Benefiting from luxury spending of Chinese millennials
January 11, 2016 01:00 By Suwatchai Songwanich Chief e 4,324 Viewed
Two weeks ago I wrote about how Chinese millennials are driving a paradigm shift towards the so-called “sharing economy”. At the same time, they are also just as keen on making and spending money as their predecessors.
Thai businesses can benefit from this by targeting Chinese millennials both within their country and as they travel abroad. MasterCard research recently reported that Chinese aged 18-29 are the biggest purchasers of luxury goods in Asia-Pacific, followed by South Koreans and Hong Kong residents. They are forecast to spend US$4,362 (Bt158,000) on luxury goods over the next year, almost double the regional average of $2,584.
High-tech gadgets are the most popular luxury purchases for the region’s millennials, followed by designer clothes, leather goods, and jewelry. About two-thirds of Chinese millennials will choose to purchase a Western brand before an Asian one – while this is a challenge for local businesses it also creates an opportunity for those who can position themselves at the leading edge of design and quality. While just over half are likely to spend a month researching a luxury product before purchasing, millennials still prefer to buy in brick-and-mortar stores than online, and Chinese millennials are the most likely to make a luxury purchase when travelling overseas (51 per cent).
This last point is especially important for Thai businesses. Thailand is currently the second most popular destination for high-spending Chinese tourists, after Hong Kong, according to “Global Chinese Shoppers: The $200 Billion Opportunity”, a report published by FBIC Global Retail & Technology and China Luxury Advisors, which forecasts outbound spending will rise from US$229 billion in 2015 to US$422 billion by 2020.
Furthermore, Chinese millennials are also changing the way in which they travel. They are far more likely to travel in small groups of friends, often as so-called “flashpackers” who want to stay in smaller boutique hotels and combine immersive cultural experiences with more traditional aspects of a luxury lifestyle.
To connect with this cash-rich demographic, Thai businesses need to get to grips with Chinese social media marketing on key platforms such as Weibo and WeChat, as well as “online-to-offline” platforms which marry digital platforms with bricks and mortar businesses. This need to better understand Chinese consumers, especially younger generations, extends far beyond the travel industry. Local companies wanting to expand into China’s domestic market not only need to understand how to build their connections with customers in the digital realm, they must also meet and exceed the needs of this powerful demographic.
At a recent trade event in China, which showcased import products from around the world, I sensed that Thai goods that had once been a favourite of Chinese consumers had lost some of their lustre. While the products themselves no doubt remained high quality, packaging often left a lot to be desired. As the MasterCard research shows, China’s millennials tend to favour Western brands over those from Asia. Thai businesses seeking success in China must take note of this: a “just good enough” attitude will fail to connect with Chinese millennials. Success is dependent on meeting and exceeding their expectations. We must do the best we possibly can.