Chinese Consumers Behavior : China

From consumer’s perspective, the motivation of their purchasing high-end products is complicated. According to the report of Mintel (Academic.mintel.com, 2013), which showed that the reason why a large number of customs have purchased luxury merchandise in UK. There were 44 percent of female interviewees and 48 percent of male interviewees bought high-end goods due to the good quality. In addition, 31 percent of men and 18 percent of women consider the sophisticated technique

The consumption of luxury goods in China is mounting sharply. Not only those born to elite families, but also many common people are greedy for luxury brands (China, a Booming

Sociocultural: In the recent years, the desire to appear wealthy has attributed to the increased popularity in luxury products. Also, the desire for luxury goods was promoted by effective advertising and TV programming that promoted conspicuous consumption to middle-income consumers. Middle-income consumers also tend to “reward” themselves with luxury items.

   Tariffs have been a main factor affecting the development of China’s luxury market. After joining the WTO in 2001 China committed to reduce tariffs. Despite this people still prefer to buy luxury goods overseas because the existing tariffs create higher prices. A survey of 20 luxury brands sold in China shows prices are 45% higher than in Hong Kong and 51% higher than in U.S (Lan, 2011).

1. Using the tricomponent attitude model, compare the differences in attitude of consumers towards Kraft Foods versus their attitude towards Vegemite.

In the luxury goods industry, the rapid development has brought the market more brands and the latest design products. Industry matures has caused the accelerated development of a wide range of luxury goods (Chiari, 2009). However, one thing was constant, no matter how much increased production costs, the large luxury brand of origin will not be transfer. Long cultural history is an integral part of the luxury brand, and the origin of products have also brought a certain cultural value for luxury goods (Heine, 2012).Especially for Asian consumers, it seems that in the far west, craft superb tailoring and rich cultural history of the western area are the pursue of Chinese consumers (Sombart, 2001).Louis Vuitton 's president has said that (2013), “when customers buy our products, they expect Western quality. The mystery of the origin of our brand is closely linked with our brand”. Although with the close of trade, many luxury goods in the production and sales process will cooperation with other country’s companies, the final product definitely launch in the country of origin. Gucci is a legendary brand in Florence (Italy), and it will also strictly control the production done in Tuscany (Italy), to ensure pure and high-quality products (Gucci, 2015). Therefore, a regional feature has brought an intangible value and more local cultural characteristics to the luxury goods.

In Chinese people 's heart, expensive stuff means high quality, so they are willing to spend more money on buying luxury goods.

This behavior brings competitive advantages to the European luxury brands. Moreover, customers in different countries have different purchase behaviors. For instance, some countries’ customers are willing to move away from common recognized brand, because they want to purchase more exclusive products. Furthermore, because of the increasing speed of globalization, people are more likely willing to travel between different countries. These travelers will buy luxury good during their trips. In fact, Chinese tourists contributed over one third of sales in Europe. The luxury goods industry should notice to adjust the actual demand between local people and tourists in Europe

The invisible competition will appear between families due to the conformity as well. Notably, family dinners are occurs often in China. Chinese like gathering together in a big hotel restaurant, where there are large round tables which can hold 10 to 20 people in a great amount of individual rooms. In these kind of dinner, it is usually the time for family members and relatives to show their “face” by ways of dressing or brand-carrying. The same norm applies to the circle of friends as well. When a rich person first buys luxurious products, his/her rich friends will then start to pay attention to luxurious consumption as well. The invisible brands competition thus exists. Those friends who may not afford the luxury, probably try every means to get a real one in avoid of being excluded from the group. Therefore, it is easy to see different groups of Chinese gather together and each group share their own similar fashion taste and dressing codes. For instance, Yang (1998) mentions that the main motivation for young people’s trend to dress in the latest fashions, drink imported alcohol and drive luxurious brand cars especially abroad, is not to express their own uniqueness, but to conform to the “contemporary mainstream norms”. (Yang,1998).

Chinese consumers are shown to be willing to give up local product consumption in exchange for added value that comes along with Western cosmetics, particularly within fashion-forward urban cities where they have become one of the major forces for growth. However, per capita average annual spending is lower than the global average, data that prove the still high potential for further growth of such market; “the China National Commercial Information Centre (CNCIC) predicts that cosmetics retail sales in China to hit 100 billion Yuan […] The Economic Intelligence Unit anticipates China’s cosmetics market to double and overtake France, Europe’s biggest cosmetics buying country, by 2012” (Industry Report, 2010; Bombagli, 2011)

Nowadays, in china, an increasing number of Chinese consumers regard luxury counterfeit as substitute good of real luxuries that allow them to gain self-actualization and establish desired social identities. A research illustrates that by asking every fifth person in a Shanghai mall about his or her shopping experiences and habits, among the 202 who were chose to fulfill the questionnaire, nearly three-quarters of them said they had consumed counterfeit luxuries. (Fakes and status in China; Free exchange, 2012). Luxury counterfeits have always been viewed as generating detrimental impacts to the society as a whole. However, this paper argues that the existence of luxury counterfeits provides beneficial effects both for consumers and for real luxury brands: The existence of luxury counterfeit improves the prestige of the real luxury brands, and it further elevates consumer’s willingness to purchase real luxuries. Luxury counterfeit also allows people who are unable to pay for the originals to gain real and symbolic benefits that help them construct a desired self-image and social identity in their surrounding groups.

LVMH’s brand portfolio is a catalogue of the finest things money can buy. Arnault said, “A Star brand is timeless, modern, fast growing and highly profitable.”[iii] LVMH has positioned its brands strongly in the luxury segment offering more than 50 different brands under their five core competencies. LVMH has been successful through all of their various brands in their portfolio giving them each their independence and creativity. “LVMH is well known for leaving much operational and marketing freedom to the various brands it owns.”[iv] “LVMH has done an excellent job of brand positioning, says Ben Cavender, senior analyst at China Market Research Group. It has succeeded in securing the particularly enviable position of gaining a following among the top percentage of China’s wealthy. As the financial crisis stretches on, LVMH customers in China still have money to spend.[v] “LVMH’s brand imaging, which relies heavily on pushing its European heritage, is so successful that it has benefited other brands by proxy, says Paul French, one of the founders of Access Asia, a group dedicated to tracking regional consumer and marketing trends. “Everyone hangs on the coattails of Louis Vuitton’s brand imaging in China.”[vi]

There are four main factors that influence the consumer’s behavior; cultural, social, personal, and physiological. These factors determine what the consumer will buy, why they buy an item, and if they will be a return customer.

The last problem we highlighted concerns how to increase the number of customers in the mainland China market . First, we believe that the most relevant issue is a survey amongst customers on the Shanghai Tang brand perception and the 5 luxury brands in their top-of-mind, in order to analyze the competitors that the company has to face in the future.

In terms of social culture, for one thing, the China consumers are attracted by middle- and high-end products and somehow more attracted by French luxury goods, and they believe that the higher the price, the better the quality (Yuval, Vinay and Cathy, 2011, para7) (Exhibit 1). For another thing, the traditional virtue of thrift is rooted in the mindset of the Chinese, with which some of the rich in China indicate that they would not spend a large sum of money to get a product.