For luxury brands catering to high-end shoppers in Hong Kong, understanding the differences between their local and Chinese mainland consumer bases, is essential. Here, Amrita Banta, Managing Director at Agility Research & Strategy looks at consumption habits in both markets.
Chinese mainland consumers are no longer flocking to Hong Kong in the same numbers as before to fill their appetite for luxury goods and western labels. There are multiple reasons for this, including shifts in mainland Chinese consumption and gifting behaviour, changes in brand pricing strategies, and unfavourable exchange rates.
Lately there has also been a lot of discussion about mainland Chinese consumers shifting preference to made-in-China brands, exemplified by the case of a Range Rover knock off gaining popularity.
Whatever the reason for the shift in mainland consumers’ behaviour, it does mean that brands need to re-examine the focus of their marketing and customer acquisition strategies, to see if the local Hong Kongers consumer base is getting the attention it deserves in this new consumer environment.
At the same time, while the future outlook for Hong Kong retailers dependent on mainland Chinese consumers might look somewhat bleak, it is important not to forget the longer term opportunities that still exist with this consumer target. In the fight for wallet share of mainland consumers, as a shopping travel destination, Hong Kong continues to have competitive advantages due to its convenient location and a common language shared with a large base of mainland Chinese.
It is also good to keep in mind that currency exchange rates fluctuate over time, and many of the consumer trends we are seeing in China could be seen as normalization of a market, with a still fast growing affluent population, bringing it closer at par with more developed ones.
In the current consumer environment it is important for brands that cater to high-end shoppers in Hong Kong to understand both their local resident and Chinese mainland consumer bases and how they are different.
We recently conducted a study among a sample of 736 affluent consumers split between Hong Kong and mainland China, looking at the consumption habits of this target in both markets.
“ The affluent Chinese consumer is still very much looking to spend big on luxury goods ”
Different Consumption Priorities
In our study, we asked respondents in both markets what is the most interesting luxury or big ticket purchase that they are hoping or dreaming to buy next.
From the responses, we can see that the affluent Chinese consumer is still very much looking to spend big on luxury goods, such as watches, bags, jewellery, fashion and accessories (see Figure 1).
At the same time their Hong Konger counterparts have biggest budgets assigned for travel categories, although there are still many who are looking to make big purchases in luxury goods (see Figure 2). These differences in consumption priorities may not be us much a reflection of current trends, but more of an indication of the maturity of the affluent consumer base.
Figure 1: Next Big Purchase for Affluent Chinese Consumers. (Source: Agility Research & Strategy)
Figure 2: Next Big Purchase for Affluent Hong Kong Consumers. (Source: Agility Research & Strategy)
Similar Motivations to Buy Luxury
There are also some characteristics that are surprisingly similar between the two consumer groups. When asked about what motivates one to purchase luxury brands, consumers in both markets ranked the importance of ten different features in the exact same order. The top five features in order of importance were: 1) Design/styling, 2) After-sales service, 3) Exclusivity, 4) Craftsmanship, and 5) Country of origin.
The above is good news to many local brands, because what it means to marketers is that in some cases the messaging aimed at triggering the consumption motivations of local and mainland Chinese consumers may not need customization.
“ Affluent Hong Kong consumers are more likely to prefer buying items in store ”
Different Role of Digital
A key thing to consider when setting up retail strategies targeting the two consumer groups is that, the way affluent consumers buy luxury products has distinct differences, especially in terms of the role of digital.
Generally the mainland Chinese tend to be more open to purchasing luxury online and besides detailed product descriptions, and maybe also online videos and demonstrations, look for opportunities to buy products on brand websites.
Affluent Hong Kong consumers however are more likely to prefer buying items in store and interested in finding product availability information by store.
Chinese affluent consumers overall have shifted more of their path to purchase into the digital world (see Figure 3), with 3 out of 4 agreeing that they research luxury products online and more than half indicating that they are inclined to purchase luxury product online from outside their home country.
Figure 3: Agreement with Statements about Buying Luxury among Affluent Chinese. (Source: Agility Research & Strategy)
When it comes to affluent consumers in Hong Kong, there are much fewer who are purchasing luxury products online, but the wide majority is still going online to research their purchases (see Figure 4). What is notable is that researching luxury products online using mobile phones is very popular, highlighting the importance for luxury brands to have mobile friendly websites for Hong Kong consumers.
Figure 4: Agreement with Statements about Buying Luxury among Affluent Hong Kongers. (Source: Agility Research & Strategy)
Besides the topics discussed in this article, there are numerous differences and similarities that brands need be aware of to effectively target affluent consumers from different markets. We at Agility Research & Strategy continue to conduct extensive research on Honk Kong and mainland Chinese affluent consumers, so that brands who work with us can react to changing realities and seize opportunities as they arise, and urge everyone who has a stake in the game to do the same.
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