Chapter 1
The Problem and Its Background
I. Introduction
The market for products in the Chinese setting has acquired a lot of attention lately from the academic sector. Changes in the pattern in terms of the buying behavior of the Chinese population have been noted in the past and existing literature. This study on the other hand intends to look into the behavior of the Chinese population towards luxury products available in the market. Luxury products provide the public with a unique value with regards to certain factors that affects the buying behavior. Apparently, existence of these products provides the customers a sense of prestige and pleasure once they have acquired and used the product. ( 2020) This study intends to look into the Chinese context on this effect from luxury products. Moreover, in order to acquire understandable findings and observable outcomes on the said study, a close examination on the luxury market of China will be taken into consideration in this study. Thus, concepts of buying behavior, consumerism, and theories on consumption will be predominantly used to analyze and examine the Chinese context. Hopefully, the findings of this study would be consequently helpful in the field of market management for the companies operating in the Chinese setting by providing a representation of the actual behavior of the buying public particularly towards what is perceived to be luxury products.
II. Background of the Study
The market for luxury items in China has been flourishing in the past years. To illustrate, in 2003, the luxury automobile distributor Bentley has acquired some orders from China when it made its first exhibition in China. This shows that consumers in China could afford a ₤850,000 vehicle whereas their American and European counterparts have trouble coming up with the same amount for the same vehicle. This is even astounding when one sees that when converted, the said amount would be equal to over RMB 11M. According to the said company, they have sold over 85 automobiles since their opening in China in 2002. They even indicated that 19 of these vehicles cost over one million US dollars,( 2004)
An article of (2005) even noted that the buyers from the Chinese region make up of five percent of the international sales of luxury items. They further claimed that mainland China acquires 2% of that overall share while the remaining percentage originated from the sales in Hong Kong. Italian luxury products such as Prada and Bulgari have been acquiring a huge market share in both Hong Kong and Mainland settings. For (2005) even claimed that the market present in China is correspondent to European city the size of Madrid. Given the said observation, it is no surprise that the market for luxury products is indeed in its peak in the said region. It also shows that the market in China has acquired a taste for the said luxury items. As seen in the article, the said Italian brands are apparently lined up with the top luxury brands in the international setting. Not only does this indicate the exiting buying behavior of the Chinese population, it also shows that the market for luxury items in the said region will only develop from its current position.
Traditionally, luxury items are not that important to the Chinese consumer.(, 2005a) Similarly, it has been noted that the Chinese are more often characterized as “good at saving money.” ( 2005) This means that financially, the Chinese know how to handle and manage their affairs. And with these rather “entrepreneurial” characteristics, they are able to amass a large number of financial resources. This means that the sudden surge in the acquisition of luxury items may have been triggered by the fact that the Chinese have actually some extra cash from their income to spend.
This has been corroborated by the several studies regarding the consumer behavior of China. To illustrate, the article of (2006) indicated that a survey indicated that over a quarter of its respondents have purchased at least a single luxury item at the time of the study. Moreover, half of the said respondents have claimed to have bought fashion items from designer brands. This shows that luxury products have been generally ingrained in the consuming behavior patterns of the public. This outcome could similarly indicate that every individual in the Chinese setting has the propensity to purchase a luxury item. This is supported by the same article stating that the buyers are expected to acquire fashion items, perfumes and cosmetics, jewelry, leather goods and accessories, and watches. Looking at the items indicated, all of which could be considered luxury, the Chinese respondents indicated their plan to buy sucovi (2005b) similarly claimed in her article about Louis Vuitton that the Chinese market is considered as “fourth or fifth” tourist market by the said famous luxury brand. Another article similarly indicated that the Chinese travelers are among the most viable market considering “droves” have been relocating to “urban markets” thus allowing the luxury brands to be accessible to a larger portion of the population. (2005)
China has been deemed as the luxury market of the futurre, 2005) With the increase in the average annual income of the individual, this means that the Chinese buyer have a much stronger purchasing powes, 2005a) The same study even predicted that by 2010 there is a possibility that the Chinese consumers will be able to set aside over five hundred billion dollars, basically allocated to purchasing luxury items. Normally, these luxury buyers are traditionally characterized as male government employees aged thirty five and over. 2005) However, current trends have shifted to a much wider scale including “women, self-employed businessmen, and individuals between the 25-35 age brackets.”
III. Purpose of the Study
The purpose of the study is to provide a descriptive account on the consumer behavior of the Chinese buyers towards luxury items. There have been a considerable number of studies pertaining to consumer behavior, and some of them have also taken into consideration the context of the Chinese buying behavior. Moreover, the discussions in this study will also be anchored on the past and existing literature pertaining to consumer behavior and the luxury market in Chinese territories. Nevertheless, based on the preliminary review of the existing literature, there has yet to be a considerable amount of studies that delve into the market of luxury items, both in the Chinese setting and in the international scale. As stated in the arguments above, there is a growing appetite for luxury items in the Chinese market. Consequently, the buying public of the said region is more than willing to adhere to those offered by the companies in the said market. To this end the purpose of this study is to generate an impetus for further studies regarding the behavior of Chinese buyers towards luxury items. This is backed up by the idea that the research that will be carried out in this study will only constitute a small part of the population. This means that a generalization in relations to the overall behavior of the Chinese buyers may not be appropriate. However, this study holds on to its basic objective to describe the consumer behavior particularly in the Chengdu region.
IV. Theoretical Framework
The Grounded Theory is the framework of choice to be employed in this study. The said theory starts with a particular situation where the researcher is tasked to make out the meaning and specific what is taking place. Moreover, the focus will also be on the players in the study and how they deal with their specific roles in the setting. Regular comparison of the data acquired in the study is the major element in the theory. As a theory emerges in the study, the theory is then compared to the data. It is in this process that the researcher is able to identify the categories and properties involved in the study.
Consequently, the process also entails that theoretical propositions materialize. More often than not, these categories appear to be central to the study. With the appearance of the categories and properties, the connections and relationship to the core category then establishes the theory of the study. In this manner, the past and existing literature is thus consulted to bear support with the claims of the study. One reason for choosing the said framework is the flexibility it provides the researcher. The framework is quick to respond to the situation presented. The use of the data in this context drives overall research in such a way the definitive theory that the study generates will fit appropriately with the situation.
V. Research Questions
The focus of the study is to present the consumer behavior of the Chinese population with regards to the acquisition of luxury items in the market. The researcher will try to address the said objectives by acquiring information from a focus group in Chengdu. Specifically, the study intends to answer the following questions:
1. What items are considered luxury in the Chinese setting? 2. What common characteristics do the luxury product buyers from China possess in terms of:
a. Gender
b. Age
c. Place of Origin
d. Monthly Income
3. What are the primary reasons of the buyers in purchasing luxury items? 4. How do these buyers come to a decision in the luxury item they intend to purchase? 5. How does the acquisition of luxury items affect the general consumer behavior in the Chinese setting?VI. Significance of the Study
The study is a significant endeavor in improving the knowledge regarding the consumer behavior of the Chinese population. The said study will be an addition to the emerging list of literature pertaining to the business environment in realm of China. China and its territories is becoming a very attractive market in the international scene especially after they have acquired an accession in the World Trade Organization. With the opening of its trade routes for other countries, it is important to establish some sort of study that would be able to describe the conditions and factors affecting the buying decisions of the Chinese consumers. This study seeks to accomplish just that, provide a starting study relating to the market of luxury goods in the Chinese setting. The study will be able to help companies in the industry marketing what is seen as luxury items. Specifically, the findings of the study will basically provide the profile of their target market, particularly in the Chengdu area. Moreover, the findings in this study will also present how the Chinese public considers luxury items. As taken in the discussions above, the buying public in Chinese territories has been acquiring some degree of eagerness to purchase such items. In addition, the findings in this paper will be able to help not only the prospective business people seeking to tap the Chinese market. It will also be able to help the students in management and business courses, especially in terms of the similarities and differences on the demographic elements on the said region. Moreover, this paper will eventually serve as an impetus to the subject area in business management studies pertaining to the consumer behavior of Chinese buyers. With such a small scale in the scope of the study, it is not likely to equate the findings in the entire population. Nevertheless, the study would be able to present the potential benefits of engaging in the objectives of this endeavor to other researchers and academics.
VII. Scope and Limitations of the Study
The study will be looking into the conditions prevailing in present day China, particularly in the consumer behavior of the population towards luxury items. The study will be covering Chengdu, the capital city of Sichuan province. The data will be taken from an interview from a focus group coming from Renhe Spring, the busiest department store in the area. The study will concentrate on the behavior that the buyers acquire in their purchasing decisions.
On the other hand, there are also some limitations towards the completion of the study. First, there is this issue relating to the use of the focus group in the study. The researcher will not be able to directly observe the decision making elements present in the shoppers in Chengdu. This means that the data will solely be dependent on the observations of the focus group. Moreover, the researcher will have no control over the variables in the positive or negative decision making made by the respondents. In addition, the study will also have the incapability of providing generalizations on the effects of the findings. Specifically, it would be hard to equate the findings of the study to the general character of the Chinese buyer considering the scope of the study is limited to a single area in the country.
Chapter 2
Review of Related Literature
VIII. Introduction
This literature review intends to look at the theoretical causes of such a phenomenon. This part of the study is imperative as it establishes the context of the issues in this study by reviewing the litatureer on con 2004, 4) More importantly, it also provides focus on the existing knowledge in the said topic. (p4) This chapter seeks to provide an account of the past and existing studies pertaining to the luxury market in China and the rest of the world. On a similar note, this chapter will also take into consideration the existing issues on consumer behavior pertaining to the Chinese consumer. In the past years, the opening of the Chinese market to the world has augmented the status of the country in the list of international companies, and particularly those in the in the trade of luxury items. As stated in the previous chapters, the Chinese population’s status has been elevated along with its living standards and even their purchasing power. This represents some indication of an expectation of more than their daily necessities. Along with this comes with the heightened appetite to something more than the plain and cheap products accessible to them. The analysis of the existing studies is vital to the analysis and investigation of the evidence of the theories being tested in this study. (1998, 5)
This literature review will be tackling the definition of luxury and consumer behavior. After the presentation of the review, a synthesis will be drawn to sum up the general claims in the existing studies in luxury goods and consumer behavior.
IX. Definition of Luxury A. Luxury
Luxury is often related to concepts of aristocracy, wealth, and affluence. Studies however have taken this concept into consideration. Asn (2005, 247) indicated in his study, the concept of luxury is “complex and fascinating”. He has indicated several connotations of the term. One is the currently commonplace use of the concept of luxury, specifically its constant connection with the word “goods.” This may indicate that the term is used nowadays to denote material objects and other mundane possessions which may be purchased by wealth. Another contextn (2005, 247) indicated in his text is the use of the term, particularly in relation to excess. Thus, the concept of adequacy may possibly be the antithesis of what luxury means, at least as Griffin places it. Nevertheless, his definition of luxury that fits today’s circumstances may possibly be intertwined with his discussion with reference to capitalism which shifted the view of the term as a political and aesthetic concept.
(2005) on the other hand provided his own definition of the term luxury. Based on his most recent work, luxury is defined by the following features:
a. something expensive or hard to be obtained
b. Something inessential but conducive to pleasure and comfort
c. Sumptuous living or surroundings: lives in luxury.
In looking at the definitions of the academics cited above, it appears that there are a couple of claims that appear to be complementing in their studies of luxury. Both of them claim that it is expensive and that it is some sort of excess. Therefore, one comes to a summation that the luxury is something costly or pricey and appears to be a non-necessity.
An earlier work ofr (2004) claimed that the phenomenon of people purchasing and consuming luxury goods and items falls into what he connoted as discretionary spending. This type of spending is divided into four categories: utilitarian purchases, indulgences, lifestyle luxuries, and aspirational luxuries. The first type, utilitarian purchases, is basically the purchase of non-necessities by the consumer. The problem in this context is that the consumer believes that they actually need the luxury goods. In looking at the said situation, it appears that this is more of an action to satisfy an urge. This type of discretionary spending is predominantly concerned with the spending of money on luxury (non-necessities) goods to satisfy certain mental utilities.
The second type of discretionary spending, indulgences, treat purchases as something that is frivolous. They do this in such a manner to avoid the feeling of guilt possibly caused by spending too much on luxury items. To some degree, they also tend to buy in a lesser amount of goods to avoid feeling guilty. As taken by (2001, 7) the modern consumers tend to adhere to a buying consumption where they treat it as a leisure activity. Leisure shopping is apparently brought about by the emergence of shopping malls and department stores all over the world.
The third type, lifestyle luxuries, appears to be the more rational type of discretionary speninger (2004) claimed that this type of spending comes after all what appeared to be the basic necessities of the individual is completely fulfilled. Purchasing a beach house, luxury automobiles, and even designer fashion are among those that are bought by those seeking lifestyle luxuries. This means that these individuals, given the fact that their daily needs are already satisfied, basically intend to take pleasure in their lives by purchasing such grand items.
On the other hand, aspirational luxuries are typically similar to the lifestyle luxurieer, 2004) However, they are merely similar in the context that the items that are purchased in this area are as grand and as expensive as that of the lifestyle luxuries. The difference rests on the practical attribute of these items for the buyer. Luxury items such as handbags and jewelry are examples, however these items have to meet the requirement of being the top of its niche. So it means that a handbag should be from a boutique bearing a famous designer’s name and the jewelry should be crafted by world-renowned jewelers. This shows that this type of spending discretion is highly connected with the brand of the item. This type of luxury is comparable to whatl (2002, 156) indicated as the new luxury. It is what he claimed as the magical story that satisfy every desire and yearning for fixity.
B. Brand and Luxury Items 1. Branding: Brand Equity, Brand Knowledge, and Brand Image
Branding has turned out to be among the primary tools of companies in acquiring a greater market share in their respective industries. A brand is a name, term, design, symbol, or any other feature that distinguishes a producer’s product or service that he/she provides from the other competitors in the market.1991) The key feature of the brand is to make the product or service rendered stand out from the rest of the completion. This means that a specific attribute of what a company presents may be used as a brand. To this period, companies allot a huge amount of their resources to build up their brand in the market.
In addition,r (2000) indicated this distinguishing factor of the brand as brand equity. (p28) This is what they claim to be the difference of the value of the brand on the market and the value of a specific product devoid of the branin (2000, 228) indicated that this idea of brand equity is basically similar to what is commonly noted as the “added value” to the product. With a myriad of companies that manufacture and offer different products and services, it is inevitable that items may turn out to be the same, interchangeable and even claimed to have been copied. It is in this added value where branding comes to play. Marketers vie to represent a product that is distinct and appear to have high value to the consumers.
Morever, (2000) further stated the need of another element in branding, brand knowledge. (p139) In looking at the discussions of the said authors, they have divided the concept into brand image and brand awareness. Barnard, Bloom, (2002, 7) claimed that the use of brand awareness is done is a process starting on the recognition of the brand. Advertising is then used as a reinforcing mechanism to promote the brand image and provide a greater name recall for the product. The last phase is where the brand name becomes equated with the product. This means every time a need to purchase a certain product, luxury or commodity, the brand comes to the top of the mind of the buyers.
Brand image on the other hand refers to what the consumers think of the brand, 1996, 12) This means that the brand image is the collection of perceptions the consumers hold with regards to their acquaintance with the brand. This could be a result from the information they receive about the brand from advertisements or even from second-hand information from close friends. This factor of brand knowledge is a significant indicator of the purchasing behaviors of the consumers.
2. Perceived Value of Brands
One of the basic attribute of luxury items is their perceived value. In the context of advertising, this perceived value is acquired through the process of branding. , 2002, 156) As it was claimed by the wll (2002) that t the central purpose of branding is to create these values that then place the difference basic items. The outcome is a luxury brand described in the work or (2005) stating that it should first be expansive. It states that luxury brand have to be a grand scheme to offer a new position for marketers to venture and new-fangled chances to complement the consumer’s private life. A luxury brand has to convey a story. The brand has to make contact with customers. Storytelling is the helpful technique to make contact with consumers and establish brand recognition. Morevger (2005) further indicated that a luxury brand have to be relevant to consumers’ need. The consumers’ emotional needs and physical necessities have to be fulfilled by brand. So it is indispensable to establish an expansive brand to provide marketers opportunity to develop. Similarly, a luxury brand has to adjust to consumers’ value. Contemporary consumers may possibly recognize whether a particular brand is laudable by evaluating whether it offer a greater meaning. They are not only concentrating on product itself but also on the added value, which may have an effect on their post purchase. (1999, 2) noted the work of Porter using it as a basis for their argument. They claimed that companies create a value for their respective clientele by building a value chain that the organization inherently adheres to. It is when the customers realize this value chain, then it is said to have a competitive advantage on the market. In the course of acquiring such an appealing value chain, organizations need to address factors of their operations by making use of theory and other economic tools to make out the possible courses of action that the company should acquire. In addition, a luxury brand has to perform for the consumeer (2005) included the performance to luxury goods particularly on the experiential requirements. If it makes the consumer feel fantastic, extraordinary, and only one of its kind, as well as carrying out its definite material function or purpose effectively, then it satisfies the consumer’s performance expectations.
In summary, brand in luxury market, is the most important matter for sustainable development in the context of the companies in the luxury market. A high-status and esteemed brand image may possibly stimulate customers’ buying behaviors and establish their brand loyalty. A lot of luxury companies allocate more financial assets to endorse their brand with the intention of acquiring a chic and fashionable image. The moment the brand loyalty is established, they acquire more time and chances in luxury market.
X. Consumer Behavior A. Consumerism
There are numerous concepts and models that pertain to the consumption of human beings. Nonetheless, the theory presented by Veblen possibly best fit the arguments of this paper. Thorstein Veblen’s foremost contribution to contemporary conflict theory rests in the actuality that he was among the not many early American sociologists to examine the origins of power and conflict in an extensive historical framework.n, 2006, 97) He examined culture in the context of conflicting interests involving diverse social and economic clusteott, 2004, 765). He was similarly fascinated in the elements and components of human nature that lie beneath social behavior. Moreover, Veblen indicated the expression “conspicuous consumption” to talk about the observance of getting goods past what one requires for continued existenceg, 2001, 100). He referred to the acquirement of goods for reasons of show and position, a practice that was, at the occasion, within the means only to the well-off, those whom he described as the leisure class (2004, 765). Veblen contended that as society grows to be rich, it turns out to be extravagant and people employ their wealth to get hold of status symbols with the intention of making an impression on others.
The connection involving Veblen’s model of consumption and the emergence of the present type of consumerism is apparent. (Trigg, 2001, 99) Consumerism is the propensity to characterize oneself by the acquisitions of goods and services. (Harris, 2000, xxi) Consumer culture acquires a personal thing, the understanding and expression of self and combines it with a remote system, the manufacture of goods, services and media in a distant market. Given that advertising generates and maintains a dogma of consumption, it is a social force that has to be examined for effect and influencin, 2000, 10) Consumerism heartens a trend of individualism by concentrating on the needs, real or artificial, of the buyer and, thus, redirects the concentration from superior societal issues. 2001, 99)
These models indicate that there is a shift towards a more materialistic orientation towards the issue of buying behavior among the consumers in general. Though there is the recurring need to buy what is considered commodities, apparently consumers have this propensity to purchase products which refer to a specific brand or even something that exude social status.
B. Relationship with Income and Social Class
It is the contention of this study that luxury goods are products symbolic of elements such as income and one’s social class. Studies have indicated that the profession or line of work of the individual have the propensity to be directly related to his/her use of time for leisure, allocation of resources for the family, political preference among other things. It is in this logic thatd (2002) indicated in their study that the occupation of the individual is the most significant indicator of social class. This may also equate to what econmoist m have claimed with regards to the purchasing power of the individual. On a study on the ideologies presented bytt (2000) indicated that the possession of wealth among individuals creates this sense of power over the goods they purchase. (p429)
C. Reasons for Purchasing Luxury Goods
The buying behavior of people often entails how a product or merchandise performs in the market. The response of the public to these specific kinds of products will similarly show how long it will stay in the market. To some extent the modern consumer is characterized as powerful in the market because not only that they now the value of their money, they are also informed and educated in making their choicesl, 2002, 12) Thus, companies go to great lengths just to keep with the patterns of decision making done by the public, particularly their target marke (1990, 134) formulated several consumer styles present among the consuming public in the United States. They indicated eight styles including the (a) perfectionist (quality conscious); (b) brand conscious; (c) novelty and fashion conscious; (d) recreational (shopping conscious); (e) price conscious; (f) impulsive and careless; (g) confused by over choice; and (h) habitual (brand loyal).
However, these do not directly address the issue on why people buy luxury items. The theory of Maslow (1999) may be useful in this category. The hierarchy of needs indicated in his theory is summarized in the table below.
1.Physiological needs
These are biological needs, such as those for oxygen, food, water, and a relatively constant body temperature.
2.Safety needs
Safety needs have to do with establishing stability and consistency in a chaotic world. These needs are mostly psychological in nature. We need the security of a home and family together with freedom from physical violence, crime, and the like.
3.Need for love, affection
and belongingness
Love and belongingness are the next need. Through the expression of this need, people overcome feelings of loneliness and alienation.
4.Need for esteem
There are two types of esteem need. First is self-esteem, which results from competence or mastery of a task. Second is the attention and recognition that comes from others. This is similar to belongingness, but wanting admiration has to do with the need for power. Desire for status and the aspiration for status symbols, like expensive cars, are an expression of this need for esteem.
5.Need for self-actualization
This is the ultimate need that is expressed only after the foregoing needs are satisfied. The need for self-actualization is “the desire to become more and more what one is, to become everything that one is capable of becoming”. People who have everything can maximize their potential. They can seek knowledge, peace, esthetic experience, self-fulfillment, oneness with God, and more.
The work of Maslow only emphasizes that the need of an individual increase and progressively become something equivalent to one’s self-actualization phase. The needs of the individual grow incrementally as one phase is satisfied. This reflects their reason to buy luxury items. The reason is based on that need. ( 2004) That need is an inherent compulsion to satisfy a distinctly felt need. Whether it may be a need to satisfy one’s need to belong to a specific social class or even to satisfy the need for one’s self-esteem recognized through recognition, these needs are basically the main motivation of a person buying the luxury items.
XI. Synthesis
This literature review has presented several discussions regarding the relationship of luxury and the behavior of the consumers towards it. It has discussed the possible reasons why some items are perceived as luxury and the reason why people are motivated to purchase them. In looking at the discussions above, it appears that a person’s income and social status may be connected to purchase these items. As stated in the discussions above, luxury is symbolic. In so doing, the one holding the luxury holds the same symbol, possibly of social status and even level of income.
Chapter 3
Methods and Procedure
This part of the study will be discussing the methods and research techniques employed in the study. Specifically, a close discussion on the methods used, respondents, instruments used, its validations and administration is presented in this chapter.
I. Method of Research to be Used
The study will employ a descriptive form of researcell (1994), noted in his study that descriptive research is predominantly based on observations and surveys. This fits perfectly to this study considering the study will be taking into consideration the acquisition of data from a focus group that are tasked to observe the respondents of this study. The descriptive method of research is characterized as cheap and quick. This means that the researcher will be able to make the most of the resources allotted in this study in implementing such a research. On a more specific note, the use of such a method will allow the researcher establish the existing situation by gathering information from an area prescribed in this study. In addition, using the descriptive method of research permits the researcher to illustrate the nature of the situation intended to be studied as it occurs and in the same time look at the possible causes that triggers the said phenomenon.
It also appealed to the researcher that the use of descriptive method will provide first hand data from the respondents. This will give way to the formulation of rational and sound conclusions and recommendations at the latter part of the study. Furthermore, the study is predominantly qualitative in nature. The researcher opted to make use of such a method because this study similarly has an objective to uncover and to construct theories that would explicate the relationship of one variable with another variable by means of qualitative factors present in research, which is the rationale of a qualitative research method 1990). These said qualitative factors do not have benchmarks or measures for that matter. In its place actions, behaviours, convictions and ideas are often gauged in this kind of study. 1990) Furthermore, the qualitative research is distinctively multi-method, concerning an interpretative, naturalistic methodology to the area under discussion. 1990) This indicates that researchers using such a method study things in their natural environments, with the intention of making sense of, or construe occurrences in the context of the implications individuals bring to them. 1990)
II. Respondents of the Study
The respondents of the study consists a focus group with eleven participants. These participants include personal shoppers that are employed in the Renhe Spring, a department store in the capital city of the Sichuan province, Chengdu. The data is acquired using interviews to the individual members of the focus group. These personal shoppers are commissioned by the Renhe’s customer service department to keep a good relationship with customers and go along with them in their shopping. Personal shoppers typically provide customers some guidance regarding how to dress up and introduce some new brands and newly arrived merchandise to draw the consumers’ consideration. They can survey customers’ buying behavior and purchasing decisions in a much simpler way when they escort them in their shopping. Consequently, their responses are very valuable for this research.
III. Instrument to be Used
The instruments to be used in this study are interviews, with a set of researcher-made questions. In-depth interviews are used because to address the difficulty of exploring the population’s psychological needs from luxury products. Using the interview as a tool will allow the researcher/interviewer to adapt to the individual sessions by developing further in-depth questions to direct the respondents in communicating the factors affecting their buying decisions. This adaptability and flexibility provided by interviews are elements that may not be provided by a questionnaire.
The researcher is going to make use both primary and secondary data so as to very much examine the conditions involved in the study. The primary source of data will be derived from the data from the interviews and the researcher-made questions conducted by the researcher. The primary data commonly provides the thorough definitions of conditions employed in the study. Consequently, these are generally divided into more detailed classifications. The secondary sources of data will be based on published scholarly articles from social science journals, theses and related studies on business management, market studies, specifically on consumer behavior. Afterwards, the researcher will sum up all the data, construct a conclusion anchored on the analysis of the said data and offer insightful conclusions and recommendations on the dealing with the consumer behaviour of the Chinese buyer towards luxury items in the market.
IV. Validation of the Instrument
In the validation of the instrument to be used in this study, the researcher will submit a sample of the set of questions to be asked to the respondents. After ethically examining the questions and upon approval of the advisor, a sample interview session will be done with two of those in the focus group. After the session, the researcher will then seek suggestions and other possible opinions from the said respondents as well as possible corrections on the wordings of the paper to guarantee a valid instrument. After that, the researcher will continue to look into the reliability for the interview questions. The researchers will exclude irrelevant questions and will change words that would be deemed difficult by the respondents, to much simpler terms.
V. Administration of the Instrument
In the administration of the research instrument, the researcher will leave out the respondents who were used in the validation of the research questions. The researcher will also compute, keep count and tabularize all the answers in the given interview questions. Furthermore, the interview will employ a structured interview. It shall be made of a record of unambiguous questions and the interviewer does not digress from the listing though he may bring in any extra comments into the interview process to allow the respondent to understand certain areas that are not clear or appear ambiguous to them. The interviewer may encourage the interviewee to shed light on indistinguishable responses or to similarly expand upon succinct comments. All in all, the interviewer is not to share his/her personal beliefs and opinions to (directly or indirectly) manipulate the responses of the respondents.
Chapter 4
Data Presentation, Interpretation, and Analysis
I. Introduction
This chapter presents the limited data gathered from the set of interviews carried out by the researcher to uncover the current situation of consumer behavior of the Chinese market towards luxury items. Specifically, the study was focused on the city of Chengdu, the capital city of the Sichuan province. The findings of the study are presented in four sections. The first part of the chapter is going to present the common characteristics of the buyers if luxury products. the second part will discuss the items that are considered luxury in the Chinese setting. The third part will be discussing the possible reasons of the consumers of buying luxury items. The fourth part will also take into consideration the decision patterns to which the consumers engage in when buying luxury products. the succeeding discussions will also be presented with reference to the existing figures regarding the luxury market of China. Similarly, past and existing studies on the topic will also be consulted to support the findings acquired by this study.
II. Common characteristics of luxury product buyers from China
This part of the chapter is going to discuss the common features that are shared by the buyers of luxury items in China. The data acquired here is based on the responses of the personal shoppers on the questions provided to them in the interview carried out by the researcher. According to the respondents, their customers come from different genders, both male and female. All of them cater to both male and female shoppers provided that they are employed by the said shoppers. However, six of the eleven respondents clearly indicated that they have more male shoppers that require their help as personal shoppers. They also indicated that more often than not, these male shoppers go for the high end products, luxuries of sorts. This response may not clearly present a particular indication on the number of the genders of the luxury shoppers basically because some male or female luxury shoppers may possibly not acquire the services of a personal shopper to purchase luxury products. Nevertheless, it shows that there is a degree of masculinity in the culture present in the Chinese society. In this context, masculinity describes the level on which a society regards masculine roles and achievement. Moreover, this shows how gender is regarded in the said society. The recent work ng (2001, 433) indicated that Chinese society acquired a high dimension of masculinity in their culture. This shows that the major structures of the society in a Chinese society are dominated by male. Needless to say that the area surveyed and observed has a high level of gender differentiation present in its society, especially in the level of luxury purchasing.
However, when one looks closer, the response of the personal shoppers also means that five of them normally tag along with women shoppers who employ their services. This corroborates what has been indicated in the earlier chapters of this study. China’s consumer profile with regards to purchasing luxury items has now shifted from the stereotypical male government worker, women are now coming in the scene as they take a new role in the market. According to the site of Direct Marketing Asia Limited (2006) the women of China is now changing its face with over 93.5% of them having an “irrational or unnecessary” consumption behaviors. The table below summarizes the DMAL’s (2006) claim on the shift on the role of Chinese women on the market.
Table 1. The Changing Faces of Chinese Women
Shanghai
Beijing
Guangzhou
Lifestyle
-Trendy
-Sophisticated
-Emphasize intrinsic beauty
-Faddish
-Fashion follower of HK
Preference
-Brand conscious
-Price conscious
-Time conscious
Shopping Habit
-Loyal to products made in Shanghai
-Experimental
-Functional purchasers
-Look for durability and maintenance
-Nonchalant
-Buy imported brands
The data above reveals the types of female buyers in three cities in China. This complements the study specifically because it is a study of Chengdu. As seen in the table above, there is still some level of variance among the findings in the three cities. On the other hand, in the city of Chengdu, the respondents stated that the ages of the people buying the luxury items were highly varied. Three respondents stated that their customers were predominantly male buyers in their early forties. They also indicated that they frequently acquire their (personal shopper’s) help in searching for items of fashion i.e. loafers, suits, and timepieces. On the other hand, four respondents claimed that their customers were female buyers on their twenties and thirties. This corroborates with the claim of DMAL (2006) on the changing face of the Chinese female. Women are now blurring the lines of the masculine society that has hounded the Chinese environment for ages. Basically, this shows empowered women who could afford to have to quench their thirst for what is considered luxury. The remaining respondents on the other hand indicated that the customers that they cater to are similarly varied in nature. Men and women alike employ their services on a similar fashion. However some of them have indicated that the customers they tend to help are those who seem to be in their early years of employment. They claim that these are young professionals that tend to be the most frequent customers purchasing luxury items.
Moreover, the respondents indicated that the majority of those that they have assisted are from the city proper. This means that most of the people who tend to buy luxury items may possibly be dwelling in the urban areas of China. According to them, their customers frequently appear to be business people and managers of some company. A handful has indicated that they have catered to teenager who admired luxury products. However, these handfuls have indicated that they assumed that these teenagers may have well-off parents to support their cravings for luxury. The common denominator is that they all live in the metropolitan areas of Chengdu. They claimed that they rarely encounter people who tend to buy branded or designer products coming from out of town.
These claim made by the respondents is corroborated by the statistics provided in the DMAL (2006) website indicating shopping as one of the top leisure activities in the cities of China. The table below summarizes this information.
Table 2. Leisure activities (%)
Activities
Cities
Countryside
Watch TV
59.3
61.7
Go Shopping
28.6
12.1
Outing/tours
27.7
6.1
Stay home/ sleeping
20.0
21.4
Play "Mah Jong"
19.4
36.3
Watch video/ VCD /DVD
15.4
9.5
Play with children
14.8
15.0
Gathering & chat
14.2
37.9
Surfing on the internet
13.3
1.4
See movies
12.4
5.9
Video /Computer games
9.2
3.4
III. Items considered luxury in the Chinese setting
This part of the study is going to present the luxury items considered in the Chinese setting. Based on the responses on the interview, the discussions will be presented and compare it to the definitions indicated in the literature review in the previous chapters. The respondents noted that there are staple products that appear to be mostly sought after by their clients. Majority of them indicated the demand for designer fashion is at the top of the list when their customers tend to seek their services. Other items include shoes, handbags, jewelry, and branded ready-to-wear clothing. The responses seem appropriate considering the study has been stationed in the mall in Chengdu. In consulting the workger (2004), it would be appropriate for the study to assume that the kinds of discretionary spending would be evolving around the four types. Nevertheless, the purchase may be limited to smaller items rather than expensive cars and beach houses. Thus, the discussions rules out lifestyle luxury as a discretionary spending feature. As stated above, luxury items that could only be found within the department store are basically the staple demands of the customers. One respondent even stated that she has a couple of regular customers that seeks her services only to consult on a couple of specific items: shoes and suits. She claimed that one of her female customers recurrently seek her specifically to do some shopping with her, particularly with shoes. Another regular appears to be a businessman who seeks her help in finding the top of the line shirts, ties, and suits that are available in the department store. In looking at the two examples above, it appears that these two have distinctively different discretionary spending features. The lady seeking help with shoes appears to be spending her money on such items not as basic need, instead it appears to be qualified to what Danzinger (2004) noted as utilitarian purchases. The said individual purchases a luxury to satisfy an urge. On the other hand, the businessman purchasing ties, shirts and suits considers these luxury items as a physiological need. Constant visit in the local department store may indicate that he does require a considerable number of the items. Moreover, the nature of his work showcase the relevance of the items he purchases. As it is established in the earlier chapters, the items discussed above are indeed luxury items because they are expensive, inessential but conducive to pleasure and comfort, possess some level of lavishness of sorts. Other luxury items that were among those purchased in the area were ready-to-wear fashion, leather goods, jewelries, eyewear and even perfumes. Based on the responses of the interviewed personal shoppers, there are specific brands that people tend to look for and in the same way, they recommend to their clients. In the context of ready-to-wear fashion, three of them indicated that Yves Saint Laurent (YSL) were among the luxury brands that they recommend. The said brand is managed by the Gucci product line, thus placing it at the top brands in the world. Several others pointed to other product lines such as Marks and Spencer, a rather less costly counterpart of YSL yet possess similar footing in the international brands. Four of the respondents indicated that normally, their clients does not have any idea on what brand to look for in the context of ready-to-wear lines. In this manner, they tend to recommend the two brands depending on the budget of the client. On the leather goods, three brands are often sought after by the clients according to the respondents. These brands include Gucci, Louis Vuitton, and Hermes. A couple of the personal shoppers claimed they tend to recommend local brands in terms of leather goods. The three of them claimed that the clients always go for big names such as Gucci and Louis Vuitton primarily because they have sufficient brand knowledge of the said goods. On the other hand, six of the respondents observed that their clients tend to try on products on the three indicated brands and look whether it looked great on them or otherwise. Normally, the respondents even indicated that the clients frequently ask for the brand of the item when they are already trying them on. This may indicate that a level of brand consciousness may be present among the Chinese consumers. On other minor items like eyewear, the respondents claimed that the brands that more frequently purchased in their watch include Bulgari, Oakley, and Gucci. Same as the leather goods, the respondents normally gives the items to the clients for them to try on before indicating what brand they belong. On the whole these items, specifically eyewear and fragrances are typically bought, as stated by the respondents, whether the clients think its suits them. They choose from a variety of items not knowing the brand but eventually asking when they find something they like.
To some extent, this supports the claim earlier indicating the treatment of shopping as a leisure activity. The consumers treat the purchase of an item like a game, trying on specific items they “need” and then deciding on what seems to be of actual value to them. Though its not clear whether the role of brands have been highly functional on the findings of the study, most of the respondents claim that the consumers normally act positively when they become aware of the brand of an item, especially if he/she has already considered purchasing the product.
IV. The primary reasons of the buyers in purchasing luxury items This part of the study is going to discuss the buying behavior of the buyers in the Chengdu area. The responses of the personal shopper in questions thirteen to seventeen in the interview questions cover this data. The responses of the personal shoppers reveal that there is a shift towards a certain level of materialistic feature on their clients. This is indicated by the responses of the respondents on the reason why they think their clients purchase luxury items. One of the respondents claimed that the possession of these items appears to indicate something about the “social status or even some level of presentation of adequacy towards other individuals.” Taken to context, the said respondent may want to indicate the earlier indicated attribute of having a story behind a purchased item. It could convey the meaning that they have the necessary excesses in their resources to afford such non-necessities. Looking on this argument, this indicates that the theory of Veblen on the concept of consumption, though it is predominately used to connote to an environment comparable to the United States, do actually apply to some degree in the Chinese setting. There is a certain level of consumerism that emerges based on the response of the personal shopper. Another personal shopper corroborated this claim when she indicated that her clients, both male and female, often feel good during and after the purchase of the luxury item. This indicates that the buyer has this certain level of anticipation of the purchase and possible possession of the luxury product. This not only connotes the assumptions made by Veblen in his theory of consumerism, this also complements whal (2002) claimed on the particular features of the behavior of the buyer. Specifically, the claim regarding the modern buyer knowing the value of their money and buying with informed and educated choices represents these ideas. This means that the Chinese consumers may not necessarily know exact product what they want, but they definitely already have an idea on what they want to buy. The presence of advertisements and possibly personal research may provide and input on these ideas. Revealing a sense of anticipation and some indications of what the respondents said as a sense as a “feel good” experience may indicate that the buyers have already seen some features on the luxury item that able to live up to what they want. This anticipation may indicate that the buyer is closer to satisfying what (2005) claimed as the satisfaction of their need. In addition, a couple of respondents have indicated that the buyers tend to “go for the branded ones” and “tend to have no problem with the price.” This shows that the buyers observed in the study highly regard brand in the sense that they think it is equivalent to the quality of the item. This means that in there is some level of brand consciousness among the shoppers. Considering the brand’s reputation is a big part of the buying behavior of the public. This means that branded products in this context is considered as those with the highest quality in the market because they have to make sure that they have a strong hold on their market share. (Kennedy, 1994, 373) Taking this into context, it is more likely that these branded products are pricier as compared to the other products made by the other players in the industry. Based on discussions above regarding the buying behavior of the public, it appears that the price of the item is negligible provided that its brand has a reputation in the market of having high quality.
The findings above indicated that brands with strong hold in the market are able to acquire a greater market share as compared to its competitors. This means that the popularity of the brand have a great impact on the number of sales and revenue earned from the market. And according to one study, the reputation and popularity of the brands also depend on the country of origin of every company. , 1997, 361) Country image is important in this aspect; brands made from specific countries not only denote quality but also exude the image of prestige. In this context, companies take into consideration and constantly monitor their intangible assets.m, 1997, 361) These intangible assets include brand loyalty and brand popularity. This will work if they create a strong brand by constantly reminding the public of their product line through advertisements and other marketing campaigns.
This is supported by the study oo (1998, 275) claiming that Chinese consumers exhibit decision making behaviors similar to what indicated as brand conscious. Chinese consumers’ decision tends to be more oriented to purchase products that are well-known brands regardless of the high price. They tend to equate high price with high quality. However, they added that the Chinese consumers are more price conscious as compared to the results of the other studies indicated here. This further reinforces the previous claim in this study that the consumers in the Chinese setting do make informed and educated choices in their purchase of luxury items.V. Decision making patterns of the Buyers
This part of the chapter is going to take into considerations the patterns in which the buyers goes through when coming to a decision in buying luxury goods. Majority of the personal shoppers interviewed for this study indicated that their customers often consult them for their opinions on the items they need to purchase. One of these respondents claimed that predominantly, her clients often ask her if purchasing a specific item would be “worth it.” There again presents the awareness of the buyers on the value of their money. When asked why these buyers would tend to ask these kinds of questions, the respondent indicated that the buyers normally seek “some signs of affirmation.” They need to be sure that they are making the right purchase and that they are getting the right value for their money. This corresponds to what (2004) claimed as a discretionary spending similar to indulgences. This shows that those who normally employ personal shoppers tend to have the spending attitude wherein guilt is often connected. Possibly the high price that is similarly associated with buying luxury items entails this type of guilt considering what has been indicated in the earlier findings in this paper regarding the possible profession of the buyers in the area. Being a businessman or a ranking employee means that purchasing luxury items does have some considerable effects on the finances on the buyers.
This brings us to the second issue in this category, the budget of the buyers when they are out to buy luxury items. When the personal assistants were asked whether their clients do have a budget prior to the entrance to their establishment, varied responses were acquired. Five of them were sure that their clients do have a specific budget to expend in their purchasing activities. According to these personal shoppers, it is part of their jobs to ask whether their clients have a certain “ceiling” in terms of purchasing items in the store. According to them, this information allows them to actually assess what kind of brands and what specific items to recommend to the customers. Normally, male and female shoppers who appear to be a ranking employee in a company tend to voluntarily present a specific amount to the respondents.
On the other hand, some of the respondents indicated that they sometimes have difficulty in determining whether their clients do have a specific budget when they shop. This is because their customers often “splurge” on their shopping activities when they come in. One of the respondents indicated that this frequently takes place when they have more than one customer (basically a couple of customers coming in to shop together but employed a personal shopper to make a more convenient shopping activity). And when this situation takes place, they claim that their clients normally pay by means of a credit card. In looking at this pattern, the respondents may not know exactly the budget of their clients because of the bulk of their purchase and the mode of their payment.
Another set of respondents indicated that there are times that a client seeks their assistance only to fetch a specific item they intend to purchase. This means that the buyer exactly knows what to buy and have a particular amount of money to pay for that item. In this situation, no consultation takes place, just an order of the specific product. According to these respondents, these kinds of buyers make their jobs “a little less complicated” because they are aware that it is already a done deal when a client asks for such a specific item. Though this has been indicated in the response of the interviewed personal shoppers, it must be noted that this rarely happen. Based on the general responses of all the shoppers interviewed, even though the brands helps a lot in the buying decision of the clients, it is the discretion of the buyer whether he/she is getting the value of his/her money that determines the decision to purchase a product.
Chapter 5
Summary, Conclusions and Recommendations
I. Introduction
The study tried to provide a descriptive account on the consumer behavior of the Chinese buyers towards luxury items. Specifically, the study intended to find out the items considered as luxury products in the Chinese setting. It also sought to find out the common characteristics of the luxury product buyers with reference to their gender, age, place of origin, and monthly income. In addition, this information was taken to find out the reasons of buyers in purchasing luxury items and their decision making patterns. The data is acquired from an interview of a focus group of personal shoppers in a department store in the Chengdu area in Sichuan province of China.
This part of the study is going to provide a summary of the findings in this study. After provided a detailed summary of the findings in this study, a set of conclusions and recommendations will also be provided based on these findings.
II. Summary
With reference to the data acquired from the respondents and support from the existing literature, the following discussions are the significant findings of the study:
Common characteristics of luxury product buyers from China
The findings of the study indicated that the buyers of luxury products in China are considerably varied in gender. Both men and women engage in the purchase of luxury items. Though men have still a slight advantage on the women in terms of those who could buy luxury products, the difference appears to be negligible considering the response of the personal shoppers regarding the variety of their clients. This shows that the purchasing power of the Chinese people has greatly increased through the years. This has been taken to context by different studies cited in the second and fourth chapter. One similarity that these luxury buyers possess is their place of origin. According to the respondents, their clients are predominantly from the Chengdu area, which means these are urban dwellers. This is also supported by a study indicating that among the top leisure activities in the urban areas in China is going shopping. Moreover, these buyers similarly have been characterized as business people or employees in companies aged between 21 to 50 years old. This means that the Chinese luxury buyers are of legal age and have a source of living to support their purchase activities.
Items considered luxury in the Chinese setting
Based on the responses in the interview questions, the study found out that designer fashion is the predominant item sought after by the buyers and what they commonly consider as luxury items. Male buyers tend to go for suits and loafers while their female counterparts purchase jewelry and other items such as handbags, shoes, and eyewear. Brands also play a part in these activities with names such as Yves Saint Laurent, Bulgari, Oakley, Gucci, Louis Vuitton, and Hermes emerged from the study.
The primary reasons of the buyers in purchasing luxury items
One of the primary reasons of purchasing luxury items is because of the social status and as a sign of adequacy on the part of the buyer. This entails that one of the primary reason for this purchasing activity is to satisfy an inherent need of the individual towards his/her society. Thus, seeing the purchase activity as a something to satisfy a need entails that the individual’s awareness of the need. With the individual’s knowledge of needing to satisfy such need is seen in treatment of the purchase activity as a leisure activity with a sense of feel good experience based on the informed and educated choices.
Decision making patterns of the Buyers
There are several patterns of decision making that materialized in this study. One is basically based on the buyer’s awareness on whether the product they are acquiring serves the value of their money. This is established by the response of the personal shoppers with their indication that their clients normally seek affirmation on their decision and ask whether the product is worth it. It also showed that most of the Chinese luxury buyers also predominantly engage in indulgences as a discretionary spending practice.
Another decision making pattern represents the formulation of a specific choice of item based on information and data accessible to the buyer. This may come from advertisements or even recommendations from acquaintances. This is manifested by the observation of the respondents regarding the presence of luxury buyers who normally provide specific details on the product (item, brand etc). And usually, these buyers often have a specific ceiling in each activity by having a specific budget.
A third pattern is indicated in the earlier chapters as irrational consumption behaviors. This is characterized by buyers having a splurge on their purchasing activities without concern on price and little concern on the brand of the item.
III. Conclusion
With regards to the above summary of findings in this study, this research established that the consumer behavior of the Chinese buyers towards the purchase of luxury items have triggered considerable changes the Chinese setting. On the economic factors on the Chinese milieu, the findings in this study indicated that the bare necessities are not the sole focus of the expenses of the Chinese buyer at this point. The modern Chinese consumer has the propensity to set aside money for what is considered luxury items. This shows that the purchasing power of the Chinese consumer has significantly changed over the years. However, it must be noted that the likelihood of a Chinese buyer to spend money on luxury items is that they see the purchase of such item as a need.
The study has also established that the lifestyle within the Chinese setting has also been altered. With the accession of the Chinese market to international trading, the lifestyle of the Chinese people has become quite dynamic. This change has also triggered international businesses and brands to consider the Chinese market more seriously. With the apparent appetite to luxury items, it is appears to be a goldmine to companies bearing brand names and luxury goods. As the study indicated, the Chinese buyers tend to have a preference to branded items. In particular, they see branded items as products with high quality. As indicated in the cited studies in the earlier chapters, the Chinese buyers tend to consider price as an indicator for quality.
The findings have also indicated several changes in the personal elements of the individual Chinese buyer. The availability of information regarding the brands and specific luxury items has triggered the buyer the informed and educated data required to make purchasing choices, especially with regards to pricy items. Awareness of the value of their money have indicated that the Chinese buyer is still in control of his/her finances regardless of the emerging flair for luxury items. Moreover, the considerable movement of the demographic towards the urban setting indicates that the buyers of luxury items may well swell up in the coming years.
IV. Recommendations
This study has provided the information require the existing situation in the Chinese luxury market. It has presented the profile of the Chinese buyer who’s more inclined to purchase luxury items. However, the scope of the study appears to be rather limited in a sense. This hinders the findings in this study to be considered general and even provide a comprehensive observation on the topic. The luxury market in the Chinese setting is an emerging market. This study recommends further studies on this area with a much wider scope. With the qualitative nature of the present study, it is recommended to academics and other learners in this area to make this existing study an impetus to make studies leaning towards a more quantitative nature.
V. Bibliography
INTERVIEW QUESTIONS
1. What customers do you often cater to? Males or Females?2. Between the men and women, who among them more frequently buys luxury items?
3. How do you characterize the age of those who buy luxury items?
4. How often do these individuals buy such items?
5. Which part of the Sichuan Province do these clients often come from?
6. In your opinion, what do you think is the estimate monthly income of these shoppers?
7. Normally, what is the occupations/profession of your clients?
8. What are the luxury products normally bought by your clients?
9. How often do they buy these products?
10. Do your clients go for the prominent brands? What brands are they?
11. What basically is the price range of the brands that your clients purchase?
12. Do you consider these items as luxury? Why do you think so?
13. Why do you think your clients buy luxury products?
14. Do your clients consider shopping as fun? Why do you think so?
15. Do your clients feel good about buying such expensive products? Why do you think so?
16. Why do you think your clients “need” these luxury items?
17. Do you think their social class or monthly income have something to do with their reason for buying luxury items? Why do you think so? 18. Do your clients often consult you for your opinion on the luxury items that they need? Why do you think so?
19. Do your clients consider first their budget or the luxury items before actually purchasing? Why do you think so?
20. Do your clients have a specific brand on their mind when they are buying specific luxury items? Why do you think so?
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