Understanding the motivations
influencing Chinese on luxury
consumption.
Shiyi Chen (10498672)
Supervisor: Rui Zhuo
Faculty of Economics and Business, University of Amsterdam, Netherlands
January, 2017
Statement of Originality
This document is written by Student Shiyi Chen who declares to take full
responsibility for the contents of this document.
I declare that the text and the work presented in this document is original
and that no sources other than those mentioned in the text and its
references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the
supervision of completion of the work, not for the contents.
Abstract
China has become the largest luxury market in the world with its strong
purchasing power. The purpose of this study is to investigate influencing motivations of Chinese luxury consumption based on Chinese specific Culture and economic through literature review of previous studies. The findings reveal that Confucian culture in regard to higher materialism and collectivism and stronger hierarchy leads to Chinese people buy more luxuries and more motivated by symbolic motivations (Veblenian, snob, bandwagon) but less motivated by hedonism. Furthermore, with the influence of opening up policy and transformation of economic pattern, Chinese buy more luxuries because rising acceptability of foreign brands. Besides, income inequality and gap between the rich and the poor driven Chinese to buy luxuries to differ them from the poor. However, with the influence of Western consumption concept, more and more Chinese buy luxuries based on independent preference and own minds, consequently, bandwagon motivation becomes less important.
1. Introduction
Luxury fashion brands developed in a dilemma and face shadowy prospect during the worldwide economic downturn. As the world’s traditional largest luxury markets, Europe, Japan, and the United States experienced flat or even downward growth in 2009 (Cavender & Rein, 2009). To the contrary, China, with its rapid
economic development and a huge population, has become one of the most important markets for luxury brands in the world and led the global luxury brand sales growth in emerging market since the global financial crisis in 2008 (Zhan & He, 2011). From 2008 to 2012, Chinese admirable growth of luxury consumption has drawn many luxury companies such as Gucci, LVMH and Cartier, and then they responded by setting up more stores in different cities of China (Lannes & Han, 2010).
Apart from that, for Chinese, 20% of personal incomes was occupied by luxury consumption, whereas the global expenditure on luxury goods was 4% of income in
average (Yu, 2014). Unger (2006) found that Chinese middle class with fixed income, relatively good financial conditions becomes the important target of luxury brands. However, Chinese middle class earns far less than that of other top global economies in spite of China is the world’s second largest economy and Chinese are consuming luxury goods in growing and large numbers (Xu, 2012). Many Chinese consumers do not have a good financial basis to purchase luxury goods so that they have to save money for several months (Yu, 2014). One might wonder why Chinese engage in such high rate of luxury consumption even some of them cannot really afford.
On the one hand, understanding the Chinese luxury market tendency and the elements influencing Chinese luxury consumers are important for international luxury brands, which is directly related to the success of their development in China. On the other hand, researches about luxury consumption started earlier depended on western cultures, some of findings might be not applicable in China because China has unique social culture and economic background and Chinese consumers also have special characteristics which result in great difference compared to Western consumers in influencing motivations and factors. In this thesis, in order to study the reason why Chinese would rather spend most of savings on luxury goods and how international luxury companies to win in Chinese luxury market, the central research question that what motivations and factors influence Chinese on luxury consumption depending on Chinese specific social background will be answered.
The research method used in this thesis is literature review. The purpose of this thesis is to examine concepts of existing researches on luxury consumption in an integrated way, also new perspectives should be provided from previous researches. Therefore, the thesis firstly reviews previous literature from scholars regarding motivations on luxury consumption in Western and general factors that affect luxury consumption motivations within western cultures. Secondly, this thesis develops a deep analysis by applying Western motivations and influencing factors to Chinese specific social culture and economic background, and comparing the influencing difference of these motivations between China and Western. Finally, the thesis
explicitly puts forward the motivations for Chinese luxury consumption behavior and essential distinctions of luxury purchasing purpose for Chinese compared that for Western consumers.
Early researches of luxury consumption motivation started by Veblen (1899). Veblen (1899 & 1964)’s research introduced “conspicuous consumption” and “Veblen effect" which indicated luxury consumption is a signal of wealth and social status. Vigneron and Johnson (1999) concluded the research results of Dubois and Laurent (1994) and Leibenstein (1950) regarding the interpersonal effect of luxury
consumption, and added two factor (hedonism and quality) personal effects to the traditional three-factor structure, which created a balance between personal and interpersonal oriented motivations. Vigneron and Johnson (1999)’s model is widely used to study the luxury purchasing behavior. Furthermore, Yu (2014) summarized and combined previous researches of Hofstede (1991, 2001), Wong and Ahuvia (1998), Richins (1994a, 1994b) on influencing factors of luxury consumption motivation, then developed a conceptual framework of the relationship between factors (materialism, collectivism, and social dominance) and symbolic motivations included veblenian, snob and bandwagon, hedonic motivation, and quality motivation. Yu (2014) found the greater the materialism, collectivism and social dominance orientation, the greater the symbolic motivation to consume luxury goods. However the the greater collectivism, the less the hedonic motivation to purchase luxuries.
To preview results of this thesis, on the one hand, Confucian culture leads to higher materialism in China, causing Chinese pursue more money and possessions to buy luxuries to improve social status and respects. Therefore, Chinese luxury consumption is more motivated by symbolic motivations (conspicuousness,
bandwagon and uniqueness). Furthermore, collectivistic culture in China increases pressures from the public and others of Chinese. As a result, with higher collectivism, Chinese luxury consumption is more like to be motivated by symbolic motivations but less motivated by hedonism. In addition, with the influence of Confucian culture, China is a strong hierarchical society with strict ordering, in which Chinese people buy
more luxuries in order to show they can be placed in high social class. Hence, symbolic motivations are more like to influence Chinese luxury consumption than Western people. On the other hand, without the influence of traditional culture, most Chinese buy luxury goods due to high quality. Also, Chinese economic pattern changed due to the reform and opening-up policy. Chinese people crazily focus on foreign luxury brands due to more and more luxury foreign brands are known. What’s more, big economical difference with income inequality and the huge gap between rich people and the poor. Chinese people are driven greatly by symbolic motivation and spend much money on luxuries to distinguish them from the poor. However, with the quick and continuing globalization process as well as the deepening of opening up policy, Chinese people tend to consume luxuries according to own thoughts and lifestyle instead of bandwagon.
The structure of this thesis is organized as follow: in section 2, the Literature review part outlines the detailed definition of luxury concept, Western background of luxury market, motivations of luxury consumption and factors impacting motivations in general. What follows is the section that specifically analyze Chinese luxury
consumption based on culture characteristics and economic policy in China. Finally, a conclusion of research results on motivations influencing Chinese luxury consumption, implications for business and limitations of this study will be drawn in the last section.
2. Literature review
2.1 Defining Luxury concept
According to different points of view, the definition of luxury is defined by scholars in different ways. In Oxford Dictionary, luxury is defined as “A thing that is expensive and enjoyable but not essential”.
In economics, luxury is often defined by comparing to the necessity. Luxury goods are not necessary and for which the rise in income leads to more proportionally
increasing in demand, whereas the necessities is one whose consumption increases proportionally less than income (Black & Myles, 2012). Furthermore, it is costly to acquire luxury goods so that people who have higher disposable income and greater accumulated wealth than the average can afford them (Guo, 2014). In addition, Simon (1998) stated that luxury has higher price elasticity than that of the necessity.
Furthermore, from the perspective of society, Vickers and Renand (2003) considered that luxury can be regarded as a symbol of identity and social status. It works as a symbolic signal that show ones’ wealth and ability to possess luxury goods to others, at the same time, consumers obtain psychological benefits by showing-off through luxury consumption. With regard to certain luxury goods, the ratio of
“intangible and situational utility” to price is comparatively high, but the ratio of functionality to price might be low ( Nueno & Quelch, 1998). Zhu (2006) further
pointed out that what the intangible utility brings to consumers is much higher than the actual function during luxury consumption. Therefore, the important difference
between luxuries and necessities is that luxuries are mostly used to meet consumer’s intangible utility and psychological values while necessities are more crucial for the basic functional needs of consumers. Thus, the psychological benefits are considered the main criterion to distinguish luxury from non-luxury products and counterfeits (Li & Li & Kambele, 2011).
2.2 Luxury consumption in Western
As one of the largest traditional luxury markets, America is always on behalf of the western luxury market (Cavender & Rein, 2009). In the United States, spending on luxury goods for American is increasing because of the expansion of the luxury consumer groups. More and more middle-income is able to afford high-end brands, the amount of millionaires in the world has increased greatly and went up to more than 200 million. Meanwhile, the traditional high-income class still keeps a high desire for luxury products (Guo, 2014). For these super-rich, they focus their sights on the
ultra-luxury products in order to highlight their unique status and to show they are different from the normal rich (Simon, 2004). In Western, people’s love of vanity is necessarily reflected in their daily life. They buy luxury goods to improve their personal taste and lifestyle, from which they can move up to a higher social class in society (Guo, 2014). In addition, luxury consumption mainly concentrates on people who are above 40 years old in western countries (Husic & Cicic, 2009).
Generally speaking, in order to understand luxury consumption in western countries, motivations of luxury consumption have raised many attentions (Danziger, 2002). In the traditional view, luxury plays a better functional role than the regular products, because they are expensive and high-level properties (Grossman and Shapiro, 1988b). However, according to more recent views, on the one hand, consumers use their own luxury properties to express their individuality, which leads to a huge demand of luxury casual use (Sun, 2011). Luxury purchase stands for an extreme form of personal value. An individual’s consumption pattern shows his social class and has an crucial effect on his purchasing behavior, exceeding the effect of income (Dubois & Duquesne, 1993). On the other hand, Bushman (1993) focused on public effect of individual's luxury purchase behaviors and proved people who care more about the likeness of external impression and community standards prefer to buy national well-known luxury brands, but ignore the real meaning of products. Therefore, people are concerned about the whole society, other people's feelings, opinions and views, which bring pressure in their purchase choices (Guo, 2014).
As there is much of the writing in the research field of luxury purchasing behavior, rather than stating each motivations of luxury consumption separately, they have been classified, interpreted, and summarized into a single framework (Table 1) using a
wide range of sources.
To be more specific, early research on the topic of luxury consumption mainly started from the work of Veblen (1899). Veblen (1899)’s research focused on the
term like “conspicuous consumption”. This research also tried to ignite the awareness that too much money was owned by too few people who had limited notions to do. Besides, symbolic motivation refers to one’s desire to use luxury goods as symbols to communicate meanings about themselves to others (Veblen, 1899). Furthermore, based on his early works, Veblen’s analysis in 1964 further divided conspicuous consumption into two motivations: one is discriminatory contrast, and the other one is pecuniary emulation. Discriminatory contrast refers that the higher wealth strata try to differentiate itself from the lower wealth through conspicuous consumption, while pecuniary emulation means that the lower wealth class attempt to emulate the higher wealth class through conspicuous consumption so as to be considered as one of their members. Based on these two motivations, the new concept - "Veblen effect" has been proposed, which can be regarded just as a specific performance of conspicuous consumption on the relationship between price and demand in practice (Veblen, 1964). Veblen (1964) stated that it is necessary for individuals to carry out the waste, non-essential consumption if they aim at showing off. The more a person can waste, the more the one can display the financial status and identity, then the underlying goal of conspicuous consumption can be realized. Particularly, in the United States, the prosperity relies on premature consumption. It is a general feature of contemporary Western society that individuals have high desires to spend future and unearned money and "carpe diem", which results in the decline of rational consumer and increase of conspicuous consumption (Jiang & Han, 2007).
Apart from that, the most pivotal and systematic work on luxury consumption motivations was conducted by Vigneron and Johnson (1999). They developed a luxury-seeking consumer behavior framework that consumer motivations can be divided into the interpersonal perception motivations such as conspicuous,
uniqueness, bandwagon and personal motivation which includes hedonic and quality to distinguish the consumers in their psychology. More specifically, Vigneron and Johnson (1999) used literature review method based on previous consumer
Table 1: Examples of literature used to define motivations (continued)
analysis carried out by Dubois and Laurent (1994) and Leibenstein (1950). Their research hypothesis is that the consumer decision-making process is explained by five main factors which form a semantic network. The main and innovative
contribution of Vigneron and Johnson (1999)’s research is to add a two factor structure based on personal effects to the traditional three-factor structure based on interpersonal effects. They realized that self-consciousness can influence consumers during decision processes of brand selections, which depends on the person's susceptibility rather than on interpersonal influence. Therefore, the prestige
framework included personal effects such as hedonist and perfectionist motives, thus replenishing the traditional three-factor structure dealing with snob, Veblenian, and bandwagon motivations created by Leibenstein (1950). Briefly, the model of Vigneron and Johnson (1999) establishes a balance between personal and interpersonal oriented motivations which tend to dominate previous researches in the feld of luxury consumption. The study results of Vigneron and Johnson (1999) can be concluded in a figure as follow:
Figure 1. Model of luxury consumer motivation in Western Source: Vigneron Franck and Lester W Johnson (1999)
Prior literature also concentrates on some key factors that affect motivations of consumers to engage in luxury good consumption, which are materialism,
interdependence (collectivism), and social dominance. Researches that how these factors affected luxury purchasing motivations can be summarized inTable 2.
What’s more, Yu (2014) carried out a more systematic study on the relationship between luxury purchasing motivations and influencing factors such as materialism, interdependence (collectivism) and social dominance. Combining separate results of previous researches on influencing factors of luxury consumption motivation and the important early works of Hofstede in 1991 and 2001 which refer to cultural dimensions, Yu (2014) developed a conceptual framework. Survey questionnaires conducted in America is the main research method of collecting data. After that, the analysis of Yu (2014) was operated through a empirical quantitative research and multiple
regression with three independent variables (materialism, collectivism, and social dominance) and three dependent variables ( symbolic motivations included veblenian,
Table 2: Examples of literature about factors influencing motivations
snob and bandwagon, hedonic motivation, and quality motivation). Yu (2014) found that materialism is the most important determinant of symbolic motivation, particularly, the greater the materialism, the greater the symbolic motivation to consume luxury goods. In addition, there is significantly positive relationship between collectivism and symbolic motivations, however the the greater collectivism, the less the hedonic
motivation to purchase luxuries. Besides, the greater social dominance orientation, the greater the symbolic motivation to consume luxury goods.
3. Luxury consumption in China
According to the report of KPMG in 2006, from 2004, the luxury consumption in China has already reached 12% of the global sales. Further, the Chinese luxury market has enjoyed an annual growth rate of 25% between 2006 and 2010 ( Wang & Sun & Song, 2011). Scheduled for 2015, China will surpass the United States and Japan to become the biggest purchaser in global luxury market (Guo, 2014).
According to McKinsey research, even during the global recession in 2009, sales of luxury goods in Mainland China increased to around 64 billion RMB by 16 %, which is far better than the performance of other major luxury markets (McKinsey&Company, 2011). In addition, according to Bain & Co’s report in 2015, Chinese consumers play a primary role in the growth of luxury spending worldwide. They account for the largest proportion of global purchases (31%), followed by Americans (24%) and Europeans (18%) (Bain & Company, 2015).
Because of a dramatic increase in wealth and the expanding middle-class, Chinese people particularly live in developed cities like Shanghai, Beijing etc, become
the basis of the potential luxury consumers (Zhang, 2005). To be more specific, it is predicted that in 2020, China will reach its goal that per capita GDP is 3,000 dollar, and GDP per capita in developed countries will even exceed 15,000 dollar. With respect to the definition of the luxury, the rise in income leads to more proportionally increasing in demand of luxury consumption, the growth rate of a national luxury consumption would probably be about twice more than the rate of its GDP (Guo, 2014). Therefore, because of a sudden increase in wealth, Chinese people do not hesitate to choose the sign of wealth - a luxury good to demonstrate their new economic and social status, which is a very natural psychological need (Sun, 2011). Apart from that, in 2009, the GDP per capita of the United States was $46, 999, however, GDP per capita in Mainland China was only the equivalent of $3,749. So there is a great gap of individuals’ wealth between China and developed countries and the gap between poor and rich in China has grown significantly (Lannes & Han, 2010). In terms of the luxury concept, luxury consumption brings more psychological benefit than functional utility. In order to get respects and self-identity from the public,
Chinese people are highly motivated to show their social status through luxury consumption, which can satisfy their psychological needs. Thus, even though some Chinese are not able to afford luxury goods, they are still willing to spend on luxuries (Wang & Sun & Song, 2011).
In addition, China has a longer history on luxury consumption than Western countries (Sun, 2011). Lu (2008) indicated that ancient Chinese upper-class purchased fine painting, artefacts and ceramics to show their taste and their social status, and this old lifestyle still influences Chinese mind in consumption today. Confucian cultural values deeply influence Chinese luxury purchasing motivations (Zhu, 2006). Under Confucian culture, luxuries are purchased for gifts. Luxury goods make both the gift giver and the receiver feel honored. “Courtesy demands reciprocit” is a deep-rooted traditional culture in China (Zhou, 2011), which means people keep friendly contacts with each other through the exchange of gifts. Luxuries with features that high quality, scarcity, exorbitant price and profound cultural foundation can be
regarded as excellent gifts and have important functions not only in business activities, but also in rewarding employees by companies particularly in festival. It is estimated that more than half of luxury goods are purchased for gifting in China (Lu, 2010). Furthermore, influenced by Confucian culture, Chinese people think “Face" that represents a reputation is important. Resulting from “face” brings a strong pressure to the group members to maintain commitment to group standards and expectations, Chinese consumers buy luxury goods with strong appetite. Luxury consumption has become a behavior to maintain or even improve their “face”, reflecting social roles and public perceptions and the dependence of relations between people in the Chinese culture (Zhang & Cao, 2010).
Because consumer behaviors may be significantly shaped by different cultural values, consumers in China and western countries may purchase the same products but for different reasons (Wong & Ahuvia, 2006). With the background of Confucian culture, firstly, China had the highest score on materialism compared with Western societies, hence Chinese have higher unwillingness to share possessions with others (Eastma & Fredenberger & Campbell & Calvert,1997). Podoshen, Li and Zhang (2011) found that the Chinese urban young have a higher score on both materialism and conspicuous consumption than American young adults. As long as people have strong face consciousness, regardless of how rich or poor, they tend to pursue money and material wealth in order to promote their reputation and social status (Wong & Ahuvia, 1998). So significant culture value regarding face in China makes the features of materialism become outstanding. Browne and Kaldenberg (1997) also found that high materialistic Chinese concern more about symbolic meanings of products. Therefore, Chinese pay more attention on their personal image in the eyes of others than Western people, so they purchased luxury goods to make them more attractive. Most of Chinese young people also prefer to use luxury brands to build their
uniqueness (Liao & Wang, 2009). As mentioned in literature review section,
materialism is the most important determinant of symbolic motivation (Richins, 1994a & 1994b; Wong & Ahuvia, 1998). Conspicuousness, uniqueness and bandwagon
concerns more about others’ eyes, such as face saving. Chinese can also earn more respect and better face saving of from reference groups by gifting. Thus, Chinese consumer is more likely to be motivated to purchase luxury goods by symbolic motivations than Western people (Markus & Kitayama,1991).
Secondly, collectivistic culture like China emphasizes public perceptions as central to one’s identity, individual goals depend on social norms and evaluations are considered as being inferior to social goals (Hofstede, 2001). On the contrary, in an individualistic culture such as found in the United States, the ties between people are relatively looser than collectivistic culture. Hence presentation of self as unique and free from constraints is more pursued in Western (Hofstede, 1991). As symbols of excellence in collectivistic culture, luxury goods are purchased to fit in standards and expectations from related groups, while for individualist consumers, buying certain luxury product is probably motivated by their inner feelings and emotions like preferences, tastes, abilities and personal values instead of the effects of norms (Wong & Ahuvia, 1998). Therefore, in the comparison with American consumers, Chinese consumer should have greater collectivism, which leads to greater symbolic motivation but less hedonism to consume luxury goods than do American consumers (Li & Su, 2006).
The last but not least, both of hierarchy and egalitarian exist in America and China, however, as a result of the deep influence of Confucian culture, China is a hierarchical society with very strict ordering structure and large power distance (Hofstede, 1980), social dominance is more likely to be found in China (Triandis, 1990). Compared with Western, Chinese people are more sensitive to their positions in social hierarchy and respect authority (Leung & Chan, 2003). In the hierarchical nature of society like China, individuals’ position is mostly measured by economic advance. Thus, Chinese have the strong need to reveal their social identity (Wuthnow & Hunter & Bergesenet & Kurzweil, 1984). Resulting from the purpose of Veblenian symbolic motivation is to show off social status and wealth, Snob symbolic motivation concentrates on exclusivity, and Bandwagon symbolic motivation underlines obtaining
social acceptability (Vigneron & Johnson, 1999; Veblen, 1964; Leibenstein, 1950), Chinese consumers influenced more by a hierarchical orientation (or social
dominance) have greater symbolic motivation than do Western consumers to purchase luxury goods (Leung & Chan, 2003).
Apart from that, in China, luxuries are also bought for personal usage in the Chinese consumer lifestyle. According to the report of HSBC in 2007, the majority of wealthy people acquire luxuries due to their high quality, the rich buy luxuries for showing-off and symbol of status accounted for 16% and 14% respectively, and 14% of the consumers are following trends. Only 8% of wealthy people buy luxury goods for other uses (Zhou, 2011). Therefore, Chinese are also motivated to buy luxury products due to the instrumental motivation of high quality that is indicated by high price (Wang & Foosiri, 2010).
it is sure that Chinese consumers’ luxury consumption is impacted not only by traditional culture, but also by specific economic pattern (Kapferer, 1997). Since the 1970s, the policy of reform and opening up to the outside world has transformed the Chinese economic landscape to a society of consumption (Li, 2006). On the one hand, as China kept rapid economic growth over the period 1979-2005 after the adoption of reforms and its opening-up initiatives, the Chinese economy has been confronted with excessive savings, the deterioration of economic efficiency, a rise in factor prices, and the materialization of internal and external imbalances. For these reasons, Chinese development pattern shifts from one driven by global investment and export to one driven by consumption and domestic demand (Ohashi, 2015). Furthermore, because of the transformation of economic pattern, China received more and more foreign investments, and has become an unavoidable market. The phenomenon of foreign brands establishing multinational corporations in Chinese market has gradually changed the daily life of Chinese people from 1979 to 2005 (Li, 2006). Chinese are likely to believe products of foreign origin have better quality, good reputation, greater diversity of choice, more attractive appearance, more character and so on. After that, more and more people think everything that has a foreign name must be expensive
and high with quality, and all those who can consume these products were regarded as rich and elite in society (Li, 2006). Therefore, in the economical background, Chinese people are driven to buy luxury goods by conspicuousness, snob and bandwagon motivations (Wang & Chen & Chan & Zheng, 2000; Zhang & Sharon, 2003).
On the other hand, at the same time with rapid economic growth, the rate of income in the top 10% and in the lowest 10% has increased to 6.8% and 18.4% respectively. The income inequality measured by the Gini coefficient has also greatly increased from 0.25 in 1980 to 0.57 in 2009. According to a report of Chinese Statistic Government published in 2006, 0.4% of the population owns 70% of the total wealth in China (Tian, 2012). Wuthnow, Hunter, Bergesenet and Kurzweil (1984) indicated that the more a society has economic difference, the more it pursues of symbolic goods. The significant income inequity and distribution imbalance extend the gap between the rich and the poor. Therefore, in order to distinguish them from the poor, Chinese people show their economic advance and social positions through high frequency luxury purchasing motivated by symbolic effect (Veblenian, snob, bandwagon) (Zhang & Sharon, 2003; Zhou, 2011; Guo, 2014).
However, according to the research of Wang and Foosiri (2010), findings prefer to disagree with bandwagon. In China, the young has become the main purchasing power in luxury consumption. More and more Chinese people acquire luxuries focus on independent preference, they respect their own minds and feelings to show good personal taste and delicate life, but less influenced by others. Therefore, consumption concept is changing and gradually close to western country concept and even
become mature in the future. Moreover, in many previous studies, most Chinese consumers buy luxury goods concentrate more on brand logo and follow fashion trend but do not understand the behind story of luxury brand (Jung & Shen, 2011),
nevertheless, in the survey of Wang and Foosiri (2010), the number of Chinese purchase luxury products for the reason of brand culture and design increase,
means Chinese consumer increased brand awareness on luxury goods, which indicates Chinese improve their band awareness and knowledge of meaning behind luxuries.
4. Conclusion
The rapid development of economy in China and the influence of native culture affects the intensity of luxury consumption. China has become the largest luxury market. The emergence of the middle class that has a strong purchasing power increase the potential of Chinese luxury market. However, many Chinese with low income level are still inclined to purchase luxury goods even though they cannot afford them. Thus, the luxury consumption is available to the individuals other than the elite and rich class in China. In this thesis, based on the methodology of literature review, the goal is to investigate the motivations drive Chinese to purchase luxury goods. Also, this thesis investigates how Chinese cultural and economical elements affect motivation and make people would rather spend most of savings on luxury consumption. The research results of this thesis can be conclude as flows.
According to previous researches, because of the definition of luxury concept, people buy luxury products in order to obtain more intangible utilities and
psychological benefits than functional value, so that intangible and psychological value differ luxuries from necessities. Luxury products with features that high price and scarcity can symbolize wealth, achievements and social status of individuals. Hence, luxury consumption can be motivated by symbolic motivations (Interpersonal effects) includes conspicuousness (Veblenian), snob and bandwagon. In addition, luxury consumers also like to realize happiness and satisfaction and even improve personal tastes and lifestyle, thus, luxury consumption motivated by hedonism. Consumers also believe that high price reveals superior quality, so they engage in luxury consumption. Furthermore, materialism, collectivism and social dominance (hierarchy) are important determinants of luxury purchasing motivations. People
pursuit wealth and possessions in terms of materialism. The greater the materialism, the greater the symbolic motivation to consume luxury goods. Besides, collectivist consumers care more about others’ feelings so that their luxury consumption motivated by public norms and standards. Therefore, collectivism positively affect symbolic motivations, but the greater collectivism, the less the hedonic motivation to purchase luxuries. Moreover, the greater social dominance orientation, the greater the symbolic motivation to consume luxury goods.
Specifically, Chinese people are deeply influenced by Confucian culture in many fields and certainly also in purchasing behavior. Confucian culture lead to gifting and face consumption in China. Within the cultural background in China, higher
materialism in China compared with Western countries causes Chinese care more about the symbolic meanings of luxuries. They pursue more money and possessions to promote reputations and social status. Therefore, Chinese luxury consumption is more motivated by conspicuousness, bandwagon and uniqueness. Furthermore, collectivistic culture in China make Chinese individuals focus on their public role in related group. However, influenced by individualist culture in which people are less tied by public constraints, Western people focus on inner feelings and personal preference rather than social norms. Chinese consumers purchase more luxury
goods to meet standards and expectations of others even if it is hard for them to afford. As a result, with higher collectivism, Chinese luxury consumption is more like to be motivated by symbolic motivations but less motivated by hedonism than do Western people. In addition, because of the deep influence of Confucian culture, China is a strong hierarchical society, in which Chinese people buy more luxuries than Western people in order to improve social reputations, exclusivity and social acceptability. Consequently, Chinese consumers have higher symbolic motivations in luxury consumption than Western people. In brief, Western people pursuit prestige and emphasize personal self more than social self, individual rights over group rights and personal self-esteem over social self-esteem, whereas Chinese affected by stronger pressure to act in accordance with external standards and expectations and social
norm to keep their face, rather than with internal wishes or personal integrity, which leads to the substantial difference on luxury consuming motivations between Chinese and Western people.
Apart from that, without the influence of traditional culture, most Chinese buy luxury goods due to high quality. In addition, Chinese economic policy also impact significantly on luxury purchase behavior of Chinese. Since the reform and
opening-up policy was implemented in China, Chinese market has attracted many investments of international brands, which makes Chinese people crazily cling to foreign luxury brands. People who can consume luxury products were regarded as rich and elite. Therefore, Chinese engage more often in luxury consumption and they are more influenced by symbolic motivations. What’s more, after opening up to the world, Chinese economy has developed dramatically, meanwhile, income inequality and the gap between rich people and the poor have also extended significantly. In order to show personal economical positions and differ from the poor, Chinese people are driven greatly by symbolic motivation and spend much money on luxuries.
However, with the quick and continuing globalization process as well as the
deepening of opening up policy, rising number of Chinese particularly the young are influenced by the Western consumption concept, they tend to consume according to own thoughts and lifestyle in a self-independent way.
It is crucial for the luxury brands to take information about motivations influencing Chinese luxury consumption into account when deciding on the sales, price and strategies of the brand. First of all, because Chinese lack of brand awareness and knowledge of the meaning of luxuries, Luxury companies should improve their brand value and create a good corporate image. They can guide consumers agree with luxury brand craft and help consumers understand brand cultures through
advertisement and introduction by staffs in stores, so that consumers are willing to pay. Secondly, quality is a important motivation for luxury consumers. Luxury companies should provide high quality products and services to guarantee brand loyalty for consumers. Thirdly, with the high demand of Chinese consumers and also the huge
gap between the prices of Chinese domestic market and overseas marke,
international luxury companies should develop Chinese e-commerce market of luxury products and further improve service online to win consumers’ trust.
Limitations of this thesis exist because motivations of Chinese people’s luxury purchasing behaviors are concluded through literature review of previous studies, which means there might be errors and biases in the research results of other scholars. Some information is outdated and cannot conform to current situations. In addition, most of previous studies found results on luxury consuming motivations by means of questionnaire surveys. Respondents might hide their deep attitudes and real behaviors to give hypocritical answers that carter to the expectations of the public due to Socially Desirable Responding (SDR) effect, which also leads to biases in findings.
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