This is the first session of Luxury Brief. In this session we will look at some of the latest changes that drive luxury growth in Asia.
Young High Earners as Growth Driver
The money is in the young. With the exception of the aging population in Japan, the young and upwardly-mobile High Earners are going to drive the growth in consumption.
They are on their way to the affluent class and have bigger spending power than the middle class. With a bigger population and total consumption than the affluent, a bigger proportion of the population is going to possess luxury goods – this means luxury will be further diffused to a “mass” level. Luxury brands will have to stay away from the ubiquity issue and redefine true luxury experience in order to maintain the image. On the other hand, the growth of middle class is an opportunity for masstige brands, which provides luxury at an affordable price for this group of consumers.
Key Data Points
China’s upper middle class household (with annual disposable income of $16,000 to $34,000) are expected to rise from 36m in 2012 to 193m in 2022, representing 54% of the household, according to McKinsey. They will take up 56% of private urban consumption by 2022.
Indians in their 30s and 40s are the highest income earners in the country (close to 70% in the top income bracket) and are forecasted to remain so in 2030. They will shape the demand for luxury products. They are the “new money”, as many of them are professional and business leaders who may not be born wealthy. Although they grew out of the middle class already, they still possess a middle class mindset – when it comes it luxury, they are still the value-conscious consumers who shop around for the best deal.
In Thailand, the 30s accounts for 15.4% of population and are the highest earning citizens. They entered the workforce after 1997 Constitution of Thailand, in a period of great opportunities. This age group will still be the highest earning group by 2030.
Indonesia also has a very young population with 60% under 30s and most of the big spenders under 45. Family, functionality and value are important when they spend. 63% say they never spend on themselves until the needs of the family have been met, compared with 46% in China.
Luxury in Action: Burberry
Burberry is one of the earliest brands who understands that luxury spenders in Asia are younger than in the West, and therefore also becomes the luxury pioneer who embraces digital thoroughly.
In 2014, it forms a partnership with WeChat to leverage its functionality and responsive contents to engage with the young Chinese consumers. Users can create their personalised runway piece and access to exclusive runway look via the app, and experience the Shanghai store opening event in a 360 degree view. At the same time it opened its Tmall store to broaden the reach. It also teamed up with Line app by creating an animated video featuring the two characters Brown and Cony in a romantic excursion to London fashion show.
In a survey by Chinese news site iFeng in 2013, Burberry was the most favourite luxury brand among a group of middle class respondents.
Image: Forbes
Source:
Data from Euromonitor
“China’s middle-class luxury consumers loved buying abroad and Burberry in 2013” (2013), Jing Daily, https://jingdaily.com/chinas-middle-class-luxury-consumers-loved-buying-abroad-and-burberry-in-2013/
“McKinsey: China’s upper middle class to drive global luxury consumption” (2013), JingDaily, https://jingdaily.com/mckinsey-chinas-upper-middle-class-to-drive-global-luxury-consumption/28413/
“China’s middle class powers luxury market” (2013), Jewellery News Asia, http://www.jewellerynewsasia.com/en/News/7060/China-s-middle-class-powers-luxury-market.html
“Is Thailand’s luxury market making a comeback” (2015), http://luxurysociety.com/articles/2015/06/is-thailands-luxury-market-making-a-comeback
“Affluent S’poreans travel ‘as often as rich Chinese” (2015), Asia News Network, http://www.asianewsnet.net/Affluent-Sporeans-travel-as-often-as-rich-Chinese–76479.html
“Indonesia’s Rising Middle-Class and Affluent Consumers” (2013), BCG, https://www.bcgperspectives.com/content/articles/center_consumer_customer_insight_consumer_products_indonesias_rising_middle_class_affluent_consumers/
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