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Jun
2015

The Chinese shopper: prepare to win

If two thirds of luxury consumption by the Chinese takes place outside of China, there is a clear need for retailers and brands in general to ensure that their staff and management understand how to handle Chinese consumers, or for it to make small adaptations in terms of the retail and customer experience to increase the probability of success with the travelling Chinese consumers.

 

 

The manner and consumer behavior of the Chinese luxury buyer is determined by a number of cultural and experiential factors, which in the main are likely to be alien to those working and living outside of the country. A better understanding of these factors and what sits behind them will help ensure that sales opportunities can be maximized as they are presented. The following are our notes of guidance that can be applied in this area.

 

Brand awareness

Chinese consumers are attracted to ‘famous’ brands i.e. those that they have seen and have heard of on a regular basis. These brands have become a point of reference for them, and have a level of trust in their eyes. Brands they have never heard of, will gain little or no trust, and will not be pursued.Consider how you can have your brand name seen and spoken of in China, even if you have no presence here.

 

Consumer knowledge

The general level of consumer knowledge of luxury is still in its infancy in China, although people are learning fast. Making complicated selection decisions is not easy, so the default position is the trusted brand names. The same brands names are also used as a benchmark against which to compare newcomers, know how you want to be seen in the eyes of the Chinese and identify with other brands they already know.

 

The consumer experience in China

Travelling Chinese consumers typically come from Tier 1 and some of the top Tier 2 cities. These people have access to a vast array of luxury brands to see and choose from where they live, and will know the standard products (and their prices) very well. In the past purchases have been made for status and peer recognition reasons, and not necessarily as a result of understanding a brand or product value. This is changing, as these consumers gather more knowledge, and also seek less common items to purchase. Price is a measure of luxury, or a benchmark by which to value a brand, and often has nothing to do with any of the other brand attributes that we in the west would care about.

 

The buying process

Luxury purchases in China fall into two distinct catagories: self-reward and gifting. The former is likely to be related to demonstrating success to others, and maintaining a suitable appearance in front of one’s peers. The latter is a big part of business etiquette, and although there are moves to try and reduce it, the probability is that it will always represent a significant proportion of luxury consumption. Buying for others demonstrates thanks and establishes stronger relationships. Watches and leather goods are very popular for men, and handbags for woman, although men are in the majority of the recipients.

 

The decision making process around purchase may depend upon where the consumer comes from in China, and not where they are making the purchase. Consumers from the tier one cities such as Shanghai will be more knowledgeable than most, and will take time to make a decision because they know more. Those from other cities may be more spontaneous and just buy a product that they have been looking for, simply because its safe, and they have no means to compare one product over another. Understand the reasons for purchase, and the sale will become easier, a simple question as to whether the purchase is for themselves or others is a good starting point.

 

The travelling luxury consumer

Those Chinese who travel are typically from the wealthy cities in the East of China who have the money and the experience to make the journey. They are likely to have a list of items to buy both from their own pocket, and on behalf of others back in China who have given them money to do so. They buy overseas for two reasons; the first being lower prices as a result of lower taxes and better exchange rates, and the second being a desire to buy an authentic product ‘at source’ and to be sure it is not in any way a fake.

There is an argument that if a Chinese consumer walks into a store belonging to a big brand name that it knows from China, they will be planning to buy something specific, so it might be a simple sale. However there is a chance to upsell them if their purchase needs can be determined. If they are buying gifts for friends or business acquaintances, they are looking for something unique and special, perhaps something not available in China, as this will add additional weight and value to the gift. If there is a story behind the gift, sharing it will also be of value, as they can repeat it on their return both to the recipient and others.

By adopting a proactive approach like this, you should not be surprised if you receive visits from other Chinese that day or the following one, as their story is shared via word of mouth, and the trust established in the retailer. If you able to provide the customer with a business card written in Chinese, word of the sale and the store can and will be spread more quickly via verbal communication and social media.

 

General advice

Although perhaps in the west, those with money tend to play this down, and want to be treated with discretion, Chinese consumers with money will want to be pampered, and made to feel important. If a senior manager can be brought over and introduced to them, they will feel better and more respected. Also, be aware that money and appearance are not clearly linked in China, many wealthy people will not dress smartly to spend huge amounts of money, so take this into account and don’t make assumptions as to their ability or right to enter your establishment.

 


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