IS CHINA’S LUXURY RECOVERY FLATTENING? CHINA OUTLOOK FOR 2022

[04 NOV 2021 – SINGAPORE] – China’s affluent remain optimistic and willing to spend, but
their road to recovery to pre-pandemic levels appears to be leveling off, according to Agility’s
latest TrendLens™ study.


TRENDLENS™ CHINA 2021

The newest report was released as part of Agility’s TrendLens™ data subscription programme which monitors the outlook, spending habits, and lifestyles of affluent and high-net worth consumers. This is the second wave of the consumer study for 2021 in TrendLens™, which covers more than 12 key markets globally and leverages respondents across the world from Agility’s LuxeTalk™ affluent & HNWI community.

The China study is based on interviews with 1,000 affluent consumers* in each wave across the country, including a sample of 300 USD millionaires.


KEY TAKEAWAYS

  1. China’s recovering optimism is leveling off. After experiencing a sharp drop in the months following the lockdown of Wuhan in 2020, affluent consumers’ outlook – in terms of expectations regarding their own economic well-being, disposable incomes, investment returns, and likelihood of spending on luxuries – had rebounded significantly as of March 2021. However, in the latest wave, the recovery trend appears to have  paused, with consumers’ luxury spend expectations remaining at similar levels to Q1 2021.

    This comes as China’s GDP growth slowed significantly in Q3 2021, to 4.9% year-on-year and only 0.2% compared with the previous quarter, impacted by energy shortages, worries surrounding the property sector and bond market, and localized shutdowns prompted by small Covid outbreaks.

  2. Millionaires remain more bullish and resilient spenders. While sentiment has remained level at an overall level, looking deeper into the data we see a diverging trend between the Affluent and high-net worth (HNW) groups in the study in this wave. HNW consumers’ optimism is continuing to trend upwards from the last wave (a net of 55% HNWs expect to increase luxury spend in the next 6 months, up from 43% in Q1 2021), while Affluent consumers’ outlook has stayed level in the last six months (41% vs. 39% in Q1).

    In particular, Chinese USD millionaires expect to increase spend the most on fashion, jewellery, and cosmetics. Cars and watches are also categories where HNWs show significantly higher willingness to increase spend than Affluent consumers.

  3. Consumers are becoming more rational and are looking for value. Since the pandemic, we’ve frequently heard the term “baozhi” or “keeping value” in interviews with consumers when talking about how they evaluate potential luxury purchases. The focus isn’t on lower price, but on getting something that will stand the test of time rather than of-the-moment. In our TrendLens™ data, we see them becoming more sensitive to value and looking for timeless products. For Gen-Z consumers especially, those agreeing with the statement “I prefer buying items that are classic and timeless” (over the alternative option, “I prefer buying luxury items that are new and trendy”) jumped from 26% earlier in the year to 44% in the current wave. We also see increasing interest in secondhand luxury goods, renting luxury, and vintage luxury among the full sample.

  4. The luxury brand experience still matters. That they are becoming more rational is not to say that the Affluent are making purchases based on cold, bloodless calculations; on the contrary, there is a strong desire for immersion in luxury brands and to be treated specially, as an honored client. Affluent and HNW consumers rated brand experiences (encompassing online, in-store, and brand events) as the top factor influencing luxury purchase decisions, with 89% saying it influences them a lot or somewhat. The in-store experience and direct brand “touch” is particularly critical for big-ticket purchases or buying a brand for the first time. In our work with luxury brands we have helped them dial these experiences in to make sure they are addressing real customer needs, delighting them, and creating affinity and loyalty.

  5. Sustainability is not just an abstract concern for the Affluent. Many people might be tempted to think that sustainability is a concept that consumers think of passively, and state concerns about it more or less as mere lip service. However, in our latest wave sustainability does stand out as a salient topic, and indeed a factor in luxury considerations – especially for the younger generation. Over half of Gen-Z consumers in our study say that sustainability influences luxury purchase decisions “a lot” and a further 44% say it influences them “somewhat”. We also increasingly hear consumers define sustainability in more urgent terms, describing it at as something that is “everyone’s responsibility” where in the past a more common view was that it is important but mainly the job of government to address it.

* Affluent definition: Min. 400,000 RMB in annual household income. HNWI definition: Min. 1 mln USD in
assets under management (excluding primary residence)

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