The luxury of youth and how it’s changing China

China Gen Z young man in Guangzhou

CHINA’S YOUNG GENERATION IS NOT JUST TRANSFORMING CHINA, IT IS GOING TO HAVE AN ENORMOUS IMPACT SHAPING THE WORLD

China’s Generation Z is moving up fast. A new report sheds light on this generation, giving a pointer to global companies on what they need to do to keep up with the rapidly evolving Chinese market

6 October 2019 | Marcus Reubenstein

China’s Generation Z is on the move and the world should sit up and take notice. There are 170 million Chinese people aged between 15 and 24 years; if these young Chinese consumers were a nation, they would be the eighth largest country in the world.  

This Gen-Z group is arguably the most significant generation of adolescents in the history of humanity.

Obviously, the sheer numbers make them too significant to ignore… but there’s much more. This is a generation entirely raised in the digital era, their social connection, to what and where to spend their money, overwhelmingly comes to them online.

As a consumer market they are too big to ignore. For Chinese brands this means the opportunity to build meaningful consumer connections and brand loyalty; for international brands they represent an enormously important market opportunity – particularly as the past decade of flat growth in developed economies shows no sign of abating soon.

The life experiences accumulated by these young Chinese will have a great bearing on their future lives and thinking; thus, have a great bearing on China’s future as many will eventually either start their own businesses or become business executives. They will also be the first Chinese generation to spend the bulk of their working lives in what will be far and away the world’s biggest economy.

China’s Gen-Z leads the world in financial literacy

By the nature of Chinese (and broader Asian) culture this generation is far more focused on the future than their western counterparts. OECD figures on international school education performance are published every two years, China’s results are somewhat skewed because only students in Beijing, Shanghai, Jiangsu and Guangdong are surveyed.

Nonetheless they ranked above the OECD average in language skills and science, while they were well above in mathematics skills. In a regional context their performance is on par with South Korea, behind that of Japan and Singapore but ahead of most other Asia Pacific nations, such as Australia.

Significantly, for the future of both the Chinese and global economies, in the area of financial literacy Chinese school children ranked number one by a margin that puts them streets ahead of every other nation. Ninety percent of children have above average financial competency skills, while three out of every ten Chinese students achieved the top score in financial literacy. In the world’s richest economy, the United States, that number is just one in ten.    

More than sixty percent will complete at least one university degree and, based on figures published by China’s Ministry of Education, six million current Gen-Z members will study abroad.

A generation of proficient English speakers

In addition, this generation will almost certainly have the highest proportion of proficient English speakers among any Chinese generation, another factor which will shape their consumer choices, later business decisions and how Chinese business engages with the rest of the world. A report in the Guardian newspaper estimated that there are more than 30,000 schools and private institutions offering English courses in China and it will continue to be the dominant second language for bi-lingual Chinese.   

Gen-Z Beijing youth

According the survey published this week by Agility Research, for which five hundred individuals were canvassed across 14 tier one and tier two cities, this group already has impact.

Even though many are not in the workforce, 70% of Gen-Z respondents receive at least 3,000 Yuan (A$620) in pocket money per month, while 21% receive more than 10,000 Yuan a month. Two-thirds said they save up the allowances they receive to spend it on a high-ticket price item  

Luxury goods seen as a necessity

Respondents identify as being individualistic, however, they selectively choose which groups to align themselves with. They use social media, both Chinese and western platforms like Instagram, to shape their purchasing choices. Trusted Key Opinion Leaders (KOLs) on WeChat and Weibo are also important influencers.

Gen-Z members said spending is about enhancing their quality of life and that luxury meant something that shows their taste. Only 16% said luxury goods were non-essential.

Travel ranked among the highest of Gen-Z’s favourite hobbies. South Korea and Australia were among the most popular destinations already visited, while for countries not already visited Australia and France rank highly among destinations that are top of mind.

The message for Tourism Australia, so heavily reliant on Chinese tourism, is that a wave of what the travel industry calls FITs (Free Independent Travelers) is on the doorstep. Tour groups are easier to manage because they are directed towards Chinese friendly attractions, FITs are far more open to new experiences but nonetheless will prefer experiences that are mindful of things such as Chinese language, culture and dining expectations.    

Personal brand recommendations trump brand promotion channels

In terms of brands, they expect brands to be approachable, particularly in the luxury category, where they said they were far less likely to connect through official brand apps and websites. Instead they are far more receptive to brand information coming from people they see as more like themselves. These “third party brand experiences” were found to be more authentic and personal, while the advice is more practical.

The Top Five Brands they identified with are all foreign brands, in order, (1) adidas, (2) Chanel, (3) Nike, (4) Dior and (5) G-Shock. Interestingly for two, French fashion houses Chanel and Dior, their brands were conceived without a thought for consumers in their teens and early twenties.  

While foreign brands dominate, their brand messages are delivered using Chinese social media and e-commerce platforms, like start-up Bedian.com which partners with Chinese KOLs to promote and sell foreign brands. To penetrate the Gen-Z market you can be a foreign brand that maintains its core brand values; but to communicate with young Chinese consumers you will need to be a “western brand with Chinese characteristics”.