Millennials to soon become the biggest consumer retail spenders in China

23 January 2018 6 min. read

China’s crop of young millennials are on course to soon eclipse their older counterparts as the country’s biggest spenders in the consumer retail market, according to a report, with their increasing eye for luxury goods and the trend toward e-commerce marking a changing retail landscape.

A survey commissioned by Big Four professional services firm KPMG in conjunction with China’s online luxury and fashion retailer has signaled an upcoming shift in the consumer demographic of China for upmarket goods, with millennials set to overtake older buyers within the next five years. The report, titled ‘China’s Connected Consumers’, also highlights the growing trend among the younger generation toward online shopping. 

Of the 67% of millennials surveyed out of the ~3,000 overall respondents, 90% expected an increase in salary (currently standing at an average of Rmb 5,852.50 a month for those born between 1985-1990) over the next five years – with 31% of those anticipating a ‘significant’ increase. Non-millennials were also bullish about their prospects for greater future remittance at 80% of respondents, yet only 16% of those expected the rise to be significant. 

Expected level of income in the next five years

In line with this envisaged cash bonanza, 70% of the millennial respondents are predicting that their consumption of luxury goods and services will increase in the coming year, with 12% foreseeing a significant increase, and just 4% hoping to be more frugal. Together, around 45% of the millennial demographic believed owning at least one designer item to be ‘essential’. 

The most coveted luxury items for the millennial kit-bag were those in the cosmetics and perfumes segment (50%), along with clothing (46%) and bags (45%), while the short-term shopping list in the event of a salary hike included an updated wardrobe of higher-end clothing (47%), perfumes and cosmetics (47%), and an increased investment in shoes (44%), watches and jewellery (both 41%). Non-millennials were more likely than their younger counterparts to be in the market for bags over the next twelve months (+4%), and less inclined toward cosmetics (-8%).  

Demand for key luxury product types over the next 12 months

When it comes to their foremost considerations when shopping for goods, the Chinese millennial brigade placed a greater onus as compared to their older compatriots on a number of various factors, including appearances (42% against 39%), celebrity endorsements (17% vs. 12%), and key opinion leaders – or in the on-trend terminology, ‘KOLs’ (20% v 13%), along with online feedback (50% vs. 44%) and social media recommendations (20% vs. 16%). In contrast, non-millennials as a group were slightly more likely to consider product quality (73% vs. 70%) and recommendations from friends (46% vs. 43%).

However, lest the millennial generation is once again cast as especially vacuous or vain, 41% of the generation’s respondents cited ‘higher product quality and services’ as the primary motive for purchasing a luxury item to be on par with non-millennials, while the 13% who believed it to be a ‘better reflection of social status’ was in fact slightly less than members of other generations. The other factors pointed to, such as it ‘instills greater personal confidence’, were also evenly spread between the groups.

Key shopping influences

The even distribution of responses given to the perceived benefits of luxury items suggests that, ultimately, there is little intergenerational difference when it comes to consumer motivations for owning upmarket products. One notable difference, however, reflected in the greater influence of online feedback and social media recommendations on the millennial consumer decision-making process, is in the shopping experience itself, with 88% of millennials shopping online more than once a week as compared to 81% of other groups.

This gap also appears likely to widen. 78% as compared to 75% noted an increased frequency in online shopping activity in the past twelve months, while 80% against 75% expect a further escalation over the coming twelve. Against this backdrop, and with approximately 77% of all respondents electing e-commerce as their overall favorite leisure activity (evident perhaps in the over $25 billion one-day spend on discounted goods last year for the Chinese equivalent of Black Friday), many retailers will need to adapt their models and strategies in response to the changing landscape.

In summary

The authors’ state; “This year’s survey has highlighted the extent to which the mainland China consumer and retail market is evolving. To maintain their competitive edge, businesses need to ensure they are up-to-date with the latest industry developments, population demographics and focus on providing the best consumer experience through the enhanced use of technology and big data,” such as by, “integrating their online and offline operations to provide an omnichannel shopping experience for consumers, which includes conventional stores, websites, social media, web chats and mobile applications.”

“Millennials buying luxury in China are strongly influenced by digital content, social media, celebrities and fashion influencers such as key opinion leaders (KOLs). They are looking for quality products, inspirational content and truly unique experiences,” the Chinese arm of the accounting and consulting firm concluded.

The increased millennial focus on luxury goods mirrors consumer trends China-wide, with a survey report from strategy giants McKinsey & Company finding that a growing number of customers in the country are intending to trade up to more expensive brands in the fast-moving consumer goods (FMCG) sector, while those in the new car market are more likely now to look to premium models