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Jun
2015

China’s rich second generation consumers; looking for niche and unusual

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As a result of the reform policies established by Deng Xiaoping in the late 1980’s that became effective in the early 1990’s, many individuals in China either started their own businesses or saw the government owned businesses they ran restructured. These were the first generation of Chinese entrepreneurs.

Their Children, born in the 80’s and 90’s are now China’s rich second generation, and a group of consumers highly sought after by luxury brands. Unlike their parents, they are well educated and have and continue to enjoy a wealthy lifestyle. Most have overseas study experience, are fluent in a foreign language, enjoy a western lifestyle and know how to enjoy life.

Having not lived through the hardships post the cultural revolution, and having experienced more of the world outside of China, these men and woman seek out new products and services, and want to be seen as trend setters, and unique in society; an attitude that luxury brands currently not available or those with a discrete profile in China could play to.

Like most in China, this group is still influenced by their peers, buying product to either follow or complete with one another. Products are still a badge of status for the group, but a unique one that allows them to enter social circles and develop their connections. Often product is not selected for its function, but its style. International designer names are popular, especially those that are currently the trend around the globe.

In a book published in mid 2012, written by a journalist named Tao Tao of the China Youth newspaper, 600 second-generation were surveyed. The respondents were split 70/30 male to female, the majority aged between 18 and 35. Only 14% of the sample did not hold a degree, postgraduate or PhD qualification, a result in most cases of the fact their parents did not have this educational privilege. All had studied overseas, on the main in Europe and the US, and a large percentage in Australia. The following graphical reference data is taken from this book and the comments and opinions are our own.

The following graphs give an indication to their material ownership.

Owning at least one car is important.

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Many do own multiple cars

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The majority owns at least a single property, although their parents may have funded the purchase.

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Taking share dividends or investment profit are the two most common sources of income.

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Most like to travel many times a year and typically on their own as a means to relax.

China’s second-generation are often stereotyped of being uncontrollable and a law unto themselves, which is some cases is true, but the majority are responsible and understand that they are role models for others. No doubt there are times when they need to relax, going to clubs or taking part in supercar track events as we have seen many do, and at which can be observed their need to be part of a group but also their competitive nature.

As consumers, due to their international experience, they are looking for new and interesting things all the time, and are less conservative than mainstream consumers in their choices. From spending time with the second-generation Chinese, we would also note their short attention span. They want to be different and consider themselves as luxury leaders, and ideally do not want to be seen with the same products as their peers; hence pink Bentleys and Ferrari’s.

According to the survey, using luxury to demonstrate their unique identity and status takes precedence over following or competing with others.

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The next 5 to 10 years for the second-generation

To the end of 2011, private enterprises accounted for 96% of the total number of registered businesses in China, 85.4% of which were family owned and run. It is estimated that in the next 5 to 10 years, almost 75% of the family enterprises will face succession issues. Private enterprise plays a significant role in the overall economic pattern in China, and contributes to over 50% of the GDP and 75% of employment. Projections are that in 10 years time, 32% of China’s GDP will be controlled by the current rich second generation. Their importance as leaders of industry in the coming years cannot be under estimated.

The second-generation consumers are now and will remain a very important consumer group, because they have money, experience and a desire for new things. Luxury brands need to create specific strategies to engage with them, no matter whether they have a physical presence in China or not. Because they are relatively young now, their longevity as luxury consumers, and the influence they will have on the sector cannot be under-estimated. Winning their loyalty now, will pay dividends in the future.


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