On 19 May I offered an initial analysis of the growing sophistication of Chinese consumers in matters of luxury. Several studies have since been published by McKinsey confirming my point - both for luxury and consumption in general (September 2009: "2009 Annual Chinese Consumer Study", August 2009 "A consumer paradigm for China" and in July, "Understanding China's Wealthy"). From these reports, I have drawn the five following points:
- Frugality: The Chinese save up to 25% of their income - in order to ensure the education of their children, among other reasons. Meagre availability of credit (except to buy a home), consumer disposable income representing barely 56% of GDP - against 67% in France and 72% in the USA (and this after having collapsed since 1992 when it accounted for 72% of GNP) - explain why it is not favourable for consumerism.
- The crisis is precipitating changes in attitude: a consumer looking for information on the Internet, a movement that is seeking better quality/price values denotes a faster-than-expected maturing of consumer behaviour.
- Rapid evolution in income: half of wealthy Chinese in 2009 were not ... 4 years ago.
- The most important areas of development in consumption (and wealth) are outside the 7 major traditional "clusters": McKinsey enumerates 22 in all.
- The sophistication of well-to-do Chinese consumers: McKinsey presents a typology in 7 groups that shows that the 4 largest groups (representing 2/3 of the wealth) are divided into two groups of roughly the same number.
On the one hand, the conspicuous consumer (of luxury), and on the other, the "discreet" consumers.
This division clearly demonstrates that - contrary to the expectations of some luxury brands – all rich Chinese are not conspicuous consumers.
While participating at a conference recently, I was asked to respond to the VP of a luxury group from the U.S. because I maintained that China would not be the El Dorado that the brands were hoping for (she confirmed that in her Group the whole management skipped around like kids exclaiming, "China! China! China!"): they believed that Chinese consumers today are comparable to Western consumers of 50 years ago... and that this market will be phenomenal for the next 50 years. I, however, say it would take them just 10 years to reach the level of maturity of Western markets.