The Luxury Industry is Dynamic

The Luxury Industry is Dynamic
Abstract
With the continuous improvement of China's economic level, China's luxury goods consumption has grown rapidly in the past decade. China accounts for one-third of the global luxury goods market, and young Chinese (born between 1980 and 1995, about 320 million people) are the main force in their consumption, and the growing generation Z is also becoming more and more a young luxury market, or some "potential stocks" of luxury brands. Although there is a lot of room for development in China's luxury consumer market, market management and consumer behavior are not yet mature. Therefore, it is of great practical significance to conduct in-depth research on the impact of luxury brand attitudes on Chinese young people's purchasing behavior. At present, most of the literature research on luxury consumers' purchasing behavior only stays on the appearance of consumption behavior, and there is little research on luxury brand attitudes and purchasing behavior tendencies of Chinese young consumers. Therefore, from the perspective of young Chinese consumers, this paper conducts an empirical analysis of the association between luxury brand attitudes and purchasing behavior tendencies.
From the perspective of the attitude ABC model, this paper selects and optimizes the scale, designs a questionnaire for empirical research, and verifies the explanatory power of brand attitudes on purchase intentions. The empirical results show that the luxury brand attitude based on the attitude ABC model has a significant impact on the purchasing behavior tendency. Furthermore, considering that the luxury brand attitude is also affected by factors such as gender, age, income, and region, this paper also discusses the attitude ABC model from the perspective of set out to study its level of action. This research is crucial for marketing directors because they can apply the findings to strategise their marketing and approach the Chinese young luxury market with knowledge of the motivations that influence the young luxury consumers.
Keyword：Luxury Brand Chinese Young People Purchasing Behavior
Introduction
Background
The luxury industry is dynamic. People have different tastes for luxury products, and their consumption depends on several factors, including age, attitudes, celebrity influence, cultural beliefs, and behaviour, among others. Luxury consumption has decreased in Traditional markets like North America and Italy due to the economic downtown in these countries and other parts of the world, while markets like China have gained tremendous growth in the Luxury products market (Ngai and Cho, 2012). McKinsey and Company reported a negative growth of the luxury market in Europe by 8 % and 25% in the United States (Atsmon et al., 2011). The report also showed that countries leading in luxury markets like Japan experienced negative growth in 2010. However, a similar report by McKinsey and Company (2017) indicates that the luxury market in China is proliferating due to robust economic growth and favourable global trade policies. The report projected a 44% growth in China's luxury market by 2020 to overtake japan and become the biggest consumer of luxury product.
Most luxury product consumers in the Western world are older people, unlike in China, where young people between 18 and 40 dominate the luxury market (Ngai and Cho, 2012, p. 256). A China Daily (2015) supports these statistics asserting that most luxury product consumers in China are youths aged between 25 and 35 years. This shows that the average age of Chinese luxury consumers is 25 years younger than American consumers and 15 years more than European Luxury product consumers (People's Daily, 2011). This insinuates that consumption patterns are often heterogeneous across a given generation and age group. The youth is a crucial age group to analyze their luxury product consumption patterns in China because they have been raised in the one-child policy era and have become a significant cohort of luxury consumption (Atsmon et al., 2011). This segment of consumers falls under the generation Y and Z, who are often wealthy, live in influential neighbourhoods, consume luxury products, and have studied abroad (Atsmon et al., 2011). Additionally, this population is individualistic and has experienced different economic and social environments.
Several reasons explain why many young Chinese people consume luxuries. The most apparent reason is the adoption of the one-child policy, which catalyzed the consumption of luxury products. This policy made the older generation lose their opportunities in education, making parents place their hope and dreams on their children. Children from many wealthy families study abroad in the UK, US, and Canada (Zhang, 2017, p. 37). Parents who send their children to study overseas often wish their children to have an advanced education experience and mingle with other cultures. This would help give them a brighter future by expanding their minds to accommodate intercultural collaborations and appreciation. These young Chinese often adopt a luxurious life in foreign countries, gaining increased interest in consuming luxury products, according to a report by the People's Daily (2011). The report noted that almost half of the consumers in the UK were aged between 18 and 40 years and spent an average of 300 million pounds on luxury products annually.
The motivation for luxury product consumption among Chinese young people can be classified into bandwagon, conspicuous, and snob, although these may change (Zhan and He, 2012). Wiedmann et al. (2009) argue that cultural value determines people's motivation to consume luxury products. Additionally, Wiedmann et al. (2009) assert that it is not enough to explore this topic based on traditional motivations. Instead, more research should focus on the characteristics of young Chinese consumers and their personal cultural backgrounds to determine how they influence their motivation to consume luxury products. Culture in this context refers to a similar way of thinking, feeling, and behaving that a group of people share (Spencer-Oatey and Franklin, 2012). Luna and Gupta (2001) believe that culture dramatically influences human behaviour.
In the business world, culture and cultural orientation are significant factors because it impacts people's cognition and behaviour. Research indicates that luxury product consumption differs between individualist and collectivist cultures (Phau and Prendergast, 2000; Wong and Ahuvia, 1998). Despite their differences, collectivist and individualistic cultures can be categorized as vertical or horizontal. People in a vertical culture believe they are radically different compared to others, while in horizontal culture, people believe they are equal to and similar to others (Torelli et al., 2020). This means that people in vertical societies embrace inequalities and hierarchy while those in horizontal communities believe that every society member has equal rights, opportunities, and status. These beliefs are likely to significantly impact the motivation for luxury product consumption differently in the two cultures.
Contemporary Chinese consumers know about Western cultures meaning their preference for luxury products is determined by many factors beyond the Chinese geographical market.
Chinese consumer knowledge about foreign cultures makes acculturation significant in this research. Acculturation is the culture change caused by the interaction of two or more cultural systems (Berry, 2006). Social norms, being in touch with people with different cultural backgrounds, the structure of a society, overseas advertisement, life experiences, and travelling are some of the factors impacting acculturation (Zhang, 2017, p. 4). Consumers also are victims of acculturation. Laroche and Cleveland (1997) argue that immigrants experience acculturation by learning motivations, values and attitudes, and behaviours relating to consumption from the host culture and integrating them with their original culture. In the end, acculturation impacts purchasing patterns of consumers. Research shows that acculturation impacts the consumers' cultural alignment leading to changes in perceived values and beliefs and luxury product purchasing motivation (Berry, 1997; Wong and Ahuvia, 1998). This means that consumers in different countries may not consume the same product because of the impact of acculturation. It also means that even though young Chinese consumers desire to consume luxury products, their motivations are different depending on their backgrounds, acculturation level, variance in cultural impact, education, and life experience. Therefore, the differences in cultural orientation lead to the difference in motivation to consume luxury products.
Defining Luxury Brands
Luxury brands can be confusing because it is relative to the context and the condition of the people under investigation. For example, people from the low class may have a different definition of luxury compared to those in the working and high classes. This makes it necessary to explore the definition of luxury that will be standard for this study and which resonates with the majority of the people in China and globally. Akpi (2012) asserts that luxury is a mystery concept hard to define but desired by most people. Sanyal et al., (2014) believe that luxury is a moving target that is never constant and that it defines how individual and collective dreams are made real. Luxury creates a sense of “specialness” in a marketplace characterized by rapid changes (Sanyal et al., 2014). Based on Sanyal et al., (2014) explanation, luxury can be used generally to refer to a people’s special lifestyle and the products and services in their routine life. However, this definition is still ambiguous.
Kapferer (1997) believes that luxury defines beauty because it is art used to decorate functional items thus luxury provides extra pleasure. In a seemingly agreeing tone, Nueno and Quelch (1998) argue that luxury brands are “those whose ratio of functional utility to price is low while the ratio of intangible and situational utility to price is high.” The contemporary world luxury brands definition has aspects of all the above definitions. Luxury expresses people’s attitudes generated through the personal and unique taste of products and services. Using luxury products enhances a person’s self-esteem and highlights people’s higher aspirations and dreams. According to Sanyal et al. (2014), consumers purchase products and use services based on their value and the desire to experience the brand images. A luxury brand’s prestige decreases when many people own it. Thus, organizations providing luxury brands have to maintain a ‘fragile equilibrium’ between awareness and high exposure through controlled product sales (Sanyal et al., 2014). This is the basis on which the current paper treats luxury brand consumption.
Research Problem
Overwhelming research exists studying the motivations, attitudes, and behaviours behind the consumption of luxury products; however, there is a need to study the Chinese market to explore the recent trends in the topic. Additionally, most research about the impact of acculturation has focused on the transformation of advertisement preferences and information systems and online consumer behaviour (Khairullah, 1995), decision-making processes of consumers (Quester et al., 2000), and media consumption (Lee and Tse, 1994). This means that little research about luxury goods consumption by Chinese customers has been explored in detail.
Inadequate and inconsistent research about luxury consumption among Chinese and the larger Asian consumers is dangerous because marketers and luxury companies will not have enough data to decide whether to venture into the Asian luxury market. This means that Luxury firms determined to enter the Chinese market will use data and market patterns that belong to the markets of Western countries, which are far from representing the Chinese market. Additionally, firms that provide luxury products will ignore the complexity and diversity of motivations of luxury consumers, thus keeping the traditional market characteristics available on a macro level. Therefore, there is insufficient data about young Chinese luxury consumers, thus affecting marketing strategies. Luxury product companies need to understand and consider the diversity of cultural backgrounds and acculturation levels and tailor adaptable strategies to enhance their sales in young Chinese luxury markets.
The young Chinese luxury market has drawn significant attention in recent years, but there is inadequate research on it. Xiao (2005) argues that three reasons have contributed to the limited nature of robust research and valid data about luxury markets. First, a section of researchers believes that motivations for luxury product consumption are homogeneous in a given society. In reality, many factors influence purchasing motivation. They include family, education, background, experience, imbalanced development of different cities, and geographic distance, leading to different luxury purchasing motivations (Zhang, 2017, p 6). Secondly, other firms believe that one has to be to be consistent, elegant, and effective to succeed. Such firms imagine and assume what the customers want instead of asking them what they want. Dubois and Duquesne (1993) assert that most luxury brand firms do not research trends in the contemporary luxury market and the purchasing motivation changes of customers. The third reason is that luxury brand companies and scholars recently got the attention of the Chinese luxury market.
Based on the above discussion, this study aims at bridging the research gap and the inadequate data in the Chinese luxury products market. It narrows down to the interest group of young people in China whose trends in the consumption of luxury products have attracted global attention. Understanding the motivations, attitudes, and consumer behavior behind the Chinese young people's increased consumption of luxury products is crucial.
Research Scope
This study aims at investigating the influence of luxury brand attitudes on Chinese young people's purchasing behaviour. It begins by reviewing existing literature on the topic in China and beyond. The second part of the study explores the primary research on the collected data from the field. The current study uses 150 participants from different cities, focusing on one luxury brand to collect data. The consumers of this product are female and male, making gender one of the interesting variables. The target participants are young people ranging between 18 and 40 years. Therefore, this study focuses on young Chinese consumers of luxury products and the attitudes that influence their luxury products consumption behaviour.
Literature Review
The world is dynamic, and people's lifestyles are changing. There has been a unique dynamism in China's young people's lifestyles, giving some good development opportunities to luxury companies to grow and expand in China (Rovai, 2016). Luxury goods are special and often have a higher experience value in quality, prices, and brand (Faccioli, 2021). Despite their high price values, luxury goods follow the law of value with a high ratio of brand image and buying value. This means that the primary function of these luxury goods is to satisfy the consumer experience and needs instead of transferring value (Zhang, 2017). Luxury goods are different, and various people have different tastes and motivations in choosing the lifestyle to live based on their cultural backgrounds (Wang, 2011, p. 346). This section reviews the literature review of three primary research areas: the motive and culture behind Chinese luxury consumption, the Chinese luxury market, and attitudes towards luxury brands. However, it is crucial to first analyze, ABC model, the luxury market industry and luxury brand consumers, and the young chinse luxury market consumers.
ABC Model
The current study uses the ABC model. ABC is an acronym for Antecedents, Behavior, Consequences. The model is critical when assessing and formulating problem behaviours, especially when clients want to understand the active ingredients for a problem behaviour. The model worksheet identifies triggers for a behaviour by monitoring environmental stimuli and internal circumstances which occur before the behavior (Phuong and Dung). In this case, environmental stimuli include company, location, visual time of day, and auditory while internal circumstances include body states, emotions, memories and thoughts. Practitioners and clients use the ABC model to consider what happens in the environment and individual before a target behaviour (antecedent) and afterwards (consequences) (Khalil et al., 2022). Once the antecedents and consequences are understood, interventions can be designed to modify or shape a target behaviour. This model uses five worksheets; the ABC model, functional analysis, problem solving, and the CBT-ABCD exercise.
This model is appropriate for the current study. It helps identify the attitudes, beliefs, behaviours, motifs and other factors that influence young Chinses consumers to purchase luxury products (Khalil et al., 2022). Consumers may not manage to change environmental factors occurring in their daily lives, but can consider the strong power of personal and cultural beliefs in shaping people’s experiences.
Analysis of Luxury Market Industry and Luxury Brand Consumers
The luxury market industry is dynamic like other sectors. In the 19th century, the luxury goods markets targeted the elite, wealthy and powerful society members, but the trend changed in the 20th century when the luxury markets began targeting anybody who could afford luxury products (Ott, 2018, p. 108). The 20th-century luxury consumption trend improved exponentially in the 21st century. A 2016 global market report shows that the luxury market grew by 7% in 2012 (Bain and Company, 2016). The report also showed that the Chinese luxury market made negative progress in 2015 but appeared to improve in 2016. Most Chinese spent more on oversea purchases from their neighbors Japan, South Korea, Australia, and Europe, with external spending increasing by 200% (Hung et al., 2021). Bain and Company (2016) attribute this to the price dynamics in the different luxury markets.
The COVID-19 pandemic affected the growth of the luxury market globally. Luxury market segments led by personal luxury products, luxury cars, and hospitality luxury, accounting for 80% of the luxury market, were affected. In a 2021 luxury market report by Bain and Company, D'Arpizio et al. (2021) reported that these market decline caused by the pandemic began to grow in 2021 by 13-15%, which is equivalent to €1.14 trillion, but that was still 9-11% behind the 2019 market value for these luxury products. These data show that the luxury market has recorded overall positive growth over time and does not discriminate against countries or regions. Luxury consumers in developing areas depend more on oversea shopping to get the brands of the luxury product they want. For example, most African countries do not have car manufacturing industries and rely on Japan and other automobile manufacturing countries. This is similar in China for globally established industries but not of Chinese origin. Zhang (2019, p. 19) argues that most luxury companies have tapped on these open opportunities by opening flagship stores in these countries.
The Chinese luxury market is making tremendous improvements globally. A 2019 McKinsey and Company luxury market report shows the Chinese luxury market is taking over half the global luxury market and that its consumers are likely to contribute approximately two-thirds of the worldwide growth in luxury spending (Luan et al., 2019, p. 4). The report projects that the Chinese luxury market spending will double from 770 billion RMB to 1.2 trillion RMB in 2025, translating to around 65% of the global growth between 2018 and 2025 (Luan et al., 2019, p. 5). The report has attributed this growth to the younger generation born post-1980s. They are at the peak of their lives, working decent jobs, most of whom have saved enough money to spend on luxury and comfortable lives. This generation of luxury consumers are actively consuming the products because they believe it marks their socioeconomic status in cities, earning them a class (Naumova et al., 2019, p 5-7)
An earlier report by McKinsey and Company (2017) showed that developing countries are the dominant consumers of personal luxury products, but the economic recession has led to a decrease in the demand for luxury goods by these consumers (Bu et al., 2017). According to the same report, the rising middle class has seized the chance and taken over the luxury market in developing economies. Between 2011 and 2016, the luxury market in developing economies recorded a 4 % growth reaching a global new value of $302 as consumers from developing countries increased their consumption of jewelry, designer handbags, clothes, and watches (Bu et al., 2017).
A 2021 report published by Delloite ranks global luxury brands based on their popularity and performance since 2017 (Faccioli, 2021). The report shows the first seven brands having maintained their positions over the four-year period whose data was analyzed. However, other companies have fluctuated in their global ratings. For example, Hermès International S.C.A. moved up from the 10th position displacing Chow Tai Fook Jewelry Group Limited (Faccioli, 2021). This is attributed to changes in people's preference for luxury products depending on what a company offers.
Young Chinese Luxury Market Consumers
Economic developments, the large Chinese population, and the growing number of wealthy society members have opened up China's luxury goods market for companies targeting young people aged 40 and below. Zhang (2017, p. 25) argues that the Chinese luxury market is youth-oriented and comprises consumers 40 years and below. Bain and Company's (2011) report also found the same trend where the Chinese luxury market is made of young people, unlike Western cultures where the dominant consumers of luxury products are older.
Currently, the Chinese luxury market has two categories of consumers that Luan et al. (2019) call Generation Y and Z. Generation Y were born in the 1980s, while Generation Z were born in the 1990s. In 2019, Generation Y accounted for 10.2 million consumers of luxury products in China, spending approximately 41000RMB annually on luxury goods, according to McKinsey and Company report. Generation Z is almost similar to Generation Y, only that they spend around 25000 RMB annually on luxury products (Luan et al., 2019). These two groups of consumers are unique compared to other groups because they were born during the one-child policy in China. Parents emphasized education for their children during the enforcement of this policy-making them willing to send their children to other countries like the U.S. and U.K. for education (Zhang, 2017, p. 37). This means that the generations Y and Z are well educated, confident, and ambitious, and studying in foreign countries has made them susceptible to Western cultural influence (Fort, 2022). They take the luxurious lifestyle back to China when they go for holidays or after they finish their education.
Similarly, Ng et al. (2016, p. 7) argue that Generation Y and Z are also called Millennials and Echo Boomers because they were brought up in the technology revolution and economic independence eras. This makes them willing to spend money on quality, luxurious brands, and technology products to show status, image, and class, according to Naumova et al. (2019). The two generations have grown up in wealthy environments compared to other groups. Thus, they do not consider saving or investing a priority in their lives as their parents have saved and invested for them. Therefore, the Chinese luxury market for young people is solid and elaborate. It is based primarily on personal consumption of luxury products.
Motive and culture behind Chinese luxury consumption
Cultural contexts determine luxury consumption patterns globally. The social and behavioral patterns in these cultures narrow down the luxury consumption needs of various people. Naumova et al. (2019) used the 2018 Hofstede model of national culture scientific study to cross-cultural differences in luxury goods consumption. The study found that cultures that embrace collectivism, low indulgence, masculinity, and long term are sensitive to conspicuous luxury status because they mainly perceive the social values in consuming luxury goods. In cultures that embrace high individualism, indulgence, low power distance, and masculinity, luxury goods consumers appear to perceive functional and individual values (Naumova et al., 2019, p 5-7). Zeng (2018) supports this based on findings from a study to explore the Chinese consumer's value perception of luxury goods. The study collected data from six Chinese cities and showed that demographic factors like income, age, gender, and residential city significantly influence the consumption of luxury goods. This indicates that Chinese luxury consumers are motivated individually and collectively.
In China, most people consume luxury goods to brag about their social status (Joy, 2001, p. 242). The Chinese people are strict on cultural behavior and often consume products that only conform to their cultural orientations (Naumova et al., 2019, p. 8). As such, the Chinese are likely to consume luxury goods manufactured by a Chinese company and those endorsed by Chinese celebrities (Rovai, 2016, p. 137). In cases where they consume goods from foreign countries, the Chinese people would prefer products from well-established companies with an established global image brand, as research indicates by Wang et al. (2011, p. 348), who studied the motives, attitudes toward luxury brands and the impact of these attitudes on Chinese consumer behavior. This affirmed that face value plays a significant role in Chinese culture, speaking to personal characteristics and qualities like social connections, wealth, and authority (Siu et al., 2016, p. 33).
Gifting is a significant motivation behind Chinese luxury goods consumption. Gift pricing and quality determine a person's level in the luxury hierarchy. Joy (2001) studied the gifting culture among the Chinese people using data collected through interviews. The research suggested that the Chinese have an elaborate gifting culture where they frequently buy luxury gifts for their family members to show off their socioeconomic status and wealth (Joy, 2001, p. 242). Further research shows that Chinese society uses gifting to establish guanxi, a Chinese word for personal connections, relationships, and social networks (Chi and Seock-Jin, 2017, p. 19). This is supported by Yang et al. (2011, p. 46), who studied the cultural difference between the East and the West and argued that gifts could be converted into monetary values through calculating, circulation, and comparing them, thus, classifying the gifts on a luxury scale depending on their prices and quality. Research also indicates that Chinese people like to reciprocate good for good and are highly likely to return a gift, thus creating a solid guanxi bond (Wang et al. (2011, p. 348). They believe that the quality and price values of gifts determine how much recognition and respect a person gets; thus, people always strive to get expensive gifts, sometimes beyond their means.
The Chinese luxury market
The notable Chinese economic growth has exposed many people, including young society members, to substantial wealth. Research indicates that a significant section of Chinese luxury customers are youths under 40 years old, as opposed to the western world, where the considerable majority of luxury goods consumers are older between 40 and 70 years (Ngai and Cho, 2012, p. 256). This is supported by Zhang (2017, p. 25), who studied luxury consumption motivators among Chinese people living in the U.K. and observed a similar trend regarding luxury product consumption among the young Chinese population who have embraced expensive, luxurious products from globally established brands making them have different preferences from the other society members. This trend was interrupted by the COVID-19 pandemic, but it picked up as soon as normalcy returned. Research indicates that the Chinese luxury market during COVID-19 depreciated by 20-35% in 2020 (D'Arpizio et al., 2020, p. 2). The study also predicted a bright luxury market in China post the pandemic, especially when people try to recover the lost time in consuming various luxu...