Our website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.
Home Business The Key Importance of Chinese Gen Zs In 2021

The Key Importance of Chinese Gen Zs In 2021

by Staff GBAF Publications Ltd

By: Domenica Di Lieto, CEO of Chinese planning and marketing consultancy, Emerging Communication  https://www.emergingcomms.com

In the confusion and uncertainty forced upon the luxury sector in the past eighteen months, there has been a shining exception to fractured markets and unpredictable futures, China. The nation and its buying public, took covid in a widening economic stride, and increased growth and spending. The luxury sector was no exception.

Every significant survey and analyses of the future of luxury buying points to China as the centre for spending, for growth, design, and more importantly, the location that will dictate the success or failure of brands of any significant size.

With one or two notable exceptions, most Western luxury producers are currently losing market share in China, and most seem directionless in contrast to indigenous rivals that have used local knowledge to adapt, and increased sales. However, brands from Europe and US were losing ground before the pandemic, which will continue unless there is a will to understand why, and reverse what is not an inevitable trend.

Favouritism for Western luxury is gone

There is no longer an ingrained favouritism towards the traditional European fashion houses, or iconic American brands. They are seen as increasingly irrelevant by Chinese buyers, and the key group they have become most removed from, and need more than ever for the future, is the Gen Z demographic.

The uninitiated will fairly ask why luxury buyers so young are important. It is after all, the high spending Chinese millennials that are the long haul travellers that have been so badly missed in Europe and US in the last year and a half. They are also massive spenders on luxury at home. But the fact is, the 226 million Gen Zs have high disposable incomes, view luxury shopping as a necessity, and unlike Western peers, have no anxiety about their financial futures holding back spending. Luxury buying for them is perceived as a hobby, and a form of entertainment. This demographic more than any other, will dictate the future of the global luxury market.

The reason for the confidence of Chinese Gen Zs is that they follow two generations that have experienced 30 years unprecedented economic growth in China. They are the product of China’s one child only family policy in a country that will shortly be the biggest economy in the World. They represent 17 per cent of the population, but are responsible for 25 per cent of spending despite many Gen Zs not yet working.

More than 50 per cent of Gen Zs consider themselves financially independent, with money from parents and significant others going towards their monthly income. They also believe they are future proofed economically. Money is no concern, and they enjoy a booming quick credit economy. According to research by McKinsey, 36 per cent over spend their monthly budget.

The combination of high income and determined luxury spending are ingredients for a triumphal relationship with luxury designs and designers from the West. But what prevents such a happy marriage is the brands themselves. What has gone wrong is simple. The majority of luxury brands have never truly made a complete commitment to China, or to understanding Chinese consumers. They have not localised the brand, their thinking, processes, or their marketing. They present themselves as a global luxury elite, and rely on marketing practice that works outside China. To consumers they appear to hold little relevance to the moment, almost relics of the past. This is a key lesson for the luxury sector to learn in 2021.

There is, however, a significant upside to successfully engaging with Chinese Gen Zs. Apart from being the best opportunity for sustained large scale sales, they become brand loyal to a high degree. When surveyed by McKinsey, 47 per cent said they stick with brands they like. Their brand loyalty is so strong in fact, that it overshadows not only their Chinese predecessors, but also the loyalty levels of Gen Zs in many other countries.

Winning sales

It pays to create a positive relationship with Chinese Gen Zs as early in their consumer life as possible. The question is, how to hook them in the first place? The answer is firstly to understand more about the buyer. Deep learning is needed. There is no substitute for knowledge. It is essential. Social media listening, data analyses, focus groups, behaviour tracking, and listening and testing via social media community management should be used continually and intensively to acquire consumer insight.

Knowledge enables effective planning, and for that strategists are needed that understand the market from the ground up. Almost nobody sitting in a headquarters office in Milan, London or New York has it, and it is highly unlikely that anyone at one of the big global advertising agencies has either. They think in theory that is wrong, not practice that is right. It is the main reason Western brands have lost touch in China in the first place.

Fundamentally, strategy cannot be about the brand as the hero. No matter how hard this keeps being pushed Chinese consumers do not buy it, figuratively and literally. The story has to be about the consumer, and how the brand will add value to their life choices and beliefs.

For example, more than 51 per cent of China’s Gen Z consumers prioritise brands that offer customisable products. This is about consumers being first. MAC cosmetic demonstrates how this works. At MAC bricks and mortar outlets, customers can personalise purchases via an instore 3D printer, and personalised products can also be ordered for home delivery through MAC’s WeChat mini programme shop.

The power of product reviews

Social media recommendation is the single biggest influence on buying decisions in China, and for luxury brands there needs to be more marketing emphasis on creating positive review feedback from buyers by utilising key platforms used by Gen Zs, such as Xiaohongshu – Little Red Book. Spontaneous reviews by customers can be greatly enhanced in number and content by adopting a strategy of encouraging positive buyer feedback.

Getting service right

Delivery times for social commerce and e-commerce purchases is very important to Gen Zs. British online retailer ASOS had many Gen Z fans in China. But it only discovered the need for fast and reliable delivery too late. It was not the ASOS proposition that failed, it was deliveries taking more than a day to arrive. Nearly a quarter of Gen Zs expect same day arrival, and it is important to be absolutely clear about delivery times, or suffer an online backlash from customers. Delivery should be a selling point.

Environmental credentials

The environment is a significant concern of Gen Zs, and they are attracted to brands that exhibit green credentials. In future it is likely they will insist on it. However, it is important brands and retailers do more than claim green values. It they need to be backed up, and publicly demonstrated. Under achievement in environmental promise is damaging.

Creative CX is essential 

Gen Zs are native users of social media and digital technology. It is their ‘go to’ for shopping, entertainment and communicating with others. They seek unique experiences, and a sense of connection.

The average Chinese consumer looks at 15 different touchpoints as part of their customer journey. What is unique about GenZs, is that their key touchpoints are all online. They also rely on word-of-mouth referrals, and instore information. They like to mix online and offline in new ways. Many say that when they are shopping at bricks and mortar retailers, they pay close attention to the digital experiences and integrations available within a shop.

For example, gamification and access to ‘gated’ experiences are some of the key ways sellers can utilise technology instore to capture consumer data, build relationships and encourage future business. To feed Gen Z appetites, retailers can use technology that enables personalisation, and use augmented reality mirrors and features that provide information on provenance, such as the history of products being revealed with the swipe of a phone against a QR code.

Live streaming

Competition in the use of live streaming is extreme. There are more than 300 live streaming apps in China, and other non specialist apps that provide live streaming capabilities, including TikTok, Little Red Book and WeChat. There is also strong competition from China’s e-commerce giants Alibaba and Jing Dong, that have invested hugely in recruiting and promoting their own in-app live stream Key Opinion Leaders – KOLs, and Key Opinion Consumers – KOCs. They also offer small business owners and CEOs the chance to star in their own company live stream broadcasts.

In recent months there has been a major change in the way in which live streams communicate with their audiences. For GenZs, the core brand values are less important. Storytelling, and generating a strong emotional connection have become the key to live stream sales success.

Emotional storytelling

Gen Z audiences rely heavily on ‘seeding’ marketing to discover new brands, and for shopping inspiration. This marketing method has proved so successful that apps such as Little Red Book, Nice, and Chao were built completely with seed marketing in mind.

Seed marketing relates closely to the product seeding used in typical Western marketing. However, thanks to Chinese Gen Z’s determinedly posting about their buying experiences, seeding is based on huge amounts of shopping focused user generated content. Apps encourage such behaviour.

When a product ticks all the boxes for young Chinese audiences, it is not unusual to see it ‘takeover’ an individual’s Little Red Book feed for days at a time. This usually leads to stock shortages. It can even have an impact on supply chains in Europe, US and Australia, as Chinese grey market sellers in those locations (Daigous) buy to resell in China to product hungry customers back home.

Group buying

Another shopping trend that has seen growth among Gen Zs is group buying. Originally seen as a way to sell to Chinese Gen X and ‘silver’ audiences, the number of Gen Zs using group buying apps such as Pinduoduo, or taking part in group buying campaigns, has grown.

Group buying works by offering a special price for a product under the condition that a given number of people buy it at the same time. It can also work by increasing the discount based on the number of people buying the product. For older generations, the focus is generally on getting more savings. But for the less price conscious GenZs, it is the social side of this shopping experience that appeals. Gen Zs like to shop with friends, peers and colleagues.

If you do one thing it is Audit

Gen Zs are one of the most discerning and consumer savvy groups that buy luxury brands. There is no substitute for talking to them on exactly their terms about exactly the right propositions. It is the ability to do this that has allowed Chinese luxury producers to overtake their Western counterparts in both positioning and sales.

The starting point of successfully reintegrating with Chinese Gen Zs is going right back to first principles by undertaking an honest audit. Self assessment does not work for obvious reasons. An audit should be by those with recognised experience of researching and successfully planning luxury strategy in China – those that have proven credentials of generating sales in the market place.

An independent examination should reveal the strengths and weaknesses of a brand. From there it is possible to start building in the right direction, but only if there is complete commitment. China is not a market for half measures, and only those that go all in can have a positive future in the nation’s growing luxury sector.