Potential niche markets forluxury fashion goods in China

Ling GaoInstitute of Textiles and Clothing, The Hong Kong Polytechnic University,

Hunghom, Hong Kong

Marjorie J.T. NortonDepartment of Apparel, Housing, and Resource Management,

Virginia Polytechnic Institute and State University, Blacksburg, Virginia, USA, and

Zhi-ming Zhang and Chester Kin-man ToInstitute of Textiles and Clothing, The Hong Kong Polytechnic University,

Hunghom, Hong Kong

Abstract

Purpose – The purpose of this paper is to investigate market segmentation of affluent Chineseconsumers and develop profiles of identified segments for potential target markets for luxury fashiongoods.

Design/methodology/approach – The data are from the 2006 edition of an annual survey calledthe “China’s New Rich Study”. The respondents form a representative sample of affluent consumers,18 to 45 years old, residing in China’s 12 largest cities. A psychographic segmentation approach isemployed to classify these consumers.

Findings – Five distinct market segments of affluent Chinese consumers are identified and profiled.Of these segments, three seem the most promising target markets for luxury fashion goods.

Practical implications – When companies understand the similarities and differences betweenconsumer segments as well as the unique characteristics of segments, they have a meaningful basis forselecting receptive target markets and formulating and implementing effective marketing strategies.The findings of this study can be useful not only to companies that offer luxury fashion goods, but alsoto those targeting the upscale market with a plethora of products and services like yachts, luxury cars,high-end electronics, resort vacations, and credit cards and other financial services.

Originality/value – This is the first study on segmentation of Chinese consumers for potentialtarget markets for luxury fashion goods. Results reveal heterogeneity among affluent urban Chineseconsumers. Strategies for marketing luxury fashion goods to promising target markets in China areoutlined on the basis of segment profiles and culturally based motivations for purchasing such goods.

Keywords Market segmentation, Consumers, Fashion, China

Paper type Research paper

China’s economy has grown tenfold since 1978 (Central Intelligence Agency, 2008).With this growth, consumer incomes have increased and a group known as China’s“new rich” has emerged (Wu, 1997). These changes, together with China’s political andeconomic reforms, have created a dynamic host environment for multinationalcorporations (MNCs), including high-end retailers who plan or have made investmentsin China (Economist Intelligence Unit, 1998; Tse et al., 1997). MNCs must approach theChinese market carefully, however, by first recognizing that it is actually manymarkets.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1361-2026.htm

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Received July 2008Revised February 2009Accepted March 2009

Journal of Fashion Marketing andManagementVol. 13 No. 4, 2009pp. 514-526q Emerald Group Publishing Limited1361-2026DOI 10.1108/13612020910991376

Numerous studies (e.g. Cui and Liu, 2000, 2001; Zhang et al., 2008) have showndiversity among Chinese consumers, implying that retailers operating in China mustunderstand this diversity and market products accordingly. Cui and Liu (2001)observed, however, that MNCs enticed by China’s burgeoning consumer market oftenerr in assessing demand and enacting marketing strategies due to their failure tounderstand the diversity of Chinese consumers. Our study shows that this diversityextends to the affluent. These “new rich” consumers are an attractive market forluxury goods. Indeed, they have helped China become the world’s third largestconsumer of high-end fashions and other luxury goods (Ernst & Young, 2005). Theheterogeneity of affluent Chinese consumers requires luxury companies to segmentthem and tailor marketing strategies by segment. In turn, development of effectivemarketing strategies requires understanding Chinese consumers’ motivations forpurchasing luxury goods.

This is an exploratory study that investigates the market segmentation of affluentChinese consumers and develops profiles of the segments identified for potential targetmarkets for luxury fashion goods. China’s luxury fashion market is not only among thelargest in the world, but it is expected to keep growing (Wiederhecker, 2007). Despitethis, research on its luxury fashion market is limited, and no previous research hasaddressed the segmentation of affluent Chinese for this market.

Consumption of luxury goodsLuxury fashion goods are apparel, accessories, handbags, shoes, watches, jewellery,and perfume for which mere use or display of particular branded products bringsprestige to owners, apart from any functional utility (Vigneron and Johnson, 2004).Luxury retail sales doubled to $US220 billion over the last decade, driven partially byan unprecedented doubling of millionaire consumers worldwide (Demos, 2007;Gumbel, 2007). Europe and the USA are the traditional main markets, but Nueno andQuelch (1998) reported that Asia had come to account for 24 percent of luxury salesversus 40 percent for Europe and 28 percent for North America.

Increased wealth accumulation across the globe over the last decade has enabledmore consumers than previously to buy luxury goods and led to increased numbersand types of luxury firms and products (Okonkwo, 2007). Facing intense competitionand saturation of traditional markets, luxury companies are expanding into emergingmarkets like China where recent wealth accumulation has fuelled growing demand forluxury goods. China’s luxury market, second largest to Japan’s in the Asia-Pacificregion, is forecast to grow 28 percent annually until 2010, owing partly to the presenceof 320,000 millionaires (Wiederhecker, 2007).

Chinese luxury consumers represent the burgeoning middle class along with thewealthy (Branding Strategy, 2007). Business press and other literature cite not onlyChinese consumers’ high demand for luxury goods, but also their ostentatious displayof luxury possessions. These consumption patterns can be understood from a culturalperspective. Consumer product purchases are motivated by both product attributesand culturally based meanings of products and consumer behaviour (Shutte andCiarlante, 1998). Culture, “the collective mental programming of the people in anenvironment” (Hofstede, 1991, p. 5), includes beliefs, attitudes, norms, roles, and valuesshared by people in a specific region and period (Mooij, 2004). Many scholars (e.g.Gudykunst and Ting-Toomey, 1988; Hofstede, 1980, 1991; Triandis, 1995) have argued

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that, of the several dimensions that distinguish national cultures,individualism/collectivism best explains behavioural similarities and differences.Individualist and collectivist orientations, salient in Western and Eastern cultures,respectively, affect the types of value consumers seek from products and services.

Drawing from research on cultural influences on luxury goods consumption, Wongand Ahuvia (1998) explained that, relative to individualist consumers, collectivistsplace more emphasis on publicly visible possessions to symbolize desirable locationswithin the socioeconomic hierarchy. For collectivists, subjective norms of importantothers outweigh personal preferences. Individualists judge products individually andfocus on hedonic private meanings of possessions; collectivists evaluate products byaffiliations denoted by brand, producer, or country of origin and utilize luxuryproducts to signal or enhance in-group members’ reputation.

Vigneron and Johnson (1999) integrated previous research findings in delineatingfive effects on luxury goods consumption: interpersonal Veblen, snob, and bandwagoneffects; and personal hedonic and perfectionism effects. The authors noted that one ofthese usually predominates for any one consumer. The Veblen effect involvesconspicuous consumption to signal or enhance status through an ostentatious displayof goods with perceived prestige value. The snob effect occurs when goods arepurchased for their exclusivity. The bandwagon effect occurs when consumerspurchase goods to symbolize group membership. With hedonic and perfectionismeffects, goods are perceived to have emotional or quality value, respectively.

Vigneron and Johnson (1999) and Wong and Ahuvia (1998) addressed the sameissue, although the former from the individual viewpoint and the latter the cultural.Both contribute to understanding consumer behaviour regarding luxury goods.Individualists purchase luxury goods for self-directed benefits: affective (e.g. hedonicpleasure), symbolic (e.g. self-expression), and utilitarian (e.g. taste for quality) (Tsai,2005; Wong and Ahuvia, 1998). Luxury goods consumption supports collectivists’search for social representation and prestige. Conspicuous consumption common incollectivist cultures is mainly for conformity to and acceptance by the community, notself-indulgence or self-expression (Phau and Prendergast, 2000).

Interpersonal factors are primary influences on luxury goods consumption in Asiancultures. Wong and Ahuvia (1998) contended that collectivist orientation goes far inexplaining Asian consumers’ purchase and display of luxury goods. They added thatthe tradition of honouring others with expensive gifts also helps account for large salesof these goods in Asia. Asian consumers purchase luxury goods to secure socialrecognition and to adhere to social norms (Shutte and Ciarlante, 1998). The immensepopularity of luxury goods among Asian consumers derives partially fromconsiderations of “face”, the importance of the regard of others (Bao et al., 2003; Liand Su, 2007). Doctoroff (2005) argued that Asian consumers purchase luxury goodsfor status display because their culture emphasizes hierarchy and status. Asianconsumers’ status-seeking purchase of luxuries emphasizes social meanings conveyedby price, brand, or packaging (Willis, 2006).

Chinese culture stresses social orientation, interpersonal relationships, and groupnorms and goals (Yau, 1994). Tse (1996) noted that Chinese people within the samesocial class or reference groups conform to pressures to behave appropriately,suggesting Veblen and bandwagon effects on Chinese consumers’ purchase anddisplay of luxury goods; however, it cannot be concluded that only interpersonal

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effects motivate their purchase of luxury goods. Every society has collectivists andindividualists (Triandis, 1995). Confucianism, Taoism, and Buddhism have shapedChinese life and philosophy toward emphasizing in-group norms and competition, butalso individuality and quality.

Market segmentationMarket segmentation is “organization and management of groups of consumers fromwhich an actionable marketing strategy can be developed” (Kellor et al., 2001, p. 3).Hague (1996) described luxury market segmentation as challenging because the basisis far from obvious. Income might seem the best criterion for segmentation, but luxurygoods consumption is not determined solely by income or other particulardemographic characteristics.

Vigneron and Johnson (2004) noted that perceived luxury levels of particular brandsvary among consumers due to differing cultural and psychographic characteristics.They developed a scale reflecting five perceived luxury dimensions:

(1) conspicuousness;

(2) uniqueness;

(3) extended self;

(4) hedonism; and

(5) quality.

Analysis employing the scale supported the multidimensionality of luxury perceptionaccording to those dimensions. Recommended uses for the scale include marketsegmentation by clustering groups according to different perceptions of brand luxuryto reveal salient psychographic characteristics. The study therefore suggests theusefulness of psychographic criteria for luxury market segmentation.

Psychographic characteristics, considered reflections of self-concept, are expressedthrough lifestyle; thus, knowledge of consumers’ lifestyles can help marketersunderstand consumers’ motives, feelings, and beliefs (Evans et al., 2006). Consumerswithin a demographic group can exhibit different psychographic profiles in terms ofproduct and brand choices (Lin, 2002). Psychographic market segmentation has gainedimportance as product marketing has moved from product characteristics to lifestyleconsiderations. The activities, interests, and opinions (AIO) method is popular forpsychographic segmentation (Anderson and Golden, 1984). Activities measure howconsumers spend their time; interests involve consumers’ preferences and priorities,and opinions are consumers’ views of themselves and the surrounding world. Manystudies to segment Chinese consumers (e.g. Cui and Liu, 2000, 2001; Dickson et al.,2004; Schmitt, 1999; Sun and Wu, 2004; Wel, 1997; Zhang et al., 2008) have employedAIO variants, often combined with demographic and behavioural variables. Valuesand lifestyles system (VALS), another psychographic tool, is known for generatingpsychological constructs that both define a broad consumer population and predictparticular behaviours. Developed by Mitchell (1983) at SRI, a management consultingfirm, VALS relates consumers’ attitudes and purchase patterns. In 1989, SRI developedVALS2, which has been used to classify American consumers into eight segments andJapanese consumers into ten (Winters, 1992).

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MethodWe used secondary data from the 2006 edition of the “China’s New Rich Study”, anannual survey of affluent Chinese consumers conducted by Sinomonitor International,Inc., a Chinese media and marketing research firm. The respondents, aged 18 to 45years, form a representative quota sample of affluent residents of 12 cities: Beijing,Shanghai, Shenzhen, Guangzhou, and Hangzhou, where respondents’ annualhousehold income exceeded RMB80,000 ($US10,127); and Nanjing, Wuhan,Chongqing, Chengdu, Xi’an, Shenyang, and Qingdao, where respondents’ annualhousehold income exceeded MB60,000R ($US7,595). These cities, the largest in China,have the highest affluent consumer concentrations in China. Each city’s sample isapproximately proportionate to its target population: 1,500 each in Beijing, Shanghai,Guangzhou, and Shenzhen, and 500 in each other city. The respondents are in theupper 10 per cent income bracket of city residents in China, according to the ChinaNational Bureau of Statistics.

Data were collected in home interviews using 24 different questionnaires withcommon questions except a few that varied by city and respondent gender in referringto local brands and media. The questions asked about demographics, lifestyle, mediausage, and brand consumption. Lifestyle was measured with 84 statements and afive-point scale ranging from 1 for “strongly disagree” to 5 for “strongly agree”. Thelifestyle data were the basis for market segmentation. We used multivariate statisticaltechniques for data analysis.

Data analysis and resultsRespondent characteristicsThe total sample of 9,841 included 5,247 males (53.3 per cent) and 4,594 females (46.7per cent). Most respondents were married (76.8 per cent), held professional ormanagerial positions (51.1 per cent), and had Bachelor’s degrees or more education(56.9 per cent). More than half (54.8 per cent) had annual household incomes ofRMB100,000 or more, and nearly 60 per cent had personal incomes of RMB60,000 ormore. Those aged 25-29 and 30-34 years each comprise approximately 30 percent of thesample.

Factor analysisExploratory factor analysis was performed to extract underlying lifestyle dimensions.Factor analysis was found appropriate with a KMO value of 0.891 and statisticalsignificance (p ¼ 0:000) in Bartlett’s test of sphericity. Principal component factoranalysis with Varimax rotation was applied to the lifestyle variables. After removingvariables with low correlations to others and low loadings on identified factors, 38 ofthe original 84 lifestyle variables were retained.

Scree tests and an eigenvalue of 1 or more were the criteria for selecting extractedfactors. The ten identified factors had eigenvalues above 1 and collectively explained63.2 per cent of the variance. Varimax rotation was used to aid interpretation of thefactors. Most variables loaded strongly (.0.6) on respective factors (see Table I). Thevariables and their loadings on different factors are available upon request. The firsteight factors in Table I contain four variables each; the last two contain three variableseach. Each factor was named according to the variables making the greatest

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contribution. Cronbach’s alphas from 0.637 to 0.866 for the variables in the factorsindicated good to high reliability.

Cluster analysisCluster analysis is considered one of the most appropriate interdependence statisticaltechniques for segmenting markets. Following Punj and Stewart (1983) and Singh(1990), we performed a two-stage cluster analysis on the scores of the ten identifiedfactors. Ward’s minimum variance method was used to obtain a preliminary clustersolution and initial centroid estimates. Alternative analyses with three to ten specifiedclusters are recommended. The sample was randomly split into halves. Using theinitial centroid estimates, K-means cluster analysis was conducted for eight differentvalues (i.e., n ¼ 3, 4, 5, 6, 7, 8, 9, 10) separately for the two data halves. A five-clustersolution was found the most interpretable and actionable from a marketingperspective. An observation found invalid in the solution was deleted, making theeffective sample size 9,840. Analysis of variance (ANOVA), to assess the internalvalidity of the cluster results (Tam and Tai, 1998), indicated significant differencesbetween the five clusters (p ¼ 0:000). Discriminant analysis showed significantfunctions at the 0.05 level and correct classification in 97.6 per cent of the cases. Theseresults further support five distinct psychographic clusters, which we labeledAchievers, Conservatives, Experiencers, Followers, and Idealists by comparing thecluster characteristics. The lifecycle cluster results, not shown due to space limitations,are available upon request.

Chi-square analysis and one-way ANOVA were performed to test whether the fiveclusters (psychographic market segments) differed significantly in demographics,lifestyle, and luxury fashion consumption. The clusters are significantly different innearly all dimensions, revealing heterogeneity among affluent Chinese consumers.Tables II and III present the demographic and fashion consumption characteristics ofeach cluster, respectively. Profiles of the clusters follow.

Profiling market segmentsAchievers (20.8 per cent of the sample). A striking characteristic of this segment is itslargely male composition (74.5 per cent). Of the five segments, Achievers have thehighest percentages of individuals with a Master’s or PhD degree (12.6 per cent) andmanagerial positions or self-employment. They are high income earners, with 26.7 per

Factor titles and items Factor loadings EigenvaluePercentage

variance Cronbach’s a

Fashion consciousness 0.695-0.818 8.075 21.249 0.866Achievement orientation 0.721-0.795 3.045 8.012 0.822Adventure orientation 0.707-0.811 2.834 7.457 0.823Well-known brand consciousness 0.696-0.790 1.879 4.945 0.797Shopping consciousness 0.697-0.766 1.696 4.464 0.795Knowledge interest 0.681-0.778 1.48 3.894 0.767Health consciousness 0.657-0.805 1.435 3.777 0.763Family orientation 0.584-0.758 1.291 3.398 0.637Public interest concern 0.726-0.829 1.176 3.096 0.749Pleasure pursuit 0.680-0.798 1.122 2.952 0.719

Table I.Factor analysis results

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Demographicvariables

Achieversa

(n ¼ 2; 046)Conservativesa

(n ¼ 1; 633)Experiencersa

(n ¼ 2; 364)Followersa

(n ¼ 2; 117)Idealistsa

(n ¼ 1; 680) x 2

Gender 507.58 *

Male 74.5 44.1 45.1 48.7 54.0Female 25.5 55.9 54.9 51.3 46.0

Age (years) 91.34 *

18-24 10.6 14.2 16.6 11.1 14.725-29 34.2 28.8 29.1 28.7 32.630-34 31.5 30.3 27.4 31.6 29.335-39 18.1 19.1 19.8 19.9 17.640-45 5.5 7.5 7.1 8.7 5.9

Educational attainment 173.47 *

High school or less 10.2 14.9 13.4 14.2 9.0Junior college 25.8 32.5 36.6 29.9 27.1Bachelor’s degree 51.4 43.9 43.3 47.4 52.5Master’s degree 10.8 7.8 6.2 7.4 9.9PhD 1.8 0.8 0.6 1.2 1.4

Annual household income (RMB) 144.41 *

Below 100,000 37.6 47.6 50.6 48.7 40.4100,000-199,999 35.6 34.4 31.9 34.8 38.0200,000-299,999 15.3 11.4 9.9 9.2 12.2300,000 or above 11.4 6.7 7.5 7.4 9.3

Annual personal income (RMB) 286.82 *

Below 60,000 29.2 48.3 41.6 44.5 38.660,000-99,999 35.2 32.2 38.7 34.2 35.7100,000-199,999 24.3 15.0 14.7 16.6 18.6200,000 or above 11.3 4.5 4.9 4.7 7.1

Occupation 330.94 *

Government orinstitution 6.4 9.3 9.3 11.2 8.1Senior skilledprofessional 7.6 6.2 7.2 5.8 7.8Primary skilledprofessional 12.5 14.8 11.0 13.8 13.0Doctors or teachers 3.3 6.4 6.8 7.3 5.6Senior companymanagement 11.1 5.0 10.3 6.4 7.7Junior companymanagement 24.3 18.1 24.8 21.9 24.7Ordinaryemployees 10.5 21.9 13.0 14.7 13.7Self-employed 21.2 13.2 14.9 14.4 15.6Other 3.0 5.1 2.7 4.4 3.8

Notes: aFigures given are percentages. *p , 0:001

Table II.Demographiccharacteristics of clusters

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cent having annual an household income of RMB200,000 or more and 35.6 per centhaving a personal income of RMB100,000 or more. Career-oriented and ambitious,Achievers expect to achieve a lot and aspire to the pinnacle of their fields. Prestigiousbrand names are important to them to symbolize status or represent power andsuccess, but their interest or knowledge in fashion is limited. Although Achievers havethe lowest percentages of reported interest in fashion (23.5) and purchase of luxuryfashion brands (30.2), they spend no less on clothing than other segments.

Conservatives (16.6 per cent of the sample). This segment has the highest femalepercentage (55.9). Their educational attainment and incomes are among the lowest forthe segments; 47.4 per cent finished junior college or less education, and 48.3 per centearn personal incomes below RMB60,000. This group has the highest proportions ofprimary skilled professionals (14.8) and ordinary employees (10.5). Deeply committedto their families, they consider family more important than a career. Conservatives arethe segment with the lowest expectations for career development and the leastinvolvement in social activities like dancing and parties. Despite a moderate interest infashion, they spend less on clothes than any other segment, illustrated by the highestpercentage (64.6) with yearly clothing expenditures below RMB5,000.

Experiencers (24.0 per cent of the sample). This largest segment has a genderdistribution similar to Conservatives, but the highest percentage (16.6) in the youngestage bracket in the sample, which may partially account for members’ enthusiasm andpositive attitude toward life. Junior company management is the dominantemployment (24.8 per cent). Experiencers earn relatively low incomes, possibly dueto youth and relatively few years of experience in their careers, but they are the mostfashion-conscious segment and spend comparatively high amounts on clothing andfashion. Nearly half of them spend RMB5,000 or more on clothes per year, making thissegment the biggest clothing spenders in the sample. Furthermore, the percentage(45.0) that buys luxury fashion brands surpasses all other segments, suggesting theyseek the status associated with these brands. Their activities cover a range, with manybeing socially oriented, like singing, dancing, and parties. Their dream may be to catchthe eye of the world by appearing at social occasions attired in luxury fashions.

ConsumptionAchieversa

(n ¼ 2; 046)Conservativesa

(n ¼ 1; 633)Experiencersa

(n ¼ 2; 364)Followersa

(n ¼ 2; 117)Idealistsa

(n ¼ 1; 680) x 2

Purchase ofluxury fashionbrandsb 30.2 30.3 45.0 30.6 32.4 162.094 *

Clothing expenditure in the past year (RMB) 71.720 *

Below 5,000 58.8 64.6 51.9 61.4 59.25,000-9,999 24.3 20.8 26.2 22.5 23.510,000-19,999 11.6 9.3 13.8 9.9 10.120,000-29,999 2.9 3.4 4.8 3.8 4.330,000 or more 2.4 1.9 3.2 2.4 2.9

Notes: aFigures given are percentages; bpurchased any listed luxury fashion brand during the past 12months; *p , 0:001

Table III.Consumption

characteristics of clusters

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Followers (21.5 per cent of the sample). This oldest segment has about 60 per cent inthe 30 and older age bracket. Many (47.4 per cent) have Bachelor’s degrees, but nearlyas many (44.1 per cent) finished junior college or less education. Risk-averse andsocially inactive, Followers engage little in social, cultural, and physical activities andtend to avoid challenges, novelty, and change. A secure job is more important to themthan a highly paid one. Their incomes are among the lowest for the sample. Perhapsunsurprising, greater proportions of this segment than the others work in governmentor institutions (11.2 per cent) and as doctors or teachers (7.3 per cent). Coinciding withthe group’s moderate interest in fashion and consciousness of well-known brands ismoderate spending on clothing and purchase of luxury fashion brands relative to othersegments.

Idealists (17.1 per cent of the sanmple). This segment has the second highestpercentage of men (54.0). Individuals less than 30 years old predominate (47.3 percent),more so than in other segments. Educational attainment rivals Achievers, with slightlysmaller percentages holding Master’s or PhD degrees and a slightly larger percentageholding Bachelor’s degrees only. Idealists are not the highest earners. A higherpercentage (38.0) than in any other segment has yearly household incomes ofRMB100,000-199,999, but a yet higher percentage (40.4) has household incomes belowRMB100,000, the lowest range for the sample. This segment has the highest percentageof senior skilled professionals, but still higher percentages in some other jobs, such asjunior company management. Taking responsibility for their families and society ismore important to Idealists than enjoying life. Committed to family, they also like toactively support public interests and environmental protection. Idealists are mature,reflective, and open to new ideas. Their varied activities are often individually oriented,like watching movies, travel, photography, sports, and maximal exercise. Behind onlyExperiencers in clothing expenditures and purchase of luxury fashion brands, Idealistsare, however, the least conscious of well-known brands.

Discussion and implicationsFive distinct submarkets of China’s affluent urban consumers were identified andprofiled according to psychographic criteria. A concentrated strategy to marketupscale goods to niche segments has been advised for companies to approach thegrowing Chinese consumer market (Cui and Liu, 2000). The market segments ofaffluent Chinese consumers revealed in our research underscore the market potentialfor luxury fashion goods among these consumers and provide a useful basis fordetermining target markets. Once target markets are identified, appropriate marketingstrategies can be devised to appeal to each. Of the five segments we identified,Experiencers, Achievers, and Idealists seem the most promising target markets forluxury fashion goods.

Experiencers, the largest segment identified, are the best prospect of the five fordeveloping a luxury fashion market. These young consumers represent early adoptersand trendsetters. Their clothing expenditures, fashion involvement, and awareness ofwell-known brands are all high. As bandwagon consumers, Experiencers would useluxury brands to signal group membership. They would work to imitate the lifestylesof those within their social class and in social classes to which they aspire byconsuming similar luxury brands. Luxury fashion companies could exploit theseinclinations as well as Experiencers’ sociability through advertisements dwelling on

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the companies’ brands and their association with an affluent lifestyle that includesnovel and fashionable products with high social value. Companies could thus propelthese consumers’ strong brand recognition and anticipation of social enhancementfrom owning branded luxury fashions. Luxury fashion companies should takeadvantage of the public visibility of fashion goods as well as consumers’ use of theseproducts to manage appearance and convey identity and group membership (Kaiser,1990). Experiencers should be regarded as a key market niche for luxury fashiongoods, in part because they can be a growth market by capturing their attention andcultivating their loyalty while young and socially active.

Also good candidates for luxury goods niche markets, Achievers and Idealists havethe highest incomes and most education of the segments identified. Clothingexpenditures are considerable in both groups, despite comparatively low fashionconsciousness. Additionally, reflecting the Veblen effect, Achievers have strongawareness of well-known brands and conspicuously use products bearing such brandsto display their affluence, achievement, and status. Efforts to market luxury fashiongoods to Achievers should emphasize the goods’ prestige value rather than functionalfeatures. Advertisements aimed at Achievers could note that individuals who have“already arrived” are conscious of luxury brands and recognize the prestige of brandedluxury fashion goods or even expect consumers with high status and achievement touse these goods. The advertisements would suggest that owning and displaying thesegoods signal affluence and high achievement and status, especially in the aspiredsocial class, or even facilitate climbing the social ladder. Given Achievers’ limitedknowledge of fashion, advertising could also address the history and culture behindluxury fashions of particular brands. This content may augment the aura of the goodsand help induce Achievers to purchase them. Nevertheless, impressing upon Achieversthe prestige value of luxury fashion goods seems critical for encouraging theirpurchase of the goods.

Of the five segments identified, Idealists are the second most active purchasers ofluxury fashion brands, but are the least conscious of well-known brands and tend toengage in individually oriented activities. Although a ready market for branded luxuryfashion goods, any prestige value of the goods may be lost on Idealists. UnlikeAchievers, Idealists may purchase these goods for self-satisfaction, not for showing orraising social status. Reflecting an individualist orientation, Idealists would beinterested in functional characteristics, quality, and aesthetic taste embodied in luxuryfashion goods. They would also want assurance of excellent after-purchase service, atraditional hallmark of luxury goods (Riley et al., 2004). Advertising aimed at Idealistsshould stress these various aspects of the goods, especially to differentiate onecompany’s products from those of others. Their openness to new ideas may also makeIdealists amenable to purchasing novel luxury fashion items. Although increasingnumbers of Chinese consumers have the means to purchase upscale products, they willnot necessarily buy them. Companies offering these goods in China should tailormarketing their strategies to different groups of target consumers.

Although this study is exploratory, the large sample and the statistical significanceof the relationships analyzed lend confidence to the findings. The implications includethe following. The study provides information to help researchers and practitionersunderstand Chinese consumers in terms of market segmentation and the influence ofcultural orientation on the consumption of luxury goods. The results of this research

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can be compared to those from similar research in other emerging or traditional luxurymarkets. Our findings also offer at least a starting point for luxury fashion companiesoperating in, or planning to enter, the Chinese market to identify and address targetmarkets for their products. When companies understand similarities and differencesbetween consumer segments as well as segments’ unique characteristics, they have ameaningful basis for selecting receptive target markets and formulating andimplementing effective marketing strategies. The findings of our study can be usefulnot only to companies that offer luxury fashion goods, but also those targeting theupscale market with a plethora of products and services like yachts, luxury cars,high-end electronics, resort vacations, and credit cards and other financial services.The heterogeneity this study revealed among affluent consumers in China may beunsurprising given the heterogeneity of Chinese consumers shown in other studies. Itis a mistake to assume that, even in China’s relatively nascent consumer market, allconsumers are essentially alike. Assuming homogeneity among Chinese consumerscould lead to failure to see opportunities and risks in this market.

Limitations and future researchThe limitations of this study should be taken into account. Despite the breadth of thedata we used, these data limited the questions addressed and the type of analysisconducted. For example, the data do not allow investigation of consumer behaviourregarding specific products or factors that motivate such behaviour. Future researchcould focus on developing models and measures of constituent constructs for in-depthanalysis of the consumer behaviour of affluent Chinese. In addition, although lifestyleinformation provides valuable insights into consumers’ activities, interests, andpriorities, lifestyle variables are a relatively unstable basis for market segmentationbecause consumer lifestyles tend to vary with time as a result of events and constraintsin daily life (Hague, 1996). It may be fruitful in future work to use an integrated or hybridapproach with demographic, behavioural, and lifestyle criteria for segmenting affluentChinese consumers. Lastly, we recommend ongoing study of market segmentation inChina because segment boundaries may shift as its economy continues to evolve.

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Corresponding authorGao Ling can be contacted at: ling.gao@polyu.edu.hk

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