The Great Chinese Exodus” and the luxury marketers’ conundrum

There is something brewing in the Orient — something that will radically change the population demographics of many key cities in the world.

In 2014, the Hurun Institute reported that 64% of Chinese high net worth individuals (HNWI), defined as those with assets of more than US$1.6 million, are emigrating overseas or plan to do so

This means about 1.9 million affluent Chinese individuals are uprooting – what The Wall Street Journal calls The Great Chinese Exodus – in search of the Promised Land that offers quality education, less polluted air, and better food safety standards.

With their extreme wealth (totaling US$3.8 trillion, according to World Wealth Report 2014) and potential spending power, this demographic shift creates an important consumer segment for luxury brands. Across New York, Paris, Hong Kong, and Singapore, global luxury houses rush to woo the overseas Chinese HNWIs through marketing strategies attuned to Chinese cultural specificities.

But what are these “cultural specificities,” exactly? What unique characteristics – if any – set the affluent Chinese expats apart from other consumer groups in their respective host countries? And how can luxury brands capitalise on consumer behaviour insights to convert this demographic phenomenon into sales?

Decoding the affluent Chinese expats in Singapore

In Singapore, this line of questioning takes on a particular significance for two reasons.

Firstly, the city-state positions itself as a global luxury hub, with half of the world’s 15 luxury brands establishing its regional headquarters there (Singapore Economic Development Board, 2009).

Secondly, Singapore is the top destination in Asia for 3% – still some 870,000 – current and would-be Chinese affluent emigrants, possibly due to its geographical and cultural proximity with China (Hurun, 2014).

Very little is known about this group of consumers, especially after they leave their hometowns and resettle abroad as expatriates. Their elusive nature – often retreating to specific cultural enclaves in their host communities – contributes to this dearth of insight on this intriguing segment.

To help luxury advertisers bridge this knowledge gap, SPH Magazines commissioned Agility Research and Strategy to conduct an exploratory qualitative study of affluent Chinese women expats in Singapore. They are mainland Chinese nationals who are based in Singapore, aged between 30 and 50 years old, with an annual income level above US$250,000 and a net worth of at least US$1 million.

What emerged from our discussions with these women are some insightful, even surprising findings, which debunk some often-held myths of the affluent mainland Chinese overseas – ostentatious lifestyles, flashy display of wealth, or exaggerated shopping conquests with suitcases full of cash.

In contrast, we observed the following intimate slices of life:

They move in intimate, exclusive enclaves.

The clearest trait that emerged across the board was the women’s relative reticence. In contrast to the more outgoing Singapore socialites, the affluent Chinese expats we spoke to maintain low profiles and tend to shy away from elite social spaces in Singapore.

“I seldom attend events ... I don’t mind attending if I have a companion. I would only go if I know somebody there or if I have a group of friends going with me. I feel that most of the people who attend these events are locals. Not many from China, Taiwan, or Hong Kong.”

This tendency to avoid the limelight is largely due to the language barrier and their preference for an all-Chinese speaking environment.

While those who have been based in Singapore for a while have few problems integrating in to the local society, they do retain some kind of group boundaries between the home and host communities. For example, they form pockets of cultural groups, creating discreet semi-private spaces such as exclusive “hometown” gatherings in private clubs in Singapore.

As such, the typical events targeting local socialites in Singapore might not resonate well with this particular audience segment. In fact, the affluent Chinese expats we spoke to are hesitant to freely mingle in high-profile societal events, especially when they perceive these gatherings to be too local-oriented.

They need trusted gatekeepers – credible individuals or institutions they perceive as credible and with whom they are familiar – to act as cultural intermediaries and ease them into local luxury spaces. 

They have limited cultural capital but display maturing luxury sensibilities.

Much has been written about the Chinese new class of affluent being self-made in terms of wealth. In fact, the 2014 Hurun Report Rich List shows that most of the wealth in China has been created only in the past 20 years. This short history of wealth leaves many affluent Chinese with extensive disposable income, but relatively little cultural capital inherent to those from an old riches family.

In “The Chinese Dream,” BBDO Beau (2009) argues that the newly affluent Chinese displays a functional relationship with luxury, seeing luxury as a status symbol acquired to affirm one’s social standing.

As they spend more time with wealth, and with increasing number of up-and-coming millionaires, the more “established” affluent individuals distinguish themselves by displaying luxury connoisseurship through more refined lifestyles and tacit knowledge of luxury. Knowledge, instead of wealth, therefore, becomes the new currency in this luxury landscape.

We observed the same trend among the affluent Chinese expats in Singapore that we spoke to. We saw women who are restrained with their spending and are relatively less brand savvy. For example, there is a general tendency to err on the side of the caution by preferring classic luxury brands like Chanel and Louis Vuitton, because they “found that other brands are not as classical and go out of style.”

We did however notice that the younger affluent women expressed more willingness to experiment with newer, edgier, up-and-coming brands to reflect their youth and personal style.

At the same time, there is a palpable sense of maturing luxury sensibilities and increasing discernment among the respondents. For example, they expressed genuine appreciation for quality goods, not just in terms of product craftsmanship but more importantly for the brand equity.

“I am not an extravagant person, I only spend when necessary, or occasionally … When buying high luxury brands, their story and history helps to convince me that the price is worth it; if it is interesting, it makes the price justifiable.”

Many go to great lengths to do research on luxury items that have caught their interest. In fact, all of them display a keen hunger to acquire knowledge on brand story and heritage, and often do so by referring to luxury fashion magazines and brand Web sites, visiting brick-and-mortar stores during their shopping trips, as well as consulting promoters at the point of sale.

“(I search for information on luxury products from) magazines, fashion magazines. I would want to understand the current trend.”

“I would go online to get information about a branded item, to see where I can get the best deal, which may or may not be in Singapore.”

Getting to the hearts and wallets of the Chinese expats in Singapore: A multi-platform strategy

The composite picture that emerges here is one of a reticent consumer at the verge of entering the world of luxury, hesitant yet eager on equal measures.

Her financial capital and relative lack of cultural capital makes her wary of being sold to, of carrying brands that are neither on-trend nor reflect her style. Yet this very lack of information makes her an eager student of luxury, who independently researches every purchase to get the best value out of the rare indulgence she allows for herself.

How do luxury marketers leverage these complex nuances and make the affluent Chinese expats brand converts?

Firstly, there is a clear need to build a dedicated “space” to communicate with them through culturally-specific channels. Despite being sufficiently conversant in English, their clear partiality for their mother tongue means that using an all-Chinese or bilingual Chinese/English medium would ensure one’s brand message would be more effectively received.

Secondly, and related to the first point above, brands need to bridge the knowledge gap by building trust and credibility. A familiar conduit, such as a trusted magazine or Web site with impartial editorial features, would provide the much sought after assurance.

In particular, brand building content that highlights brand stories and values in a tasteful manner would find good reception among this consumer segment.

It is also important to cater to these customers’ preference for discretion by customising marketing touch-points with personal touches and through “gatekeepers” such as trusted sales representatives who can act as their personal concierge.

As one of the respondents shared:

“I was invited (to an event) by the sales person whom I got to know and later became familiar with as I’ve been buying the products from her. She was at the event to welcome me.”

Thirdly, this group of consumers are voracious researchers who obtain information from a range of sources – online, offline, and/or through direct experiential means. Therefore, a multi-platform approach would help brands reach out to them simultaneously through various points, further solidifying the brand message.

The challenge is to coax this segment out of their consumption “reticence” by tapping into their desire to acquire the new currency of knowledge to navigate the new landscape of luxury in their hometowns and host country.

A dedicated cultural space, trusted medium, and multi-platform approach help to convey the brand message that is contextual to their current stage of evolving luxury maturity.

To see an example of how advertisers can reach out to the affluent Chinese audience in Singapore through a culturally attuned medium, see ICON, SPH Magazines’ premier Chinese-language magazine targeting the Mandarin-speaking audience in Singapore and Malaysia.