The aim of the study
The aim of the study was to examine what drives Chinese customers to be fascinated about luxury fashion: marketing or themselves.
Objectives of the research
The objectives of the research included:
- Investigating the buying trends of Chinese customers in terms of luxury fashion
- Determining the factors driving Chinese customers to purchase luxury fashion
- Making relevant recommendations to the companies in the luxury fashion industry in China
Targeting the Chinese luxury fashion industry
The study was done targeting the Chinese luxury fashion industry, which means that the research respondents were drawn from China.
Methodology
Mixed methodology was used where primary data was collected for analysis and the appropriate research instrument utilized was a questionnaire and interview questions. The study adopted a structured questionnaire that had 10 questions and an interview transcript with 9 questions. Copies of the questionnaire and interview questions are attached in the appendices. The questions were subjected to a reliability and validity test to ensure that respondents understood the intended meaning during the actual study. The respondents in the study were selected using simple random technique. In total, a sample of 100 respondents was identified to be part of the study. However, upon distribution of the questionnaires, only 83 were completed satisfactorily for use in the analysis. The questionnaires had been distributed through the internet. Before filling the questionnaires, participants were required to read and sign a consent form acknowledging voluntary participation. Three interviews were conducted after obtaining consent from a student, freelancer, and sales assistant. Analysis of the quantitative data was done through Microsoft Excel using descriptive analysis. On the other hand, interviews were analyzed using thematic analysis.
Key finding
The key finding is that consumers of luxury fashion products in China are influenced by symbolism and not the marketing activities of companies.
Recommendations for future research
Numerous recommendations for future research have been made such as what domestic Chinese luxury brands can do to gain increased market share.
Rationale
In the last decade, the Chinese luxury goods industry has been on the rise with enormous business opportunities. While the market capacity is increasing, the consumers in China have both awareness and spending power features that have seen a continuous improvement for the demand on luxury fashion (Statista, 2015). Nevertheless, a number of components remain unclear for the luxury fashion companies such as the attitudes of the consumers as well as the lack of domestic brands that can compete with those from foreign countries. The rise in the luxury industry has been contributed by the growth of the Chinese economy (Statista, 2015). The global luxury goods market is composed of items such as cosmetics, fashion, drinks, watches, handbags, and jewellery and among others. In 2016, the global personal luxury market was valued at 249 billion Euros (Statista, 2015). In the recent years, the Chinese consumers have been leading in shopping for luxury. Despite experiencing a weaker currency and the tidying on gifting, the Chinese luxury market has remained stable (The Economist 2014). By 2015, estimates already showed that China’s sales value of individual luxury goods were approximately 18 billion Euros ranking 3rd after America and Japan (Statista, 2015). Nonetheless, considering that wealthy Chinese consumers often travel in foreign countries to purchase luxury goods, the contribution these consumers have on the global luxury market is higher than the domestic consumption (Statista, 2015). The luxury goods market dominating in China is the store-based retail. The current trend in the Chinese luxury market is that shoppers are now attracted to purchase luxury items from online shops compared to physical stores.
While the luxury market has been experiencing growth in China, companies operating in the industry have to deal with the cultural challenges such as offering gifts and purchasing power differences of the Chinese consumer (Li, Li, and Kambele 2012, p. 1516). According to Li Li, Li, and Kambele (p. 1516) China is largely considered to have a culturally collectivist environment where their identities puts emphasis on group welfare and social relationship over individualistic needs. Additionally, the Chinese consumers show more concern on positional value consumption and hence they pursue comprehensive values related to the different fashion brand (Li Li, Li, and Kambele (p. 1517). At the same time, Chinese consumers are known to emphasise on social value brands more than other nations (Li, Li, and Kambele 2012, p. 1518). Customers use brand names and material as a method of enforcing their social identity. Luxury goods in the Chinese culture are tools for increasing distance from other groups in the society as well as a method to identify with peers well known of equal and same social status (Zhan, and He 2012, p. 1452). Thus, luxury fashion is used as a measure of social class (Zhan, and He 2012, p. 1452). Nonetheless, social class, age, constant travel, and education influence individual cultural orientations. Chinese consumers are also associated with being heterogeneous (Zhan, and He 2012, p. 1452). As a result, if a luxury brand appears to have similarities with the consumer’s cultural orientation, the customer is likely to develop positive attitudes and beliefs towards making a purchase. The middle-class group in China is growing and has significantly led to the growth of the luxury fashion industry. Often, most of the consumers lack knowledge and depend on recommendation from fashion experts (Zhan, and He 2012, p. 1453). Based on the information provided, it is critical to conduct a study that investigates what drives Chinese customers to be fascinated about luxury fashion.
Aims and Objectives
The main objective of the research project was investigating what drives Chinese customers to be fascinated about luxury fashion.
The specific objectives of the research included:
To examine the purchasing behaviours of Chinese consumers in the luxury fashion industry.
To investigate what are the factors driving Chinese customers to purchase luxury fashion products.
To make relevant recommendations to the companies in the luxury fashion industry in China.
Methodology
In the study, a mixed methodology was adopted where both qualitative and quantitative methods were utilised in the collection of primary data. The instrument used for quantitative data gathering was a questionnaire with 10 questions. On the other hand, an interview transcript with 9 questions was used to obtain qualitative data. Both instruments have been attached in the appendices. All the questions had been subjected to a reliability and validity test through seeking approval of their appropriateness from the supervisor and conducting a pilot study respectively. A reliability and validity test helps to ensure that the quality and structure of the questions in the questionnaire are standard, relevant, and understandable by potential research participants. The data obtained from a pilot study is not included during the actual research. The questionnaire had a filter question that asked the research participants if they had bought an item considered luxury in the last 12 months, which was important in ensuring data was eligible and useful to analyse. The respondents in the research were chosen through simple random technique. In total, questionnaires from 83 respondents are used in the data analysis. The questionnaires were distributed through the Internet. Before administering the questionnaires, the research participants were required to fill and sign a consent form, a critical ethical consideration component. Analysis of the data collected was done through Microsoft Excel, which enabled presentation of data through charts and graphs. Consequently, descriptive analysis was used to give meaning into data while thematic analysis identified, analysed, and reported patterns emanating from the three interviews conducted from a student at the University of East Angela, a freelancer, owns a company in China, and finally, a sales assistant at Givenchy Boutique in China.
Chapter Outline
The research project was divided into five chapters that included introduction, literature review, methodology, research findings, data analysis and discussion, and finally, conclusions and recommendations. First, the researcher utilises secondary data information to define luxury fashion and the industry in China in addition to explaining theories related to the topic. Primarily, secondary data has been used in the literature review and methodology chapters. On the other hand, primary data was used in chapter four and making suitable conclusions and recommendations.
What is Luxury Fashion?
Luxury fashion goods include accessories, apparel, shoes, watches, handbags, jewellery, as well as perfumes. The display or use of any particularly branded product is supposed to bring prestige to the owners irrespective of any other functional utility (Roll 2016, p.88). According to Amatulli, De Angelis, Costabile, and Guido (2017), consumption may be categorised into four main segments: basic (for normal prosperity and growth), necessary (for maintenance of life), luxury (difficult to have, limited supply, or extremely expensive), and affluence (not necessary for prosperity and growth). The notion insinuates that the scarcity of material and the elevated price of luxury exist.
Luxury goods have become part of the social protocol where self-worth and self-identity are determined by brands that an individual wears (Balmer 2015, p.176). Consumers have increased probability of paying more for luxury brands because they have unique characteristics like craftsmanship, premium quality, reputation, exclusivity and recognisability (Manlow 2016, p.24). Current studies show the perspective of luxury fashion goods as the prestige consumption behaviour.
Luxury fashion elevates the social status of an individual as well as their symbolic value. People buy luxury fashion because of their symbolism, for instance, wealthy people buy them so that they display their wealth and attain a superior social status (Batt et al. 2017, p.560). Consumers that prefer elevated prestige possess a higher regard for the brands because they desire to have a higher role in society. The brand name is the symbol of their identity especially in collectivistic countries like China. Collectivistic societies puts emphasis on the goals and needs of a group as a whole before an individual’s desires and needs.
Historically, people became influenced by the power of excess and gratuitousness. For instance during the Roman times, a specific legislation was formed in order to limit luxurious spending by people (Antola 2017, p.54). The growth of the Roman Empire led to the people being influenced by luxury and they became accustomed to simple indulgences. The rest of the world followed suite and prosperity and wealth was only shown through luxurious fashion and accessories.
During the middle ages, regions like Britain perceived that possessing something expensive or unique was an offense specifically for individuals considered to occupy the low class in the society. For instance, clothing attained more attention because the rules were normally introduced with the stipulation of which class was allowed to wear certain garments (Canziani et al. 2016, p.45). By the 20th
century, the demand and democratisation for luxury items increased, but in World War 2, people were incapable of affording or accessing luxury. As a result, brands focused on small items like perfumes, handbags, scarves and shoes. For instance, Louis Vuitton, focused on railway passengers and designed luggage bags which best attained the needs of the clients (Silvestri 2015, p.60). The luxury that we have today has been largely contributed by historical events. Silvestri (2015, p.60) noted that today’s consumers want goods that emotionally appeal to their experiences while maintaining the strong ideals of the ethics and sustainability of society. As a result, companies such as Gucci want to put evidence in their operations and quality by ensuring that “Made in” is not just another slogan but a term which necessities the involvement of consumers to appreciate the organisation’s product both immaterial and physical parts (Silvestri 2015, p.86).
Luxury fashion in key markets
Globally, the new luxury consumer that is of interest to fashion companies is the millennial. The primary reason for this according to Deloitte (2017, p.8) is that compared to other luxury consumers, millennials are highly affected by digital influence where 42 percent of their purchasing has been through mobile devices or computers. In comparison, Baby boomers share is 28% and 35% for Generation X (Deloitte 2017, p.8). Overall, the luxury industry is composed of nine key segments where three; personal luxury goods, luxury hospitality, and luxury cars are estimated to control 80% of the global market. In 2017, the luxury market experienced a growth by 5% which equates to about 1.2 trillion Euros as shown in the figure 1 below (D’Arpizio, Levato, Kamel, and Montgolfier, 2017).
The market is largely dominated by sale of luxury cars while luxury experiences remained attractive as the sales of wines and high-end foods continued to grow. In 2017, the personal luxury goods segment reach a high of 262 billion Euros after receiving a boost from the revived buying by customers from China both abroad and at home. The Chinese consumption of luxury items bounced back from a slow growth in 2016 the catalyst being rapid emergence of a middle class and increased confidence from the customers (D’Arpizio, Levato, Kamel, and Montgo 2017).
In Japan, the market for personal luxury experienced a growth of 4% driven by a strong currency in addition to the travellers from China. At the same time, the Europe market grew by 6% reaching 87 billion Euros in sales making it the most valuable region for luxury items. On the other hand, the United States market experienced slow growth estimated to be 2% equating to 84 billion Euros (D’Arpizio, Levato, Kamel, and Montgo 2017).
Some of the global brands dominating the luxury market include Louis Vuitton, Cartier, Burberry and Bulgari. In each of the luxury segment, there are numerous brands that dominate the global market. According to Deloitte (2017), top ten luxury goods organisations by sales in the world are shown in the figure 2 below.
Luxury Market in China
China has emerged as the biggest economic power worldwide especially during the past few years. High-income groups have increased and which means that China is becoming the ideal market for global luxury goods (Canziani, Watchravesringkan, and Yurchisin, 2016, p. 43. Furthermore, Chinese consumers have superior maturity levels a factor that has influenced the way they purchase luxury goods and has diversified their requirements in relation to luxury or other related services (Canziani, Watchravesringkan, and Yurchisin 2016, p.43). Luxury goods companies have become attracted to the Chinese market due to factors such as continuous growth of China’s economy. As a result, China is ranked top in the consumption of luxury fashion goods, and the market prospect is still growing (Liu 2015, p.24). From a historical perspective, the Chinese people lack adequate information about luxury fashion goods. Furthermore, there is minimal research on the topic because the emergence and growth of luxury fashion goods in China is still at the beginning stage.
Generally, luxury represents the high-end merchandise lifestyle that has triggered increased consumption of luxury goods (fashion) in China today (Antola 2017, p.36). According to Calefato (2014, p.24), China has experienced growth of the middle class which has made the country the globe’s fastest growing market in the luxury fashion industry. It has proved to be a promising market for luxury fashion especially with the current saturation in the American and European markets.
The market capacity and business opportunities in China’s luxury goods sector are immense; Chinese consumers possess high spending power as well as consumer awareness and there is a high demand for luxury goods (Zenk 2017, p.56). Nonetheless, even though there is a growing demand for luxurious items in the Chinese market, the industry is still relatively new. For instance, many of the consumers do not understand the luxury goods well enough and their attitudes towards this emerging market are yet to be explored.
The symbolic interaction theory defines China’s yearning for luxury fashion as the manner where the focus of the consumers is on the external social needs rather than internal individual needs (Atwal and Bryson 2017, p.111). The symbolic value normally elevates status within the Chinese societies meaning that they may be purchasing luxury fashion so that they can rise in social status; this is very vital to them.
Even though significant growth of luxury goods consumption has been seen in China, it is seemingly connected to their economic and societal trends (Batt et al. 2017, p.547). Therefore, the growing demand for luxury goods and brands will assist in protecting the luxury brands companies’ profits which are otherwise suffering from the shrink of the market from the rest of the world.
The United States and Europe regions are seen as the traditional luxury sales markets; however, Asia has gained recognition as the fastest growing market within the area (Manlow 2016, p.30). In specific, China is ranked second in terms of the largest luxury market right after Japan. In the figure 3 below, China’s market for luxury items has been compared to other region such as Europe, America, Asia, Japan, and the rest of the world.
The fashion products are supposed to convey the social status of the individual as well as the symbolic value (Roll 2015, p.40). Whenever fashion goods incorporate luxury brands, they transform to a symbol of wealth. Most people consume the luxury goods because of their symbolism; the wealthy people normally consume conspicuous goods so that they can show their wealth and attain a high social status (Calefato 2014, p.54). Thus, the purchase of luxury products represent a type of conspicuous consumption.
Many of the Asian consumers buy luxury goods so that they can gain social recognition as well as affirm their status in the society a behaviour caused by cultural influences that focus on status and hierarchy (Zenk 2017, p.60). In comparison with other societies, the Chinese society is strongly guided by higher roles. The Chinese people buy luxuries conspicuously so that they can display their status and wealth in order to accommodate the societal expectations. Furthermore, they concentrate on luxury branded goods that have popular logos (Amatulli, De Angelis, Costabile, and Guido 2017, p.45). Chinese consumers in the middle class category associate having luxury goods with a symbol of becoming members of the elite social circles and thus luxury brand names which are recognised by other people may be important in terms of the effect they have on the consuming luxury fashion goods in China.
How luxury brands first entered into China market?
Luxury consumption in China was started years ago especially by the upper class a feature that surpassed the western world. Traditionally, the Chinese society has an elite class, which assisted the emperor to help in the country’s management (Antola 2017, p.56). Over the years, there have been many generations of Chinese and they have been immensely influenced by social upheavals emanating from the formulation of Chinese Republic. Consequently, luxury brands from Europe and America started investing in the highly lucrative market.
Louis Vuitton ventured into Chinese market in 1992 and was soon a popular brand primarily because of Chinas’ growing economy. Louis Vuitton entered the market at the right time which further cemented the dominance of Western luxury brands in the Chinese market. Other than Louis Vuitton, there are numerous brands that operate in the Chinese luxury fashion market and include Cartier, Burberry and Bulgari. Of importance to be aware is that despite the significant growth of luxury goods consumption seen in China, it is ostensibly connected to their economic and societal trends (Batt et al. 2017, p.547). Therefore, the growing demand for luxury goods and brands will assist in protecting the profits of luxury fashion companies’ which are decreasing from the shrink of the market in other parts of the world.
The Marketing Strategy of Luxury Brands
The marketing of luxury items is different from other products in the market (Kapferer, and Bastien 2012). The critical aspect is that marketing of luxury brands often is focused on the luxury. In other words, the focal point is on the quality, the happiness, the sheer opulence, and the prestige associated with these kinds of products. Marketing of luxurious products involves the exclusion of audiences who are unqualified in addition to targeting ads using the level of income (Kapferer, and Bastien 2012). Using the luxury strategy of marketing helps the organization develop the highest brand value. When utilizing the luxury strategy to market products organisations should know that luxury sets its own price, advertising is not done to sell, the client should feel dominated, a rise in demand should not be responded to, luxury is not competitive and hence no need for positioning and finally, prices should go up occasionally (Kapferer, and Bastien 2012).
Companies marketing luxurious brands should be aware that consumers of fashion products are less interested with showing off as they are more concerned about a product’s attributes rather than the brand’s glamour (Chrysostome, and Molz 2014, p. 245). Organizations in the fashion industry are required to provide an excellent service and a product line that is strong. Fashion brands should design VIP programs and unique marketing events for a few customers rather than mass marketing. Marketing managers of fashion companies should understand seven segments of the luxury industry for maximum effectiveness (Chrysostome, and Molz 2014, p. 245). These segments include targeted marketing, diffusing strategies, local content, local manufacturing, store formats, rapid expansion, use of local partners, quantitative study of the intended market location, having sale associates at the sale point. Marketing fashion luxury products requires brands to be innovative as it allows targeting the right customers without having to incur huge resources. Many luxury customers know what they want and considering the price of the product does not push them away from purchasing, the aim of the company should be to make them aware of the brand’s availability in a certain region (Chrysostome, and Molz 2014, p. 246). Details such as location of a physical store offering luxury products should be well communicated to the target customers. Moreover, when marketing, a sense of exclusivity should be exercised such as using email for communication or having exclusive VIP club members who get access to new products before official launch. Importantly, marketing tactics should have aspiration content.
The consumption of luxury products can be explained through the self-concept theory. In other words, the concept of the self determines the extent to which an individual appeals to certain luxury products. Through the self-concept theory, consumers can establish a relationship with the brands forming a self-brand connection (Bhar, and Kyrios 2016, p. 8). The connection becomes more robust when the marketing messages used and the reality of the product usefulness assists the customers achieve objectives endeavoured by ‘self.’
The marketing strategy of luxury brand in China
The Chinese market consists of customers who have varying demands and purchase motivations and hence the need for the fashion luxury brands to implement market segmentation and identify their target sales group as the main marketing strategy (Liu 2015, p.88). Once a company develops the final marketing segment, they determine the value of the customer as well as the enterprise. The Chinese market is divided into smaller segments in which the deciders make up the target group. Alternatively, deciding the value of the consumer is significant when distinguishing the market as well as making the market offering within the target group’s mind. The increasing demand for luxury fashion will continue to be experienced and as shown in the figure 4 below, estimates shows that the industry is not declining soon.
Online Marketing Strategy in China Market
Shopping online has quickly become the focus in the Chinese luxury brand market. The Chinese consumers spend more time collecting and searching information about the products and brand while comparing reviews on what they want to buy. In China, there are different social networking sites which usually offer reviews of luxury brands and they include RenRen, Youku, or Kaixin and many more. The most crucial marketing strategy for luxury fashion brands is working with the social media platforms so that more access can be available to respond and monitor online conversations among or with consumers. Luxury fashion brands in China recognised the significance of identifying and engaging the influential fashion blogger an important step towards providing awareness among the population on matters fashion because they have a significant impact and they act as brand ambassadors. As shown in the figure 5 below, selling luxury items online continues to evolve notwithstanding the presence of physical stores.
Songer (2014, p.87) argues that the luxury brands have to refrain from normal forms of marketing like using fashion magazines. Nonetheless, it is of importance to maintain brand presence in all media to reach untapped market. In China, there is need to have online marketing strategy because most potential luxury fashion consumers can be reached easily. Online marketing influences the lower middle class and attains them as potential luxury consumers in future. Importantly, most Chinese consumers buy luxury fashion to confirm their social success and accomplishments.
Digital marketing has led to the expansion of the customer base and is considered more effective in terms of advertising because a larger scope of the public is reached; this simplifies interaction between the consumer and the company. Decisively, a customer may take more time navigating through luxury brands in the website so that they can know more about the product. In China, luxury fashion brands like Gucci have launched websites that display their products and allow users to purchase them online. This has increased their visibility and popularity in the online platform and more consumers are opting to do online shopping. Utilising such strategies stands as the most appropriate way to compete with local online retailers such as Taobao which is one of the world’s biggest e-commerce website. While foreign luxury brands have an upper hand emanating from the nature of the Chinese consumers to gain competitive advantage, they require marketing tactics that increase their online visibility similar to Taobao.
E-commerce has become more popular especially since luxury fashion brands have created attractive and highly informative websites to attract consumers to purchase their goods online. Luxury fashion brands write reviews of all their products individually so that they can entice the Chinese consumers to purchase their products (Liu 2015, p.88). Luxury firms like Armani, Gucci and Burberry have successful e-shopping websites that provide unique service when customers are purchasing the luxury products.
In China, there are different social networking sites which usually offer reviews of luxury brands and they include RenRen, Youku, or Kaixin and many more. Armani, Gucci and Burberry have successful e-shopping websites that provide unique service to customers purchasing their luxury products online. The most crucial marketing strategy for luxury fashion brands is working with the social media platforms so that more access can be available to respond and monitor online conversations among or with consumers. Luxury brands have identified the most popular social media sites in China and are conducting rigorous advertisements through them. Luxury fashion brands are using celebrities and social media influencers from China to promote their brands and this has proven to be successful because more consumers are purchasing their products (Zenk 2017, p.87).
Luxury brand offline marketing strategy in China
Luxury brands like Cartier are conducting both offline and online marketing strategies. It has invested heavily on creating social media content and films which continuously run across social media platforms like Instagram and YouTube (Calefato 2014, p.67).
