in China.
“Our Chinese customers usually come here with bag images in their phones, ” a sales associate at Coach said. “And they like to buy bags that are only sold here in the States.”
Like Coach, many brands produce different collections in different countries. The best way for Chinese to get items that have “scarcity value” is to take advantage of their overseas trips. As for those people who don’t have either money or time to travel abroad, all they can do is to ask someone to bring or mail certain products back for them. In fact, seeing an increasing demand for exclusive Western products, many Daigou (middleman buyers) businesses have sprung up, that specialize in acquiring foreign goods for Mainland Chinese consumers. Today, Daigou has become a huge phenomenon in China. Some students who study abroad make a large profit with these businesses..
“I flew half way around the world to be here,” said Jing Li, a 25-year-old independent traveler from Beijing. “Products here are cheaper and many collections are not available in China.”
So, what does this all mean in a nutshell? Chinese tourists are interested in products that can enhance their social status and make them feel different. Brands with a compelling reputation, a memorable story, sought-after star products, and exclusive limited editions are what Chinese tourists spend money on. Besides the brand itself, marketing is also vital to attract Chinese consumers and the most effective way to spread the word about your brand in China is through digital marketing, especially social media campaigns. If you want to know more about this, check out our blog “Understanding Social Media in China”.
Are you missing out on Chinese tourism spending? Contact Attract China to find out how you can benefit from a record number of independent Chinese tourists. Click here or email us directly at firstname.lastname@example.org.