China’s 'sugar generation' sweetens up the luxury market

By

Florent Gilles

Published
Feb 26, 2013

How the Chinese market will change in the future is giving luxury brands plenty to think about. The country is not likely to lose its Eldorado status anytime soon, provided that the brands are careful. What they need to do is attract a new generation of consumers with a specific set of tastes as described by The Boston Consulting Group, otherwise known as the “sugar generation.”

“The tastes and behaviors of Chinese customers are changing faster than anywhere else,” warned Nicolas Oudinot of the Boston Consulting Group at the Luxury Outlook conference held in Paris last week, organized by the International Luxury Business Association. Only a few years ago, you could easily sketch out the Chinese customer — predominantly male and mainly motivated by a quest for status. Now it is the Chinese middle class that consumes half of the country’s luxury economy. In the future, the Sugar Generation will describe one-third of Chinese households. They are the product of the country’s one-child policy, bolstered by parents with annual revenues on an average of $20,000. According to forecasts from the Boston Consulting Group, their number will double by 2020 to reach 280 million, spread across 100 Chinese cities.

These new consumers are more “educated” about the values of luxury than their parents and look beyond the mere logo. “They have always had a life of ease but they focus more on mix & match and can develop an appetite for consumer goods, Adidas and brands,” explained Nicolas Oudinot. “This new situation requires more targeted strategies in terms of products and communication,” he cautioned. But in China, the use of both the word and the idea of luxury is prohibited by law for ideological reasons, which further complicates a brand’s work.

British photographer Nick Knight translated this trend toward modernity in a new customizable advertising campaign for Hong Kong department store Lane Crawford (photo). By 2014, the group will have opened three units in Beijing, Chengdu and Shanghai, a network of nine department stores that mix major brands and emerging designers selected from around the world.