The Buying Power of the Asian Market

A powerhouse for consumer culture and the consumption of luxury goods, Asia has been playing a large role in the continuing growth of the luxury fashion market. Just looking at China alone, as the world's second largest economy and home to 1.4 billion people, its purchasing power is robust. [1]

In light of the recent rise of Anti-Asian hate crimes across the United States and the world, Lux Second Chance is turning the spotlight on the Asian luxury consumer market and how large of a role it plays within the industry. To put this influx into cold, hard numbers, more than 2,500 incidents of anti-Asian discrimination have been recorded to Stop AAPI Hate reporting center since its launch in March 2020. Seven out of 10 incidents involved verbal harassment, with physical assaults accounting for 9% of incidents, according to the report. NYPD data shows anti-Asian hate crimes have spiked 1,900% in New York City in the last year alone. An U.N. report found that more than 1,800 anti-Asian incidents took place in the U.S. over an eight-week period from March to May 2020. [2]

This is disturbing and the fashion industry can no longer be silent. 

A lot of Asian fashion designers and houses are now speaking up about the realities Asian designers and Asian consumers face in the luxury fashion world. In a statement, designer Phillip Lim said the work of fashion houses “should represent the world we want to see.” [2] Designer Jason Wu shared his experience by stating, “Growing up, there wasn’t a lot of Asian representation in fashion. It is more important now than ever that we stand up as a community to push for change and acceptance—we will not stand for racism and intolerance.” [3] Both powerful messages that render the question, what is the fashion world doing to address this issue?

Arguably, good business strives to reflect and cater to its consumers, so why is the luxury fashion industry so slow to include Asian voices, perspectives, models, designers, and business leaders? 

Often overlooked and definitely underrepresented in high fashion magazines and brand campaigns, the Asian population is one of the driving forces that is growing the luxury market. In 2019, Chinese consumers alone accounted for 90% of the growth in the personal luxury goods market or some €19 billion ($21 billion USD) in sales. They also generated 35% of global luxury spending. [4] With these stats, it only makes sense that we should see Asian representation in the luxury market from models, to designers, to CEOs. 

It’s also encouraging to see that these numbers aren’t exclusive to Asian countries, but also Asian Americans living in North America. Asian Americans are the fastest-growing consumer segment in the U.S., according to a report from Nielsen, which previously projected that Asian American buying power would be worth $1.1 trillion USD by 2020. [2] Asian American households on average have a 41% higher income than the national average, and that buying power adds up. By 2024, Asian American buying power is projected to reach $1.6 trillion USD. [5]

It is important to note that Nielsen did not disaggregate that number according to Asian American subsets, among which there exists great wealth disparity. [2] It is essential for people to understand the wealth disparity among Asian Americans and Asian countries. As such, the stereotype of “crazy rich Asians” can neither be applied to the majority of people of Asian descent living in North America nor Asian countries. This wealthy demographic only allots for a portion of the population, but a small, influential portion with robust purchasing power.

The very wealthy Chinese households are, of course, powerful drivers of growth for luxury and the prime target for luxury brands. However, according to a report done by Martin Roll Business & Brand Management, the rising Chinese middle-class, consisting of households with monthly incomes between $2,600 USD and $3,900 USD have become the fast-rising consumer segment in China – they have become the subject of much attention from global brands. In the next three to five years, Chinese consumers between the ages of 25 and 30 will be the prevailing group in luxury consumption. This demographic of China’s new middle class is termed “Generation 2”. [6]

Brands cannot afford to overlook the Asian and Asian American community. Brands that hope to capitalize on this growing demographic have to make sure they are including and serving the Asian market. [5] Speaking specifically about luxury fashion, brands need to work harder at including Asian talent from the first steps of production to selling the final product. 

Now more than ever, in part due to the COVID-19 pandemic, there has been heightened “cultural sensitivities'' in the luxury market. As Western luxury brands have focused on the Chinese consumers for growth, their cultural carelessness has been reflected in a lot of culturally inappropriate mistakes. Take for example the notorious Dolce & Gabbana campaign featuring an Asian model eating pizza with chopsticks, just to name one of many. [4]

The sad conclusion one can make based on this information is that the luxury fashion market wants Asian sales and revenue, without implementing Asian perspective and influence into the business, branding, and marketing of the products themselves.

However, what’s even more impressive than Asia’s current buying power is it’s own future. Global management consulting firm, Bain & Company, expects that Chinese consumers will make more than half of luxury goods purchases by 2025 when global sales are expected to reach €320-330 billion ($346-357 billion USD). That means the Asian market would have to gain some 15% more market share in only five years, a pretty staggering and aggressive expectation that luxury brands better look out for. [4] 

Instead of white-washing the luxury fashion scene, brands should be opting to authentically reflect the audience that they sell to. Not by including cliches, ignorant stereotypes, or a “one size fits all” perspective of the Asian and Asian American market segment. 

Similar to the movement to be more inclusive of Black talent and professionals at all levels of the supply chain, luxury fashion brands should be expected to make those same efforts in the Asian community. Lip service is no longer a viable option. Real change takes hard work, education, time, and input from a wide range of individuals of all different races, ethnicities, and identities. 

Sources:

1. Adela Suliman, “Nike, H&M, Burberry face backlash and boycotts in China over stance on Uyghur treatment”, NBC News, March 25, 2021. https://www.nbcnews.com/news/world/nike-h-m-face-backlash-china-over-xinjiang-cotton-concerns-n1262019

2. Alexa Tietjen, “Fashion Designers, Beauty Community Speak Out as Industry Stays Mum on Anti-Asian Violence”, WWD, February 24, 2021. https://wwd.com/fashion-news/fashion-features/fashion-beauty-prabal-gurung-phillip-lim-jason-wu-anti-asian-violence-hate-diversity-inclusion-1234737038-1234737038/

3. Alex Kessler and Emily Chan, “Anna Sui, Soo Joo Park, and More Fashion Leaders on the Importance of Standing Up Against Anti-Asian Racism”, Vogue, March 24, 2021. https://www.vogue.com/article/fashion-leaders-on-the-importance-of-standing-up-against-anti-asian-racism

4. Pamela N. Danziger, “Fate Of Luxury Depends On China, But Continued Success There Is Not Guaranteed”, Forbes, May 15, 2020. https://www.forbes.com/sites/pamdanziger/2020/05/15/fate-of-luxury-depends-on-china-but-continued-success-there-is-not-guaranteed/?sh=319f55bf530c

5. Rosa Escandon, “Asian American Consumer Market Is Now $1.2 Trillion And What That Means For Digital Brands”, Forbes, May 22, 2020. https://www.forbes.com/sites/rosaescandon/2020/05/22/asian-american-consumer-market-is-now-12-trillion-and-what-that-means-for-digital-brands/?sh=3fc170663620

6. “Chinese Luxury Consumers – Trends and Challenges for Luxury Brands”, Martin Roll Business & Brand Management, October 2020. https://martinroll.com/resources/articles/asia/chinese-luxury-consumers-trends-and-challenges-for-luxury-brands/