China's affluents defy economic downturn with unwavering expenditure on elegance

"Old Money“ chic, refined taste, and the power of Xiaohongshu - strategies for winning the wallets of China's high-end consumers

Although concerns about the slower-than-expected consumption recovery in China linger, affluent Chinese consumers have not stopped shopping for elegance and refined products. Furthermore, the high-end products and aesthetics associated with the notion of an upscale lifestyle have transcended the “elite” group and democratized to a broader population, propelled by the influential social media platform Xiaohongshu.

While some consumers have opted for prudent consumption, it is noteworthy that high-end consumers are spending even more. However, capturing the attention of this discerning group of customers requires more than just offering "good quality" and "value for price".

In this article, we delve into the rising trend of high-end consumption amidst a sluggish recovery and shed light on the key observations we have made regarding consumer preferences and behaviors.

High-end consumers show resilience amid the economic downturn

The number of high-net-worth individuals is increasing, and their assets are growing even faster

According to China Construction Bank’s 2022 annual report, the number of private banking clients has reached 193,700, growing YoY at 9.31%. However, the financial assets of private banking clients have reached RMB 2.25 trillion, representing a more robust YoY increase of 11.26%.

Similar patterns have been observed in other prominent retail banks, including China Merchants Bank, suggesting a relatively moderate impact from the sluggish economy on high-end individuals’ assets and consequently, their purchasing power.

Luxury consumptions driven by VIC customers are less affected by the pandemic lockdown and weaker economy

• Sales of luxury shopping malls even rose despite the lockdown

According to Hang Lung* Properties’s 2022 annual report, “a drop in footfall had less of a negative impact on sales in luxury malls. This was the case in Shanghai and even more so elsewhere. For example, Center 66 in Wuxi, which was hit hard by the pandemic, had 21% fewer shoppers, but sales still rose by 1%. Olympia 66 in Dalian saw a 6% drop in footfall, but sales jumped by 67%…”

*Hang Lung is one of the leading property developers in Asia, with a focus on commercial projects, including shopping malls, office buildings, and residential complexes.

• Prestige brands maintained stronger growth momentum than the overall market

BigOne's online sales data tracking reveals a similar trend - prestige skincare brands gained stronger growth momentum in May, surpassing both the category average and overall online sales performance. On average, the prestige skincare brands charged RMB 1238, which is 10 times higher than the average price of the category.

Xiaohongshu Live, a new incubator for upscale consumption?

Xiaohongshu (aka Little Red Book), a renowned social media platform focused on beauty and lifestyle product recommendations has become a new contender in the rapidly growing live-streaming e-commerce sector, seizing opportunities in high-end consumption.

One notable example on Xiaohongshu is Teresa Cheung (章小蕙). Born into a scholarly family, Teresa made headlines for her grand wedding and subsequent broken marriage with HK pop star Kenny Bee. She was once labeled as an actress, a socialite, and even a spendthrift. However, facing bankruptcy during the HK property market crash, she rebuilt her life from scratch…Her life reflects the fluctuations of the golden age in Hong Kong from two decades ago and embodies the essence of "old money" fashion (that is inherited, wealthy, elegant and understated).

At age 60, her debut live stream in May 2023 on Xiaohongshu attracted nearly 600 million views, outperforming other streamers. In just one day, her live stream generated over RMB 50 million in sales revenue.

Winning strategies to learn from Teresa Cheung

Teresa's success and the strong buying power of Chinese high-end consumers can be attributed to three key factors:

1. Quality over price: Instead of focusing on discounted prices, Teresa promotes a consistent lifestyle and good taste. Her brand, "Rose is Rose", takes inspiration from the famous line "Rose is a rose is a rose is a rose" coined by Gertrude Stein in her 1913 poem "Sacred Emily.” Her curated "Rose Boxes", comprising products from various brands, particularly niche ones, provide a comprehensive routine and solutions for hair care, skincare, and more. Despite not mentioning prices explicitly, these offerings are relatively high-priced, with the best-selling haircare box priced at RMB 1154, vs L’Oreal Extraordinary Oil Haircare set (shampoo+conditioner+mask) priced at RMB284.

2. Distinctive live streaming style: Teresa's live streaming style stands out with the eloquent and refined language, as well as profound knowledge and appreciation of art. For instance, she draws inspiration from renowned artworks like Sandro Botticelli's "Primavera" during product introductions, adding a touch of sophistication to her presentations.

3. Younger and richer audience: According to CBN (a leading business media platform in China), over 70% of Teresa's followers fall within the 25-44 age group, with 40% residing in first-tier cities. These consumers possess strong purchasing power and seek not only products but also the opportunity to realize their dreams.

Teresa’s two "Rose Boxes" for haircare reached RMB4.5m/4.3m in GMV

Teresa Cheung's rise symbolizes the enduring consumption power of certain groups who are less affected by the slow economy, embrace diverse cultural influences and prioritize a high-quality lifestyle.

Quiet luxury: The rich get richer but in a low-key manner