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|Jun 20, 2014

Three Key Things to Know about China’s Luxury Travelers


Luxury travelers from China spend more on luxury than those of any other nation, accounting for almost half of total consumption. They are also becoming increasingly sophisticated about where they buy, with about two thirds of spending taking place while traveling abroad.

So now that we know how important they are, who are they really? Let’s take a look at three key questions to help us better understand.


1. They’re upgrading their travel purchasing destinations


In the past, luxury consumers from high-GDP cities such as Beijing and Shanghai would travel to Hong Kong to purchase items, and consumers from mid-tier cities such as Xi’an and Chengdu would travel to high-GDP cities or purchase through shopping agents.
Now, luxury consumers from high-GDP cities are traveling to Europe or the US, while mid-tier consumers are making trips to Hong Kong, and also South Korea. Those from lower-GDP cities are now the ones traveling to Beijing and Shanghai.


2. They’re preparing in advance


From a strategic consumer study we performed in 2013, across consumer groups, we found at least 60% of purchases are planned before consumers leave China. This is particularly true for brand or logo driven consumers, as they have preferred brands in mind and will compare luxury items within the preferred brand before they leave.

Additionally, on the ground advertising at the shopping location is a relative non-factor, as only 20% of customers pay any attention, and what’s more, only 8% would rate advertisement as a trigger to make a purchase.


3. They bring back higher service expectations


In the study, we found that while in-store experience has little effect on whether consumers fulfill their planned purchases, it has a major impact on how customers view the brand. While visiting abroad, luxury consumers especially those first time travelers are introduced to a whole new higher level of service.

Once they return to China, they have higher service expectations that are then applied to and raise the bar for, future purchases.


What does this mean for a luxury brand?


As most purchasing decisions are being made before they leave the country, it means that for a luxury brand, it is better to allocate a larger amount of marketing budget in China, elevate the service level, as well as focus on aligning incentives between the European and Chinese stores.


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