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Why Gen Z is dominating the luxury market in China

According to Jing Daily, Gen Z already account for 40 per cent of all consumption in China. The reasons lie in the convergence of two important socio-demographic phenomena

21 February 2024

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There is a lot of talk in the luxury world, especially in China, about theimpact of Gen Z, the generation born between 1996 and 2011.

According to Jing Daily, Gen Z already account for 40 per cent of all consumption in China, a figure to which Bain/Altagamma says they will soon reach on a global scale also in the purchase of luxury goods, overtaking Millennials.

This just wasn't necessary.

We had barely made time to recalibrate the marketing mix and communication of our brands on the Millennials, who had finally managed to build buying power in their 30s, and suddenly the conversation shifted to Gen Z.

How is this possible? In Europe, our income pyramid clearly shows that Gen Z have very few resources to spend. Yet in China it is different, Gen Z have been the driving force in the market for a few years now.

The reasons lie in the historical convergence of two very important socio-demographic phenomena in China.

Firstly, the abandonment of the communist economic model and the embrace of the market economy has led to the monstrous increase in China's per capita income, which has multiplied by 13 in the last 30 years, i.e. an increase of 1,300%. In fact, we are facing the largest exodus from poverty in human history.

A materialistic society, starved and deprived of consumption for decades, as soon as it emerged from poverty, felt the need to accumulate and consume voraciously, to enjoy the same well-being as us Westerners, and above all to acquire social currency, to prove through consumption that it belongs to the newly emerging middle class.

On this first phenomenon was grafted a second equally disruptive one, the national one-child policy, embraced for a third of a century from 1980 to 2016, and brutally applied throughout China, which has generated a funnel and a concentration of this new purchasing power of Chinese families on a single heir, generating millions of new little emperors who are granted everything that previous generations could never have dreamed of.

These two phenomena explain the enormous acquisitive power of these young people and the disruptive impact of Gen Z in consumption in China and the global luxury market.

How to overcome this generational challenge for those doing Branding, Communication or even just Retail? We will cover this in the next Go East article!

* Partner at FA Hong Kong Consulting