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Luo Jifeng: Inconspicuous Consumption, the New Vogue Among China's Luxury Consumers

Alumni and Public Relations Office 2017-09-13

A report by Bain & Company suggests that in 2016, global luxury market could reach 249 billion euros in value, with Chinese consumers buying products worth 73.9 billion, accounting for one third of the total.

Although past researches on Chinese luxury shopping habits indicate a tendency of buying to showcase one's status and wealth, the so-called 'Conspicuous Consumption', China's consumers are, as Professor Luo Jifeng from Antai College of Economics and Management finds out, getting more inconspicuous and 'low-profile'.

'We believe that consumers are paying more attention to quality and cultural characteristics behind luxury products, instead of simply buying to display richness and social status' said Professor Luo.

'And we are trying to see how can brands cope with the latest changes.'


Deluxe but not showy

'Luxury is a loanword, meaning an inessential, desirable item which is expensive or difficult to obtain. There is no sense of showing off or flaunt in it,' notes Professor Luo.

The displaying factor was later put forward by American economist Thorstein Veblen when explaining why the demand for certain luxury goods increases with price.

Veblen argued that consumers prefer items with higher prices because they think that it can raise the status of an item through exclusivity, and identified conspicuous consumption as a mode of status-seeking.

Since then, luxury products start to be viewed as indicators for social hierarchy, and the ability to afford them as proof of gaining social status.

However recent studies find that luxury consumption is gradually being 'detached' from conspicuous showing off, and the shift can be seen on individual, regional and national level.

'On the one hand, the elite class no longer wants to openly flaunt their status, on the other hand, when third-tier cities are chasing Kappa, second-tiers dwellers are going crazy about Nike or Colombia, those living in the richest Tier I cities have already begun exploring lesser-known brands,' said Professor Luo.

Nationally speaking, with rising living standards and more spare money in their pockets, the Chinese people are switching from simply buying luxury products to pursuing other exclusives such as customised travels, immersive experiences, as well as high-end education and healthcare services.

Professor Luo attributes the shift to several reasons. First, large scale industrial production continues to lower retail price, bringing a democratisation of shopping and making compulsive consumption impossible.

Second, the spread of entry or affordable luxuries has indeed widened the consumer base, but driven away the higher class at the same time.

In addition, a large number of fake luxury goods have also played their part.

'The trickle-down effect states that fashion flows vertically from the upper classes to the lower ones, with each social division being influenced by a higher order, and when being copied by lesser social groups, the higher groups respond by adopting new trends to differentiate themselves,' explains Professor Luo.

'Therefore, when luxury goods with showy logos started to be associated with 'tuhao' or the vulgar rich, they will also inevitably be rejected by the higher class.'

'Cultural and social fragmentation also contributes to the effect,' adds Professor Luo, 'as people's circles get smaller, using products which are less conspicuous but carry unique signs or languages which only an insider can recognise, will become a certain cultural capital which can better reflect personal taste.'


Consumption upgrade demands changes from brands

Professor Luo thinks that the rise of inconspicuous consumption – whereby brand signals are subtle, or not easily visible, to most consumers and the overt display of social status is sidestepped, is a positive signal of consumption upgrade.

In Maslow's hierarchy of needs, conspicuous buying of luxury goods belongs to the third stage, while inconspicuous consumption the highest level, where a person seeks quality, cultural expression, individualisation, customisation and experience, pursues unique enjoyment which is in line with personal identification and taste.

The shift also provides opportunities for China's home-grown brands, as 'inconspicuous consumers tend to value the origin of the Chinese culture and prefer a lifestyle more in line with the Chinese tradition,' they are more likely to notice low-profile brands with a distinctive Chinese flavour.

Western cultures have ancient myths and imperial past for inspirations, the Chinese also have their own cultural capital to utilise, the wine culture, tea culture, the delicate way of life depicted in the novel 'Dreams of the Red Chamber', just to name a few.

For brands and marketers, such upgrade also means they need to create more diverse contents to suit different locations and individuals. 'However, they also need to remember that whichever way they use in marketing campaigns, the strive for perfection, the craftsmanship and the pursuit for art and aesthetic remain indispensible for every luxury brand, they are the foundation for producing an exclusive product,' said Professor Luo. 


This article (in Chinese) was originally published on Xinmin Evening Post, a Shanghai-based local newspaper on Aug 12, 2017.


A paper by Professor Luo and others on this subject is to be published by Marketing Theory and an online version is available here