Luxury Consumers and Luxury Brand Management in China

Introduction

China is one of the most important emerging luxury markets, with huge sales volume and growth potential. China was the major driver of the luxury industry during the financial crisis (Alderman, 2010) and is expected to become the second largest luxury market worldwide, reaching sales of approximately $28 billion in 2015, approximately twice that of 2009, according to McKinsey’s estimation (Wassener, 2011). A recent report released by Bain & Company (2012) reported that although luxury sales in China declined in 2012 compared with the previous several years, Chinese consumers are still the top spenders for luxury products, making 25% of luxury purchases worldwide.

The continuing “high fever” among Chinese consumers for luxury products (Chadha & Husband, 2006; Frank, 2001) has prompted an increasing amount of research focusing on the Chinese luxury market (Lu, 2004, 2005, 2008; Tsai, 2008). This research has made use of a historical angle (Tsai, 2008) or has focused on market segmentation (Lu, 2008), thereby contributing to our understanding of this complex behavior.

Luxury consumption in emerging markets is strongly influenced by Western consumer culture (Üstüner & Holt, 2010) and globalization (Chaudhuri & Majumdar, 2006). The Chinese elite hold ambivalent attitudes toward luxury goods consumption, mainly due to the coexistence of both traditional and modern values in China; the latter are mainly imported from Western cultures (Lu, 2008). Therefore, it is important to use an internationally validated scale to capture Chinese luxury consumers’ psychology and behavior. However, few studies have investigated this field using a cross-culturally validated scale (e.g., Lu, 2008). This gap in the literature has limited the comparability of the results of previous studies with findings derived from other cultural samples. Research using cross-culturally invariant measurements to study consumers’ luxury value perceptions has not included the Chinese market (Hennigs et al., 2012; Shukla & Purani, 2012; Shukla, 2012). In this study, we investigate Chinese consumer values and behavior regarding luxury consumption by using Wiedmann et al.’s (2009) scale of luxury value perceptions, which has been tested in both Western and Eastern cultures (Hennigs et al., 2012; Wiedmann et al., 2009).

First, this study explores the segmentation of Chinese luxury consumers based on a sample of 255 Chinese mainlanders. Six luxury value dimensions – materialism, quality, status, self-identity, self-gift giving, and exclusivity – are retained. A cluster analysis and discriminant analysis results in four consumer segments, which we term “Snobbism”, “Conformism”, “Follower/pragmatism”, and “Indulgence”. The characteristics of these segments are discussed, and the behavioral tendency of each segment is examined by assessing each of their relationships to the reported consumer luxury item count (number of possessed luxury items). We focus on watch consumption as an example to summarize the characteristics of these segments.

In the following section, we examine Chinese consumers’ preferred luxury brands to develop further implications for luxury brand managers. Regarding the rise in recent years of Chinese luxury brands such as Shanghai Tang (Yim, 2007), the most frequently discussed questions for this market are as follows: Would Chinese consumers be interested in luxury brands that integrate Chinese cultural DNA (Booker, 2013; Yoon, 2010)? Do Chinese consumers only prefer Western luxury brands? To answer these questions, Chinese consumers’ favorite luxury brand items will first be analyzed. An analysis of selected Chinese luxury brands, such as Shang Xia, Qeelin, Shanghai Tang, and Ne-Tiger, will then be conducted to explore the avenues that may lead Chinese luxury brands to success.