China’s luxury sector has been especially savaged by the fallout from the COVID-19 crisis, and one customer may be hardest to win back, the most desirable of all, the High Net Worth Individual (HNWI).
Evidence suggests these wealthy and super-wealthy consumers are still spending, but it’s not entirely clear on what, asks Jing Daily.
The aspirational middle-class consumer will still go in for conspicuous consumption, Jing Daily says, but the country’s HNWIs and UHNWIs have been looking for alternatives for a while, certainly before the pandemic struck.
“They’re now replacing investments in impractical luxury goods with activities that build knowledge and soft skills or safeguard their health, and the COVID-19 outbreak has only accelerated the process” the publication reports.
Nowadays, living a healthy lifestyle and investing in private healthcare options, along with retirement plans are, perhaps, becoming the ultimate luxury, it says.
“The impact of the epidemic on the luxury industry has been huge, affecting not only the revenue of offline stores, but also the supply chain, the global economy, and consumer confidence,” Jennifer Ye, PwC China Consumer Markets Leader, told Jing Daily.
As a result, digital marketing, channel transformation and upgrading, along with digital capacity building, are now playing an increasingly important role in luxury brands.
“China’s consumer market is highly stratified,” Ye added. “On one hand, Chinese consumers are paying more attention to prices, seeking higher value and better deals. On the other hand, Chinese consumers are also experiencing consumption upgrading, moving up the consumption value chain and spending more and more on non-necessities and services.”
The focus now within luxury on social responsibility is clear evidence of a significant shift within the sector, says Jing Daily, citing a report from consulting firm Agility Research and Strategy.
Agility found that 81% of Chinese millionaires demand brands “conduct themselves in an ethically responsible manner”. The causes HNWIs show special interest in are clean water and sanitation, arts and culture, along with fair trade, and ethical sourcing.
Brands in the luxury sector that don’t embrace CSR will become “unsuitable for the Chinese market and might even lose some of their brand value”, Jing Daily argues.
Luxury brands will need to stress ethical fashion and sustainable design to attract HNWIs in future, and, in post-COVID-19 China, more luxury brands will certainly be emphasising sustainable storytelling and ethical marketing.
Sourced from Jing Daily; additional content by WARC staff