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Golden Goose via Net-a-Porter Golden Goose sneakers, such as this $530 pair, are one voguish status symbol.
There’s a new phrase pushing its way into the Chinese lexicon over the last year — jingzhi qiong, literally “the exquisite poor.”
It refers not to some fetishization of poverty, as with the long tradition of well-off Westerners traveling through impoverished countries seeking enlightenment or empathy.
China’s rise over the past decade to become by far the world’s largest luxury-goods market is well documented, and brands have been capitalizing on it for years. But the younger demographic among this high-end-consumer sector is punching above its weight, and certainly above its recommended expenditure levels.
Nor does it denote more recent examples like the viral venture undertaken by luxury Italian shoemaker Golden Goose, which marketed a “distressed fashion” sneaker, complete with scratches, dirt marks and a strip of tape holding the toe of the shoe together — at a price tag of more than $500.
Rather, the term refers to a growing number of China’s youth who spend far above their income levels, often on luxury or specialty goods.
China’s rise over the past decade to become by far the world’s largest luxury-goods market is well documented, and brands have been capitalizing on it for years. But the younger demographic among this high-end-consumer sector is punching above its weight, and certainly above its recommended expenditure levels.
A Beijing resident who asked to be identified only as Guo and said she was in her 30s ascribed the trend to three factors: “I would say advertisements for younger people are more effective, as youth are more susceptible to trends. Secondly, many have never been poor, unlike their parents and grandparents. And, thirdly, many don’t plan to buy a house any time soon, at least in the expensive bigger cities, so they feel a reduced need to save,” she told MarketWatch in Chinese.
And data confirm some of what Guo posited. For instance, younger Chinese seem far less concerned about long-term financial stability than did their predecessors. A LinkedIn China survey last year found that Chinese born in 1995 or later only stayed at their first job for an average of seven months, many leaving without a second position lined up. By contrast, Chinese born in the 1980s remained at their first job for 3.5 years on average, the study found.
China’s youth are also saving less. A survey earlier this year by OC&C Strategy Consultants found that 24% of Chinese born after 1998 have no savings, compared with 15% globally.
But these young spendthrifts are “a double-edge sword,” according to McKinsey & Co.’s China Luxury Report 2019. While they have continued to spend even as the economy has slowed, their tastes move so quickly, and they are so attuned to shifting online trends, that it presents “both a tantalizing opportunity and an implicit imperative for brands to stay current, or risk losing out to more digitally savvy rivals.”
But it is isn’t just working-class youth driving luxury sales as the rest of China’s economy slows.
A survey earlier this year by OC&C Strategy Consultants found that 24% of Chinese born after 1998 have no savings, compared with 15% globally.
The country’s ultrawealthy tend to be younger than the global average. In China, 27.5% of individuals worth more than $1 billion are under the age of 50, according to the New York–headquartered research firm Wealth-X. That’s more than double the global average of 13%.
So what are they buying? Automobiles are one example of the luxury segment resisting the overall economic malaise.
Car sales fell last year in China for the first time in three decades. But sales of luxury vehicles actually rose 11% in the first nine months of 2019, even though overall car sales dropped 12%, according to the China Association of Automobile Manufacturers.
Western brands seeking to maintain robust sales in the high-end space may also take note of a second trend. Chinese, who are traveling abroad less as the economy slows, are more and more turning to domestic and online options for their luxury purchases. In a survey earlier this year, nearly half of Chinese respondents told consultancies CSG and Ruder Finn that they intend to buy more Chinese fashion brands in the future than they had previously.
“Our belief is that the split between shopping abroad and shopping at home will shift from 75-25 a few years ago to an equitable 50-50 split within the next 12-24 months,” said Erwan Rambourg, a managing director and global co-head of consumer and retail research at HSBC in Hong Kong.
If all these trends hold, foreign brands that can target higher-end consumers may do well by focusing on three key areas: closely following the head-spinning tastes of younger buyers, ensuring a solid online presence, and, as the Chinese consumer turns homeward for that 2,000 yuan dress or purse, consider partnering with a trusted domestic player.
Tanner Brown is a contributor to MarketWatch and Barron’s and producer of the Caixin-Sinica Business Brief podcast.
