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Consumers in Asia buy luxuries for different reasons to the West

Different mindsets: the world does not view luxuries in the same way. CC BY-SA

From Louis Vuitton to Chanel, Rolls Royce to Johnny Walker, Asian markets have become vital for the growth of luxury brands. Asia turned over some $90bn (£58bn) in luxuries in 2014 according to Euromonitor, roughly tied with North America and not far behind Western Europe. The region is also forecast to be the main driver for growth among these big markets over the next five years, as the chart below suggests.

But there’s a paradox. The marketing strategies for many luxury brands are not producing the desired returns in that part of the world. So what’s the problem – and what can be done about it?

We all buy and consume what we believe offers value. It is one of the fundamental drivers of people’s purchasing decisions. For products that we buy regularly, the value that we perceive is largely a trade-off between what it costs, mainly in terms of price, and the benefits in terms of how useful it is. In other words the more useful a product to us, the higher the price we are willing to pay.

With luxury goods this equation becomes more complex. Here the costs are high and the benefits are not just about utility, but much more about personal pleasure and social status. But what many luxury businesses don’t understand well enough is how this varies between different countries.

Forecast growth in luxuries to 2019


Many a time on my travels I have seen the same adverts, messages and communications employed by luxury brands across the world to serve vastly different markets. Sure enough, analysts say one key reason why some luxury brands underperform in Asia is because their owners see Asian and Western markets as homogenous.

It seems many luxury businesses have erred in believing in the universality of their brand’s message. This is baffling when analysts and researchers like me tend to emphasise the diversity of individual markets in terms of geography, demography, culture and consumption patterns. To find out more about the distinctions in relation to luxuries, my co-authors and I asked 900 luxury consumers about how they see the value of such products in the UK and in leading emerging luxury markets including India, China and Indonesia.

‘He who buys Ferrari needs no more good fortune’ Christian Junker, CC BY-SA

East vs West

Indian luxury consumers are particularly influenced by what others think of them. They consume to achieve societal acceptance, reflecting the hierarchical nature of the society. They use luxury brands to indicate social status, symbolising achievement, wealth and prestige. Shopping for luxuries is fundamentally not an individual experience. Instead it seems rooted in group decisions, meaning that people’s choices of luxury purchases are directed towards others rather than themselves.

Contrast Indonesia, where the culture revolves around how you judge yourself, not how others see you. Indonesians seek to enhance themselves through consumption. Despite the general perception of the country as a collectivist society where people tend to see themselves as similar, consumers won’t follow the recommendations of others if the choice is distasteful to them. They also value luxuries as an enjoyable experience, and may buy such goods as a distraction from the problems in their lives.

Where to spend it in Jakarta: the Mal Taman Anggrek. Matthew Tenwrick, CC BY-SA

In China, despite spending more on luxuries than even the US, the country’s attitude to this market has been strained in recent years. In 2013 luxury advertising on television and radio was banned, which may explain why consumers do not strongly attach such purchases to social status or personal pleasure. Even the country’s premier got involved, calling on Chinese officials to refrain from luxury gift giving.

But what we found was still very important to Chinese consumers – and also to a lesser extent those in India and Indonesia – is the quality that luxury brands represent. They are willing to pay a premium price as a result.

In Britain, meanwhile, consumers attach less psychological meaning to luxury goods than in India, China and Indonesia. They are not swayed significantly by the pleasures offered by these brands – which may partly be because many brands have long since gone mass market. Analysts have observed that the likes of LVMH and Gucci have lost their lustre because they are widely available both in the UK and in other developed markets (the report costs £800 – a sign that luxuries is a valuable business).

The execution question

The question for the people who sell luxury brands is how they should be applying these insights in their marketing strategies. Much of it follows logically. Given that consumers in India and the UK care more about what others think of their purchases, for instance, they are likely to be drawn by messages about the product’s social acceptability and by symbolism connected to achievement, prestige and wealth.

In Indonesia, you would want to customise the sales pitch to include some emphasis on how a brand could enhance a consumer’s sense of self and make them feel good about themselves. You would also focus on the experiential aspects of buying and using the brand.

Because of the way the government has been intervening against luxury purchases in China, pursuing consumers requires a far more subtle approach – away from the bans on television and radio, of course. Connecting the idea of buying luxury brands with personal identity and pleasure may be the best strategy.

At the same time it would be important to emphasise quality, not only in China but also in the other three countries too. The fact that consumers in all these markets thought that a product’s functional value was important indicates one area where the same kinds of messages might cut through – pointing to at least some potential for economies of scale.

Aside from this, the clear message is that different countries in East and West perceive luxuries very differently. However much it is convenient to treat the world as one market, it doesn’t fit the reality on the ground.

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