New consumer research suggests the Hong Kong luxury market is set for another challenging year.
While 42 per cent of consumers surveyed in China are looking to spend more on luxury items, in Hong Kong the figure is only 25 per cent. That marks a five percentage point drop from 30 per cent of last year, according to the seventh edition of the China Luxury Forecast, released by PR company Ruder Finn and Asian market research company Consumer Search Group (CSG).
The report says the results further reinforce last year’s conservative approach to retail spending by Hong Kong consumers.
Growing wealth has led to consumers broadening their international horizons, with spend on travel still the top luxury category for both mainland China and Hong Kong. More than half (53 per cent) of consumers on the mainland say they intend to spend more on luxury travel in the coming year, up from last year’s figure of 50 per cent. This is expected to drive more growth in luxury markets outside China.
In Hong Kong the luxury travel picture again paints a decrease in purchase intention, down by 5 per cent compared to last year.
Meanwhile, eCommerce continues to be the bright spot for luxury brands, with online purchases by mainland Chinese and Hong Kong customers amounting to 26 and 20 per cent respectively of luxury spending.
Surveying 1040 consumers from more than 120 cities in China and 301 from Hong Kong, the forecast covers people from tier 1, 2 and 3 mainland cities. For first-tier cities it interviewed 300 consumers, 400 from second-tier cities and 340 from third-tier cities. Their average annual household income was RMB 833,509 (US$128,293.35) in the mainland, and HK$957,006 (US$123,340.22) in Hong Kong.
When it comes to online purchases, accessories and beauty are the favoured products, and official brand websites the most preferred digital channels. Customers have also indicated higher confidence in spending online without having first visited physical stores, with an average number of two visits, down from 2.3 and 2.6 visits last year in China and Hong Kong respectively.
Word of mouth is the key influencer for product choice, surpassing celebrities, luxury communities and key opinion leaders.
Hong Kong and China customers also value “Chinese” elements differently when it comes to buying products or services. On the mainland, 58 per cent of respondents said that “embedded Chinese elements” were “extremely or very important”, compared to sentiment in Hong Kong, at just 11 per cent. Also, 55 per cent of Chinese consumers said they appreciated “elements symbolising good luck” compared to 25 per cent of Hong Kong consumers.
Most valued by Hong Kong consumers (44 per cent of respondents) were elements reflecting Chinese heritage, which were second-most appreciated by Chinese consumers (52 per cent).
Travelling to shop
China’s luxury travel market continues to grow, with Chinese respondents taking four domestic and three international trips, while in Hong Kong luxury consumers take 3.7 international trips annually. Japan, Taiwan and China are the top three destinations for those from Hong Kong, while Hong Kong tops the list for mainland travellers, followed by France and Japan.
For mainland consumers, culture and history were the main reasons for destination choice (63 per cent), while Hong Kong travellers most valued transportation convenience (50 per cent). Shopping was the second most popular motivation in both markets (46 per cent and 47 per cent in China and Hong Kong respectively).
Most luxury consumers in both Hong Kong and mainland China have a budget for shopping when travelling abroad. As many as 57 per cent of Chinese consumers and 46 per cent in Hong Kong know in advance what brands they will buy.
“While the demand for luxury remains strong in mainland China, Hong Kong luxury consumers are showing lesser intent in luxury purchase,” says CSG Hong Kong executive director Simon Tye.
“Hong Kong customers are still interested in discovering new luxury brands and experiences. They are very discerning customers who know and appreciate quality products.”
Travel and beauty show the most significant growth in the luxury sector, according to Ruder Finn Asia GM for luxury Gao Ming.