Once-untouchable luxury goods are beginning to enter ordinary households in China as the country becomes the world's second largest consumer of luxury goods. More and more young Chinese people are becoming fans of luxury goods, making up an increasing share of China's luxury consumer group. On average, Chinese luxury consumers are 15 years younger than their European counterparts and 25 years younger than their U.S. counterparts, according to a study by the World Luxury Association (WLA). Why are young Chinese people so interested in luxury goods when China's household consumption level is much lower than that of the United States and most European countries?
Chinese luxury consumers relatively young
Ms. Wu is working for a foreign company in Shanghai. She earns more than 10,000 yuan a month. Wu has spent much money on foreign luxury goods since she bought a Louis Vuitton handbag in 2010 during her first trip abroad. Over the past two years, she has taken advantage of every trip abroad to buy expensive purses, shoes, clothes, necklaces, and other things at various luxury stores.
There have been a growing number of young fans of luxury goods like Wu in recent years. “Young people will become the dominant luxury consumer group in China in the next three to five years,” said Ouyang Kun, head of the WLA'S China office. More than half of Chinese luxury consumers earn around 10,000 yuan a month, and they are all between 25 and 28 years old. The lowest age of China's mainstream luxury consumer group dropped from 35 years old in 2007 and to 25 years old in 2010.
“It only shows that Chinese luxury consumers are expanding to a younger age group, and cannot be generalized,” said Dr. Zhou Ting, head of the research center of the Fortune Character magazine. He added that there are entry-level, mid-range, and high-end luxury goods. Core consumers only make up 20 percent of China's luxury consumer group, but contribute to 80 percent of luxury goods sales. The majority of the core consumers are over 40 years old and insensitive to the prices of luxury goods. The remaining 80 percent only buy 20 percent of luxury goods, most of which are just entry-level ones.
Rich children are keeping up with the Joneses
Young people are making up an increasing share of China's luxury consumer group, while most U.S. and European luxury consumers are wealthy people above 40 years old.
"China has the world's youngest luxury consumers and most of them buy the luxuries with their parents' money," Ouyang Kun said. Western people use the money they earned to buy the luxuries while young people of China buy them with their parents' money. Their parents had not enjoyed life during their entrepreneurial processes, so they spend a great deal of money on their children to remedy the regret, resulting in some pupils using the best mobile phones, best school bags and the best pens. A major factor that luxury consumers become younger and younger is the psychology of comparison of the "second-generation rich." Luxury first is the symbol of identity and then the household wealth and social status. In Europe and the United States, few parents buy luxury consumer goods for their children, but China's rich of first generation want their children to enjoy these luxury goods.
Showing off and comparison have been widely regarded as the biggest reason for young people to buy luxuries. Zhou Ting said that the luxury has a social attribute, or a philosophical symbol, which called class distinction. The class distinction can make people compare with each other.
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