A China-Based Business Report on Identifying the Better Business Practices of American Affordable Luxury Fashion in the Groups of Gen-Z and Millennials in the Chinese Market

A China-Based Business Report on Identifying the Better Business Practices of
American Affordable Luxury Fashion in the Groups of Gen-Z and Millennials in
the Chinese Market
Chapter one: Introduction
1.1 Introduction
1.2 Context
1.3 Rational
1.4 Aim and Objectives
1.5 Proposed Research Design
1.6 Theoretical and Managerial Implication
1.7 Chapter Outline
1.1 Chapter introduction
Chapter one presents the context of the study, followed by the rationale, which states the
necessity of the study. Next, a brief introduction of identified business challenges and market
gaps will further point out the direction of this paper. In addition, the chapter also includes the
aim and objectives of the research. The chapter comprises theoretical and managerial
implications from academic perspectives and a brief article structure.
1.2 Context
The study is aimed to identify better business practices for the traditional American affordable
luxury brands in the Chinese market. Before diving more profoundly, it is necessary to
understand the difference between luxury and affordable luxury fashion and how the two
concepts are defined. From prior research, Chevalier and Mazzalovo (2008) mentioned that
luxury is selective and exclusive and has an additional creative and emotional value for
customers. In terms of luxury, it must critically satisfy three criteria: it must have solid artistic
content, it must be the result of craftsmanship, and it must be international (Chevalier and
Mazzalovo 2008).
Even though “affordable luxury” is usually hard to define, people tend to have different
understandings of this term; traditionally, “affordable luxury” refers to products with the similar
quality compared with luxury products but at lower price points. In order to increase the brands’
awareness and attract more customers from the middle class and younger generations, some
luxury brands started selling some items which are more accessible and affordable at the price
points (Truong, McColl, & Kitchen, 2009). Therefore, the luxury segment, which is usually
associated with exclusivity, scarcity, specialty, and high price and is only available to the top
wealthy class, has become increasingly popular in other classes (Mundel et al., 2017). Appendix
#1 is the luxury pyramid which defines the price range of affordable luxury fashion brands
should be between $300 – $1,500.
As with the rapid economic development of China, the consumption power in this market has
been brought to a higher level, and the market size in the fashion sector has been further
stretched, which has made China one of the most important markets in the global fashion
industry. According to Statists, Chinese consumer spending accounted for 21% of the worldwide
luxury market. It is expected to grow at a CAGR of 13 percent between 2021 and 2025, making
it the world’s largest personal luxury goods market by 2025 (Ma 2022). In addition, the Chinese
luxury goods market reached $43.9 billion in 202 and is expected to reach $56.1 billion by 2025
(Statista 2021). The robust macro-environment has turned out to have great potential for global
fashion companies to dive deeper into this market while many local players are growing up.
Thus, the competitions are unprecedented hyper-aggressive across the country amid
multi-direction players. In today’s Chinese market, customers are no longer purely interested in
international brands for multiple reasons, such as the limited international travel caused by the
pandemic, the Chinese got more time to discover and learn about the local brands, the rising of
national pride, and the better performance of the domestic labels, which they can provide more
Chinese-favored products when it comes to design, price, and customer service. According to
the report from Reuters, the sales growth of Chinese brands was 4% higher than that of
international brands, and the increase in customer numbers exceeded that of global brands by
16% during the JD.com shopping festival (Yu and Wu 2021). The growth of home-grown
Chinese brands has signaled that international brands are no longer the only preference for
their fashion consumption for Chinese customers.
Finally, China is one of the most complicated markets by its large population size; people living
in the different city tiers have turned out different interests, lifestyles, and shopping behaviors,
and people in various age groups and different city levels tend to have other consumption
behaviors. For instance, most luxury consumers have concentrated in tier-one cities, such as
Beijing and Shanghai. However, the rest of the towns still present a great potential for luxury
fashion goods consumption. Since the one-size-fits-all business strategy will not work out in the
complicated Chinese market, especially for the Chinese Gen-Z and millennials who are no
longer blindly follow western luxury brands and seek individual self-expression, they would
prefer brands that can precisely express their personalities, individualities (Vogue Business
China 2021). And today, the Chinese Gen-Z and millennials have become the major force in
fashion consumption. According to Statista, the total number of Chinese Gen-Z and millennials
accounted for 400 million, five times more than the U.S.(Statista 2021). In addition, the
desirability and buying frequency have made the younger Chinese generations the primary
target audiences for foreign luxury brands worldwide. They can buy an average of eight luxury
products annually, three more than the baby boomers (Statista 2021). Therefore, how the
American affordable luxury fashion brands could better grab the Chinese younger generation
customers with more curated products and services is worthy of consideration since the groups
of Chinese customers will be a focal point that the fashion players workaround.
1.3 Rationale
According to the report from McKinsey, China is steadily becoming an important market for
categories geared toward higher-income consumers. By 2030, it may be home to about 400
million households with upper-middle and higher incomes — roughly as many as in Europe and
the United States combined (Zisper & Poh, 2021). The number directly indicates the opportunity
and growth space for international fashion companies.
The increasing number of Chinese middle-class gives the affordable luxury market tremendous
potential; Companies including Tapestry-owned Coach, SMCP, and Capri Holdings, which owns
Michael Kors, all reported a double-digit increase in revenue in Mainland China in the quarter
ending in December 2020 (Biondi 2021). As Han Chong, creative director of Self-Portrait,
mentioned in Vogue Business, there is a prominent young generation of customers and a
growing middle-class population who have an appetite for brands that balance price, design,
and quality (Biondi 2021). In addition, the lower-tier cities present a great potential to this
affordable luxury sector, which many of the customers would like to approach luxury from the
bottom of the fashion brand pyramid. The luxury-liked designs, high quality, and more
accessible price points are the primary attributes of the business growth of this sector. Thus, the
Chinese lower-tier cities that the high-end luxury players usually stay away from will be another
battleground for brands in the affordable luxury sector.
However, in the more affordably priced luxury segment, the market space has further squeezed
from the younger consumers looking to jump directly to pure luxury brands or simply to
approach the high street fashion brands, such as Nike, Tommy Hilfiger, Li Ning, and so on. They
tend to have ongoing fashion trends and are at much cheaper price points, skipping accessible
luxury on the way (Hall 2021).
Indeed, the robust business performance of European luxury players has left many business
challenges to affordable luxury brands. For the American brands as well, even though they may
not be the direct competitors since the price points of the products are in different ranges, their
primary target customers are almost the same groups. And these customers usually have higher
desirability for high-end luxury goods for various reasons. To clarify, Chinese customers typically
have different thoughts about luxury brands than Western customers; they expect luxury and
fashion brands could help them signal their fortune and success, communicate their tastes, and
express their personalities. Chinese young customers usually like to relate luxury products to
confidence, self-esteem, investment for the future in the secondhand market, and consumer
psychology. And, they tend to have fewer interests in the subtle nuances attributed to a brand’s
authentic culture and history (Chen et al., 2020), which has been one of the reasons that some
scholars mentioned that Chinese customers failed to connect with fashion brands in a
meaningful way (Oswald, 2010).
Additionally, markdown and brand promotion have been massively adopted by the American
affordable luxury brands, such as Coach and Michael Kors for a long time, which is another
dominant reason the brands are losing their brand equity and becoming less attractive in groups
Gen-Z and millennials. Because to have something unique and not be the same as other people
on the street is very important for the younger Chinese customers. Thus, for the similar budgets
compared with the American brands after discount, the young customers would instead go for
the niche designer brands that have something they are looking for (Hall 2021).
For these reasons, the current business issues for the American affordable luxury brands are
that they have fewer market values for Chinese customers than the European high-end fashion
brands and fewer distinctions when it comes to styles and designs compared with niche
designer brands with similar price points. But it doesn’t mean that American brands can’t
compete with them in China. The key is how American brands could set themselves apart from
their competitors and give the customers, especially the young generations, different reasons to
purchase products from them through more curated marketing strategies and messages.
1.4 Aim and Objectives
Aim:
This report aims to analyze the current landscape of affordable luxury fashion business in the
Chinese market and evaluate American luxury fashion brands’ position and marketing practices.
Ultimately, to identify the business problems, challenges, and potential opportunities of the
brands to figure out the success factors and possible solutions for better business performances
in the target customer groups based on the capability and applicability of the brands.
Objectives:
● To critically review the overall landscape of affordable luxury fashion business in the
Chinese market and the current market position as well as performances of American
affordable luxury fashion brands.
● To contextualize the relationships and impacts between the brand’s marketing strategies
and customers’ consumption behaviors.
● To identify the barriers, challenges, strengths, and opportunities that American affordable
luxury fashion brands have under the current business landscape and marketing
practices in China.
● To analyze the perceptions, interests, and personas of the younger customers toward
American affordable luxury fashion.
● To evaluate critical success factors and aim to provide marketing recommendations for
the further business growth of the American fashion brands in China.
1.5 Proposed Research Design
This master’s project will be an industry-based business report, with all data presented as
hypotheses and personal viewpoints. It will be based on industry-relevant experiences,
statistics, numbers, facts, and narratives, all of which will be used to highlight a contemporary
situation from a unique perspective. Because ontology is more concerned with reality, requiring
people to apply existing knowledge to create facts, epistemology takes precedence over
ontology, which is notably different from the purpose of this industry-based business report.
To lay out the onion model, which will start with interpretivism, referring to researchers’ attitudes
regarding uncovered issues. Due to the outperforming high-end luxury companies and modern
designer brands, this business study will cover the challenges that classic American businesses
have in the Chinese market regarding their current business practices. Finally, the research will
explain the problem’s presence and determine the causes to develop a better business solution.
The report will use an inductive approach. The project’s second layer will be an industry-based
business report based on market observation and personal reasoning using data from chosen
sample groups. Market objective business scenario analysis and reflection are critical, even
though literature and concepts form the foundation. The inductive research technique will work
for this business report in terms of sample size. Few people will be interrogated in-depth,
representing their social world views on the issue. A deductive study will need a significant
amount of generalized data to illustrate social reality, but it will be unable to investigate human
activities and psychologies. Thus, the inductive method may be better applicable to this study.
The final layer of the report will include expert and customer opinions. The study will employ a
multi-method qualitative approach, in which semi-structured and focus group interviews will be
conducted. Interviews are utilized to acquire narratives, beliefs, and other information from
participants in the natural social setting. Narrative research will be used in the fourth tier.
Narrative inquiry is a spoken or written piece that describes an incident or series of events
chronologically connected (Czarniawska, 2004, Creswell & Poth, 2018). After the narrative
inquiry, readers of this report will be able to get in-depth interpretations of the narrative
accounts’ experiences with the topic and applicable insights. Due to time constraints and the
chosen subject, the business report will be a cross-sectional examination.
1.5.1 Semi-structured interview:
There will be five industry experts involved in this research, which will be discussing multiple
topics, such as the current position of American affordable luxury fashion brands in China,
brands’ business practices, the insights of business challenges as well as future business plans
for customer retentions and gaining new customers.
1.5.2 Focus group
There will be a group of five participants involved in this method, which will be at the customer
perspectives to reflect their feelings about the American brands, their shopping behaviors, their
fashion preference, and their expectations toward the American brands. In addition to why they
like or don’t like the brands.
1.6 Theoretical and Managerial Implication
This research will mainly contribute to two areas, theoretical and managerial. It will contribute to
the literature on young Chinese customers’ consumption behaviors on traditional American
affordable luxury fashion brands. It will theoretically analyze the American brands’ current
business practices and performances in China and identify the factors impacting young Chinese
customers’ shopping decisions.
For the managerial, this study will work as a reference for the American companies in China to
have a better understanding of their target customers and to formulate their business strategies
with more accuracy and effectiveness. It will also enable readers from other fashion business
sectors to be more transparent with today’s Chinese market and Chinese customers; thus, they
will be able to have more sense of how to communicate with the people in the Chinese market
for better business outcomes.
1.7 Chapter Outline (to be finished)
2.1 Market Analysis – Introduction
Chapter two will discuss existing literature in-depth based on published scholarships, academic
journals, and articles. The literature review will be divided into three sections, shown below:
Section 2.2 will mainly discuss the macro-environment of China; the PESTEL model will address
the current situation of China from political, economic, social, technological, environmental, and
legal aspects. The literature involved in this section will provide readers with a basic framework
rationally that will help them to understand any given business analysis of affordable luxury
fashion in the Chinese market in the later sections.
Section 2.3 this section will firstly provide a theoretical framework regarding customer behavior,
which will summarize the definitions of customer behavior from prior research and conclude the
factors that will possibly impact customer behavior. Secondly, 2.3.2 will mainly provide insights
into current Chinese customers’ shopping behavior in the different market segments. Lastly,
there will be a deeper study about the perceptions and attitudes of the young Chinese
customers toward the American affordable luxury fashion brands for better improvements.
Section 2.4 will demonstrate an overall picture of the current status of affordable luxury fashion
businesses in the Chinese market, which will analyze their business performance and
distribution channels. In addition, there will be an in-depth discussion around the marketing
practices of American affordable luxury fashion brands, which will evaluate both online and
offline marketing strategies to identify where further improvements may be needed.
Section 2.5 will mainly focus on the chapter conclusion and indicate research questions
specifically.
Section 2.2 PESTEL analysis of the Chinese macro-environment
With the rapid development in mainland China, China has become one of the most critical
markets for business across industries by its large population size and robust consumption
power. And it is one of the reasons why China has been the major continent that attracts many
foreign businesses entering this market. However, compared with the Western world, China
looks like a completely different story; cultural distinctions, political environment, the
development of technology, and many more need foreign companies to be very cautious. In
addition, the pandemic has also made the market unprecedentedly dynamic in every imaginable
aspect at different levels. Thus, the PESTEL model will work as a framework to provide a
clearer picture of the current Chinese market.
Political:
The political factors are usually about how the government interferes and regulates the country’s
overall economy, living, or a specific industry; the government will manage and control the
country through issuing systematic regulations, such as government policy, tax, international
trade, investment, and government stability (Laitala 2021). Politics is a term that covers a wide
range of aspects of a country; therefore, the politics in this research will mainly concentrate on
the retail industry, which plays a significant role in the international fashion business in China.
Starting with political stability, it is a variable of great importance in a country’s evolution since,
across time, it has been identified as causing a low level of economic growth. It was also a
consequence of poor economic development (Radu 2015). Political stability is the reflection that
presents the status of a country’s economic growth. According to the global economy published,
the political stability of China is -0.29 (-2.5 weak; 2.5 strong in Asia), with an average of -0.4
across 48 countries in 2020 (GlobalEconomy 2020), which has seen 0.25 improvement over the
last seven years since 2013. Therefore, based on the index, it turns out an overall pleasant
environment for international business in the retail industry.
Furthermore, China is in an open situation to the fashion and retail industry, in which there are
no bans from the Chinese government on businesses (Wenjing 2021). But rather, the “Belt and
Road” initiative, a global infrastructure development strategy adopted by the Chinese
government in 2013, aims to promote economic development and international connectivity. By
2022, there are 100+ countries that have been on the list and have signed up for the BRI. To
appreciate the OBOR initiative, the entry requirements for foreign companies have become very
friendly. Thus, China has welcomed many international fashion companies to open up their
branches and retails across the cities.
However, nationalism is a political ideology that significantly impacts Chinese customers’
perception of multinational companies. Prior studies have demonstrated that MNCs, as the
representatives of their home countries, have been greatly affected by nationalism regarding
their operations in host countries (e.g., Gürhan-Canli et al., 2018; Strizhakova & Coulter, 2019).
It is the same situation in China; many international fashion companies have failed at this point.
Prior studies have found that multinational fashion companies are usually vulnerable to
nationalistic attacks due to mistakenly adopted marketing and communication strategies (Li
2009). From geographic tension to sensitive cultural ads and discrimination. All of these have
caused a series of boycotts and outrage toward foreign fashion companies from the local
customers (Zhao 2022). Additionally, the complaints and anger among Chinese customers
have given the local Chinese brands a great opportunity and left many business crises to
foreign companies.
Economic:
On the economic side, China has been in rapid growth over the years. In 2021, the GDP of
China amounted to around $17.46 trillion; it ranked first in the year compared with BRIC
countries and second in the world GDP ranking (Textor 2022). In addition, according to the
National Bureau of Statistics of China published, the per capita disposable income of residents
in China reached 35,128 yuan ($ 5,230), which increased by 9.1% compared with the previous
year. The average growth rate in the two years was 6.9% (National Bureau of Statistics of China
2022). The growth rate indicates that Chinese customers now have more financial resources for
living expenses. More specifically, the per capita consumption expenditure of national residents
was 24,100 yuan ($3,586), which increased by 13.6% National Bureau of Statistics of China
2022). Thus, regarding the economy of China, the overall environment is on the positive side for
the fashion and retail business.
Social:
Regarding social activity, China should be divided into two scenarios, offline and online. Since
the outbreak of Covid-19, China has entered a normalization stage of prevention and control.
The so-called Dynamic-COVID-Zero strategy has been massively adopted over the country to
minimize the pandemic’s impact on the economy, society, and production (China CDC Weekly
2022). However, because of the strategy, there are significant impacts on the offline retail
business. According to the report from The Economist, since April 2022, 25 million Shanghai
residents have been confined to their homes due to the transmission of Covid-19, which means
there is no offline social activity allowed (The Economist 2022). The food, supply chain, hotel,
travel, and fashion were all impacted at different levels, even completely shut down. Thus, for
offline social activity, there are too many uncertainties existing. The fashion companies will need
to be well prepared for the retail lockdown at any given moment. When it comes to online social
activity, it is in a prosperous situation. Because people had more time to spend online, online
platforms were the only channels for people to stay connected. Due to the most recent
lockdown, the fitness Livestream of the Taiwanese singer and actor Genghong Liu has attracted
64M followers within a month, which has led millions of people to work together and interact with
each other (Li 2022). This atmosphere has turned out many online business opportunities for
fashion companies. For example, the sports label Fila became the first international brand to be
worn by Genghong Liu with an investment of $2.53 million for appearing on Livestream for two
days, and the Videos earned 1.32 million likes (Li 2022). Thus, the increased online social
activity is an opportunity for fashion brands to grow their brand awareness and online sales.
Technology:
The fashion business has dramatically been benefited from China’s rapid technological
development, which has turned out many opportunities, from digital payment to e-commerce
and real-time communication to customer data analysis. Prior research defined that technology
plays a significant role in the online shopping process, in which the final offering, in addition to
other value-added services such as information about product specifications and word-of-mouth
in the form of opinions/reviews from other customers, are mainly relying on the internet-based
technology development (Kardes, Reineck, and Dugan 2020). Indeed, the Chinese all-in-one
application style has made it unprecedentedly effortless for the customer to access fashion
goods across all platforms. According to the data from Statista, the online revenue in the fashion
segment reached $297.52 Billion in 2021, and the number is expected to reach $312.21 Billion
in 2022 (Statista 2022). Furthermore, behind the stage, the Wechat & Alibaba-based data
analytic tools have helped fashion companies better understand Chinese customers to deliver
more curated products and services. Therefore, the development of technology not only has
created opportunities for the fashion business but also has diversified the shopping experiences
for customers.
Environment:
The implementation of environment-relevant regulations is urgent for the Chinese government
to consider. It is not only about pollution control but also about the overall economic growth of
this country. Prior research found that China is ranked in the very front position in energy
consumption and carbon emissions, accounting for 26% and 31% of the global in 2020 (Zhang,
Liu, and Zhang 2022). China, as the largest carbon emitter in the world, is now under
tremendous pressure to reduce greenhouse gas and the emission of Co2. Indeed, by 2020,
China threw away 26m tons of clothes every year, and there was less than 1% of them were
reused and recycled (Bloomberg 2020). Fortunately, Chinese consumers are now aware of
problems caused by an overload of waste and pollution amid worldwide sustainability advocacy.
According to a group of data from Statista, the secondhand market size in China has reached
1,052 billion yuan ($156 Billion) by 2020, which increased by 20% compared with 2015
(Statista 2022). And in the positive side, by looking at the distribution of second-hand goods
sales in China in 2020, by product category, fashion and luxury goods reached 30% in total
(Statista 2022). Even though China may still be in the beginning stage compared with the
western world on environmental management, there are now some multinational fashion
companies that have involved the eco-friendly strategy in their business in China by launching
recycling services through WeChat, such as Zara and H&M (FashionChinaAgency 2021). Thus,
there might be more and more Chinese customers and fashion companies participating in
environmental management and pollution control actions over time.
Legal:
In the past few decades, China’s legal framework and market regulations regarding fashion are
lagged behind the global market. But China has issued relevant rules and laws to protect
intellectual properties and align with international standards, such as trademark laws, patents,
and copyright, which are also used for fashion creations and designs (Cavalieri and Wu 2021).
However, over the years, there is still a misalignment between the issued laws and law
enforcement. Counterfeit is usually the top concern regarding fashion law; once China was the
biggest counterfeit market. As Daxueconsulting mentioned that once there was 80% of the
world’s counterfeits originated in China, which had caused a $323 billion loss in 2017
(Daxueconsulting 2021). Even in 2022, there still are many copyrights and counterfeit relevant
lawsuits raised, which have directly led to profit loss and intellectual infringement to fashion
brands and designers. In a recent report from InsideRetail, an American freelance artist has
sued Chinese fast-fashion retailer Shein for $100 million, alleging the company copied her
artwork without permission (Stockdill 2022). Consequently, China will need to enforce the law
regarding intellectual property to give fashion brands, artists, and designers better protection.
Section 2.3 Chinese Consumer Behavior Analysis
2.3.1 Theoretical framework of customer behavior
2.3.2 Current Chinese Consumer Behavior overview
2.3.3 Young Chinese Consumer Perceptions Toward American Affordable Luxury
Brands
2.3.1 Theoretical framework of consumer behavior
Consumer behavior reflects the totality of consumers’ decisions with respect to the acquisition,
consumption, and disposition of goods, services, activities, experiences, people, ideas by
human decision-making units over time (Hoyer et al. 2021). It is about the interaction between
consumers and sellers, which a product, service, and so on offered by organizations to
consumers to satisfy their needs, demands, and desires and the process by which a
consumer comes to evaluate, consider, and own an offering of the organizations (Hoyer et al.
2021). And this interaction process will involve many people and their decisions, such as
whether, what, why, where, and how to purchase, use, and dispose of any tangible or intangible
offering (Hoyer et al. 2021). And this dynamic process is usually impacted by many factors in
both external and internal ways. Shown as figure #2.
HAWKINS, D. I., & MOTHERSBAUGH, D. L. (2010). Consumer behavior: building
marketing strategy. Boston, McGraw-Hill Irwin.
For the external influences, culture is one of the most notable factors that constantly determine
consumer behavior, which includes knowledge, belief, art, law, morals, customs, and other
capabilities and habits acquired by humans as members of society (Hawkins and Mothersbaugh
2010). Culture provides a framework for individuals or households’ lifestyles to evolve, and it is
the primary element in forming the values of individuals. Subculture usually refers to a smaller
segment of a macro-culture group in which the members within the segment share
distinguishing values and patterns of behavior (Hawkins and Mothersbaugh 2010).
Demographics describe a population in size, distribution, and structure (Hawkins and
Mothersbaugh 2010). It contains age, gender, income, location, education, occupation, and
more. Lastly, the external marketing activity is a large complex which refers to tactics and
strategies businesses utilize to encourage customers to purchase products and services by
properly using words, images, and any medium.
For the internal influences, motivation is the primary reason for the behavior; it represents g an
unobservable inner force that stimulates and compels a behavioral response and provides
specific direction to that response (Hawkins and Mothersbaugh 2010). It usually exists in the
gap between the customers’ desired state and the actual current state. Thus, motivation has
become a major driving force of demands and needs. Both need and motivation are usually
associated with customers’ feelings and emotions that impact their purchase decision-making
process. Personality is another critical internal factor that affects consumer behavior; it refers to
an individual’s characteristic response tendencies across similar situations (Hawkins and
Mothersbaugh 2010). Thus, people may have different behaviors toward the same needs.
Emotion can be identified as positive and negative in a subject manner; it is strongly linked to
needs, motivations as well as personalities. Ultimately, brands and companies constantly work
on generating positive emotions in consumers in order to increase consumer satisfaction and
loyalty (Hawkins and Mothersbaugh 2010). Lastly, attitudes are formed as a result of motivation,
needs, emotions, and personalities. Specifically, an attitude represents an individual’s thoughts,
feelings, and acts toward a particular aspect of their environment. Attitudes usually consist of
three components, shown in figure #3 below.
HAWKINS, D. I., & MOTHERSBAUGH, D. L. (2010). Consumer behavior: building
marketing strategy. Boston, McGraw-Hill Irwin. P398
2.3.2 Current Chinese Consumer Behavior overview
Generally speaking, the external influences may directly relate to the shifts of the internal
influences. Indeed, consumer behaviors may have changed at different levels globally due to
the widespread pandemic, including the Chinese customer. Notably, one shift in the Chinese
market is that more and more customers are less price-oriented. Instead, they are paying more
attention to the attributes of products, such as quality, brand preference, service, and
experience, which should attribute to the country’s economic resilience and a highly advanced
e-commerce ecosystem (PwC 2021). From a customer survey conducted by PwC, 25% of the
Chinese customers said a brand’s ethical practices would impact their brand loyalty, ranked at
the top among other options (PwC 2021). Price is no longer the primary factor influencing
Chinese consumer behavior. In contrast, the cultural factors have spiked at the front stage amid
the Chinese are expecting more engagements with brands via cultural resonance. Indeed,
Chinese nationalism has led to a new wave of Guo Chao. According to the survey indicates that
37% of Chinese respondents are now more and more willing to consider domestic brands, only
24% said they would stick to foreign brands, and 40% of respondents said there is no difference
between local brands and foreign brands (PwC 2021). And the Xinjiang act has made the local
Chinese sportswear companies more welcomed by the mass market. Over the 12 months
ending January 31, 2022, domestic Chinese brands saw sales grow by 17%, while foreign
brands saw sales decline by 24% (Killingstad 2022).
Furthermore, in the era of post-covid 19, many Chinese customers have realized that family
should come as a priority. Thus the family needs to play a more significant role in the
decision-making, especially with budget limits. According to a survey from Accenture, there are
70% of respondents said their family needs should be above their personal needs; even among
university students, the proportion is as high as 60% (Accenture 2022). Lastly, there is an
increased number of customers willing to spend on non-essential goods with more personality
expression. As the survey indicates that consumers willing to increase expenditure on products
that highlight their personal identity rose to 56% in 2021 from 45% in 2013, and 70% of
consumers from high-income levels are willing to pay a premium to highlight their social status
(Accenture 2022). Therefore, for the organizations in the fashion industry, how they could make
more curated adjustments toward the altered Chinese consumer behavior may have become a
new challenge to overcome.
2.3.3 Young Chinese Consumer Perceptions Toward American Affordable Luxury
Brands
When it comes to “affordable luxury”, there tend to have different perspectives across boards;
the prior research mentioned that this term emerged in the U.S business in 2002 and was first
introduced in China in 2008 by Coach to lure more customers from the middle class (Mundel et
al. 2020). Today, the Chinese Gen-Z and millennials have become the primary luxury
consumption forces and target markets of fashion companies based on the data shown in table
#4 from Statista below. It demonstrated that the age groups between 31-41 and 26 – 31
accounted for 43% and 31% of luxury distribution shares.