罗德传播集团 与 精确市场研究中心 Ruder Finn & Consumer Search Group

February 2020

TABLE OF CONTENTS

01 FOREWORD 5

02 EXECUTIVE SUMMARY 6

03 SURVEY METHODOLOGY 8

04 PURCHASING OVERVIEW AND CONSUMPTION FORECAST 11 Less Optimistic Outlook Strong Performance in 3rd-and-Lower-Tier Cities Clothing and Jewelry: The Crown Jewel Younger Consumers, More Mature Attitudes

05 ONLINE VS OFFLINE PURCHASES 24 E-commerce: Tmall Leads While Official-Brand Websites Gain Momentum Price-Conscious vs Convenience-Focused

06 LOCAL AND OVERSEAS SHOPPING 33 Preference for Local Shopping Japan Overtakes Hong Kong as Most Favorite Travel Destination

07 INFORMATION AND INFLUENCE 47 Omni-Channel with Digital Focus KOLs and Celebrities Most Influential in Clothing, Beauty & Cosmetics and Jewelry Paid Cooperation Between Brands and KOLs/ Celebrities Highly Accepted

08 LOYALTY PROGRAMS 59

09 WINNING BRANDS 64 Watches Jewelry Clothing Handbags & Leather Goods Beauty & Cosmetics Wine & Spirits Travel

10 SUGGESTION FOR BRANDS 91

3 01 4 02 FOREWORD01

We are delighted to share with you the 2020 China However, geopolitical uncertainties and slow growth Luxury Forecast. Since its launch in 2009, the China for the Chinese economy are casting shadows over Luxury Forecast has been closely monitoring Chinese the 2020 forecast, with a distinct increase in the luxury consumers in terms of their purchasing behavior, number of consumers planning to reduce spending brand engagement and consumption sentiments. in 2020. This less optimistic outlook sets the stage for more challenges coupled with the outbreak of Notwithstanding the impact of Sino-US trade tensions Novel Coronavirus Pneumonia epidemic across and regional challenges in 2019, luxury consumption in China at the beginning of 2020, which is expected to Mainland China still witnessed a strong growth rate of severely affect retail, consumption, and consumer 26%, outperforming the national GDP growth rate of confidence in general. 6.1%. This growth is reflected in the increasing spending on almost all types of luxury items in 2019, according to In the face of a challenging outlook, we hope the our survey. Domestic consumption has continued to 2020 China Luxury Forecast will help you not only grow rapidly over the past three years, with 31% of understand the changes occurring among Chinese luxury consumption recorded domestically in Mainland luxury consumers, but also identify opportunities China and 44% occurring locally in Hong Kong. for better satisfying their demands and growing your Digitalization is also fueling the development of the business successfully in China. China luxury market, introducing new methods for engaging with brands and boosting e-commerce. E-commerce has become a strategic priority winning in the China market, especially for reaching the younger and burgeoning consumers across the country. In GAO Ming Simon TYE addition, the China market is undergoing stronger Senior Vice President Executive Director growth in lower-tier cities, which are set to be the new Managing Director Luxury Practice Greater China CSG engine for growth. Ruder Finn Group

5 EXECUTIVE SUMMARY

Global personal luxury goods observed a moderate This year, we also analyzed consumers across different 02st nd growth rate of 4 percent, rising to 281 billion euros in tiers of cities. While 1 -and-2 -tier cities have become rd 2019, according to Bain & Company 's“ Luxury Goods too saturated and competing, the 3 -and-lower-tier Worldwide Market 2019”. As a growth engine, the cities are still underserved in terms of luxury brands - Mainland China luxury market maintained strong even while they account for more than 50% of total momentum by registering a 26% growth rate to 30 luxury sales, according to BCG's Chinese Luxury billion euros in 2019. The Chinese consumer remains Market Digital Behavior Report. the biggest luxury buyer in the world, accounting for 2020 China 35% of global luxury sales in 2019. In addition to these three key engines, the Luxury Forecast has inaugurated with this ninth Against the backdrop of slowing growth for the Chinese edition some new sections in view of the changing economy, escalating Sino-US trade tensions, and Chinese luxury consumer and the market. We have regional challenges, this bullish growth rate stands out added a discussion of the influence of KOLs/ as even more spectacular. The luxury industry has celebrities, which is extremely important in the China become one of the best-performing sectors in the luxury market, as well as a look at loyalty programs, to Chinese economy. The booming market can be provide a more comprehensive understanding of how attributed to a growing number of middle-class consumers engage with luxury brands. households, rising domestic consumption and online sales. Chinese government initiatives aimed at The report is based on a survey jointly conducted by boosting local consumption have paid off, with stricter Ruder Finn and Consumer Search Group. The survey customs inspections and reductions for import duties involved gathering data from 2,100 luxury-goods and in the VAT rate. In the meantime, luxury brand shoppers, with 1,599 of these consumers residing in companies are investing more in terms of narrowing Mainland China and 501 in Hong Kong. Among those the gap between prices at home and abroad, and surveyed, the average annual household incomes improving sales services and providing extra after-sales are RMB 1,358,040 in Mainland China and HKD services with the goal of attracting more local 997,360 in Hong Kong. The survey was conducted in consumption. December 2019.

Albeit the leader in global e-commerce, China remains at an early stage in terms of developing an online market for luxury sales, which accounts for about 10% of total luxury sales in China. However, e-commerce has become a growth engine for luxury brands in China, growing at a rate of more than 20% annually.

6 03 Key takeaways from this year's survey are: 1 4 Less optimistic outlook: The percentage of Preference for local shopping: Among Hong Kong consumers expecting to spend more during the next consumers, 44% of luxury spending was local, while 12 months is similar to last year's percentage. But Mainland China consumers spent 31% locally. From the number planning to spend less witnessed a the perspective of shopping destinations, Hong distinct increase, with 10% of Mainland China Kong consumers said they preferred shopping in respondents and 20% of Hong Kong respondents Hong Kong, Japan and Europe, while Mainland saying they plan to spend less in 2020, compared to China consumers preferred shopping in Mainland 6% and 12%, respectively, in 2019. Coupled with the China, Hong Kong and Japan. outbreak of Novel Coronavirus Pneumonia 5 Paid cooperation between brands and KOLs/ epidemic across China at the beginning of 2020, celebrities highly accepted: Knowledge of paid consumer confidence in both Hong Kong and cooperation between brands and KOLs/ celebrities Mainland China turned even less optimistic, with rarely reduces consumer purchase intentions. Only Hong Kong facing a more challenging future. 9% of Hong Kong and 4% Mainland China 2 rd Strong performance in 3 -and-lower-tier cities: On consumers’ purchase intentions decrease based on rd average, consumers in 3 -and-lower-tier cities knowledge of paid cooperation between brand and spent about RMB 393,000 during the past 12 KOLs. Meanwhile, 4% of Hong Kong and 1% of months, which is more than the RMB 344,100 Mainland China consumers’ purchase intentions st nd reported in 1 -tier cities and RMB 275,000 in 2 -tier will decrease based on knowledge of paid cities. Luxury consumers in lower-tier cities have cooperation between brand and celebrities. shown strong purchasing power and are poised to Mainland China consumers attach more value to become the engine for future growth. Furthermore, KOLs and celebrities than Hong Kong consumers. rd consumers in 3 -and-lower-tier cities are more Among all Mainland China consumers, rd willing to shop online and spend more on online 3 -and-lower-tier consumers value KOLs/ celebrities nd shopping than those in 2 -tier cities. the most. 3 E-commerce at official brand websites gaining momentum: In terms of e-commerce platforms for luxury goods, Hong Kong consumers prefer buying through official brand websites while consumers in Mainland China prefer the Tmall/ Taobao/ Luxury Pavilion platforms, followed by official-brand websites and JD.com. It is worthy to note that shopping through official brand websites has increased rapidly to rank number two.

7 03 SURVEY METHODOLOGY

2020 China Luxury Forecast The was jointly conducted by Ruder Finn and CSG in December 2019 through an online survey of 2,100 consumers in China. Details of respondent03 profiles are presented in the charts below:

Sample size: 501 Sample size: 1599

ANNUAL HOUSEHOLD INCOME

AVERAGE ANNUAL HOUSEHOLD INCOME: HKD 997,360

22% 27% 26% 14% 11% HKD 720,000 HKD 840,000 HKD 960,000 HKD 1,080,000 HKD 1,200,000 - 839,988 - 959,988 - 1,079,988 - 1,199,988 or above

AVERAGE ANNUAL HOUSEHOLD INCOME: RMB 1,358,040

10% 8% 12% 17% 14% 16% 12% 11% RMB 500,000 RMB 600,000 RMB 800,000 RMB 1,000,000 RMB 1,200,000 RMB 1,500,000 RMB 1,800,000 RMB 2,000,000 - 599,999 - 799,999 - 999,999 - 1,199,999 - 1,499,999 - 1,799,999 - 1,999,999 or above

8 GENDER 1st-tier cities

46% 54%

2nd-tier cities

47% 53%

rd 42% 58% 46% 54% 3 -and-lower-tier cities 03 44% 56% AGE

26% 8% 24% 9% Below 25 Below 25 26 to 35 26 to 35 26% 22% 36 to 45 36 to 45 40% 45% 46 or above 46 or above

AVERAGE AGE : 38.1 years old AVERAGE AGE : 36.7 years old

GEOGRAPHY

Beijing

17% Shanghai New Territories 33% 36% 32% 12% Shenzhen

Kowloon Guangzhou

13% nd Hong Kong Island 2 -tier cities 31% 13% 13% rd 3 -and-lower-tier cities

9

PURCHASING OVERVIEW AND CONSUMPTION FORECAST

Less Optimistic Outlook rd Strong Performance in 3 -and-Lower-Tier Cities Clothing and Jewelry: The Crown Jewel Younger Consumers, More Mature Attitudes 04 11 LESS OPTIMISTIC OUTLOOK

Against the backdrop of slower growth for the they plan to spend more during the next 12 Chinese economy, Sino-US trade tensions, and the months. However, it is noteworthy that there has impact of upheavals in Hong Kong in 2019, the been a distinct increase in the number of sentiment for luxury looks less optimistic. consumers planning to spend less, with 10% of Compared to last year's report, according to the Mainland China respondents and 20% of Hong survey, the ratio of consumers planning to spend Kong respondents saying they plan to spend less more on luxury goods in 2020 shows little change, in 2020, compared to 6% in Mainland China and with 44% of Mainland China respondents and 32% 12% in Hong Kong, respectively, in 2019. of Hong Kong respondents, respectively, saying

WOULD YOU SPEND MORE, THE SAME OR LESS ON LUXURY GOODS IN THE NEXT 12 MONTHS?

% %

Spend less Spend the same Spend more Spend less Spend the same Spend more

12 20 56 48 32 32 6 10 48 46 46 44

2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020

Compared with last year, the proportion of electronics in both regions. Meanwhile, Hong Kong consumers planning to spend less increased for consumers plan to spend more in jewelry, shoes, almost all product categories except the travel in accessories and beauty & cosmetics, while for Hong Kong and the beauty & cosmetics in Mainland China consumers spending on beauty & Mainland China. More consumers will spend less cosmetics, clothing, jewelry and wine & spirits are on automobiles, watches, handbags and expected to rise.

12 04 WOULD YOU SPEND MORE, THE SAME OR LESS ON THE FOLLOWING LUXURY ITEMS IN THE NEXT 12 MONTHS?

Black=2019 data

% Spend more Spend the same Spend less

34 41 36 26 24 23 26 29 26 N/A 32 35 37 35 25 -33- 35 32 33 33 32 46 27 40 34

39 41 48 47 47 42 48 -56- 52 55 48 62 48 N/A 49 53 51 57 53 65 53 37 61 52 61

33 38 2 26 16 26-11- 14 27 N/A 17 12 16 20 19 11 14 20 14 6 12 10 8 5 14

42 39 -41- 38 39 33 37 46 55 48 46 46 46 43 47 41 40 44 46 44 N/A 54 50 57 54

47 44 47 48 52 49 52 43 46 -54- 45 48 43 50 47 49 45 53 48 47 N/A 40 47 40 43

15 7 17 4 11 -5- 12 6 20 15 2 9 6 3 7 5 10 3 3 8 6 8 6 9 N/A

Black=2019 data Spend more Spend the same Spend less %

The outbreak of Novel Coronavirus Pneumonia epidemic at the beginning of 2020 dealt an even greater blow to China's retail business, domestic consumption and consumer confidence, creating more challenges for the luxury market in 2020.

13 STRONG PERFORMANCE IN 3rd-AND-LOWER-TIER CITIES

rd th During the past 12 months, Mainland China 3 -and-4 -tier cities, which is higher than the 23% st nd consumers on average spent altogether around recorded in 1 -and-2 -tier cities. Moreover, the RMB 330,400 on luxury items, while Hong Kong booming e-commerce market in China is boosting consumer spent around HKD 167,400. It is consumption in lower-tier cities, where the physical particularly interesting to note that consumers in brand presence is still scarce. Luxury consumers in rd 3 -and-lower-tier cities are spending about RMB lower-tier cities have shown strong purchasing 393,900 a year, an amount that is higher than the power and are poised to become the engine for st RMB 344,100 spent in 1 -tier cities and RMB 275,000 future growth. Furthermore, consumers in nd rd for 2 -tier cities. According to the 2020 McKinsey 3 -and-lower-tier cities are more willing to shop China Consumers Survey, the number of online and spend more on online shopping than nd households with a yearly disposable income of RMB 2 -tier consumers. 140,000 to RMB 300,000 has grown 38% annually in

HOW MUCH HAVE YOU SPENT IN TOTAL ON EACH OF THE FOLLOWING CATE- GORIES OF LUXURY PRODUCTS IN THE PAST 12 MONTHS, EITHER FOR YOUR- SELF OR TO OFFER TO SOMEONE?

HONG KONG (HKD) MAINLAND CHINA (RMB) 74,900 88,000 Luxury watches 53,500 68,900 Luxury jewelry 28,600 39,800 Luxury clothing 17,300 29,700 Luxury shoes 18,600 22,500 Luxury wallets/ small leather goods 46,300 50,700 Luxury handbags 12,600 18,800 Luxury accessories 19,000 20,300 Luxury beauty & cosmetics 1,023,000 1,271,000 Luxury automobiles 16,200 30,400 Fine wines, liquor & spirits 21,800 30,700 Luxury electronics 38,500 46,900 Luxury travel 15,100 20,300 Fine dining TOTAL 167,400 330,400

14 (RMB) 1st - TIER 2nd - TIER 3rd - AND - LOWER - TIER 85,500 92,700 84,700 Luxury watches 67,700 71,500 67,600 Luxury jewelry 40,900 38,400 38,700 Luxury clothing 28,900 29,100 33,600 Luxury shoes 22,000 22,200 24,600 Luxury wallets/ small leather goods 51,000 50,100 50,800 Luxury handbags 18,300 18,700 20,400 Luxury accessories 19,100 21,600 21,200 Luxury beauty & cosmetics 1,263,000 1,295,000 1,295,000 Luxury automobiles 30,500 30,200 30,400 Fine wines, liquor & spirits 32,100 28,600 29,700 Luxury electronics Luxury travel 50,300 44,700 41,900 Fine dining 20,400 20,800 19,500 TOTAL 344,100 275,000 393,900

15 CLOTHING AND JEWELRY: THE CROWN JEWEL

Luxury clothing and jewelry remain at the top of purchased luxury clothing and jewelry. Meanwhile, the list among luxury categories purchased over luxury watches and beauty & cosmetics are highly the past 12 months in both Mainland China and appealing to Hong Kong consumers, while Hong Kong. Last year's survey had a similar finding. Mainland China consumers are more inclined to More than 70% of Mainland China consumers and purchase luxury shoes and beauty & cosmetics. nearly 60% of Hong Kong consumers have

HAVE YOU BOUGHT ANY OF THE FOLLOWING LUXURY GOODS IN THE PAST 12 MONTHS?

64 Luxury clothing 63 Luxury jewelry 63 Luxury watches 62 Luxury beauty & cosmetics

Fine dining 56

Luxury shoes 56

Luxury wallets/ small gds 56 56 Luxury handbags 55 Luxury travel 54 Luxury accessories 47 Luxury electronics 44 Fine wines, liquor & spirits

Luxury automobiles 15

16 75 Luxury clothing 74 Luxury jewelry 61 Luxury shoes 59 Luxury beauty & cosmetics 55 Luxury watches 51 Fine wines, liquor & spirits 49 Luxury accessories 49 Luxury handbags 48 Luxury travel 39 Luxury wallets/ small gds 36 Luxury electronics 35 Fine dining 29 Luxury automobiles

Meanwhile, it is noteworthy that Hong Kong spending on luxury goods to luxury experience, consumers are more willing to spend on a luxury especially travelling overseas and fine dining. experience than their Mainland China counterparts, Dining has become one of the most important a fact reflected by fine dining and travel choices. activities during overseas leisure travel as well. In Some 56% of Hong Kong respondents have paid for addition to concrete physical benefits, various fine dining experiences compared to 35% in experiences such as history & heritage, cultural Mainland China. Meanwhile, 55% of Hong Kong exploration, high-end services, sensational respondents said they had enjoyed luxury travel pleasures can bring unexpected emotional compared to 48% in Mainland China. It is enjoyment. understandable that as consumers grow in luxury consumption, their purchase focus is shifted from

17 YOUNGER CONSUMERS, MORE MATURE ATTITUDES

The survey shows that consumers are making three years younger than Millennials aged 26 to their first luxury goods purchases earlier in both 35. In general, Hong Kong consumers purchase Mainland China and Hong Kong. On average, their first luxury goods at a younger age than Generation Z consumers between the ages of 21 those in Mainland China, with 9% of Hong Kong and 25 said they generally bought their first luxury respondents purchasing a first luxury item before item at no more than 20 years old, which is two to the age of 18.

AT WHAT AGE DID YOU FIRST PURCHASE LUXURY GOODS?

21-25 26-35 36-45 46+

9 20 11 8 3 Below 18 50 80 62 46 26 18-24 22 - 21 25 27 25-29 12 - 6 16 23 30-34 7 - - 5 21 35 or above 19.1 21.3 23.7 27.9 23.4 Average years old

21-25 26-35 36-45 46+

5 15 5 5 1 Below 18 45 83 57 28 28 18-24 28 2 32 30 26 25-29 14 - 6 27 22 30-34 8 - - 11 24 35 or above 19.5 22.8 26.6 28.7 24.8 Average years old

18 When asked why they buy luxury goods, both discreet goals revolving around improving Hong Kong and Mainland China consumers said personal quality of life. Mainland China consumers their primary reason revolves around improving have become more confident and are now the quality of life. This marks the first time that increasingly sophisticated. The survey found that Mainland China consumers have mentioned this their consumption philosophy has changed in step reason since the launch of the China Luxury with the decade-long development of China's Forecast survey in 2009. Mainland China high-end consumer market. consumers have shifted from favoring show-off attitudes such as flaunting wealth to seeking more

FOR WHAT REASON DO YOU PURCHASE LUXURY GOODS?

51 To improve life quality 46 To reward myself 44 To reflect my taste 39 To feel more confident 29 To feel more attractive 28 To reflect my achievement 24 To improve social status 21 To show to other people

58 To improve life quality 51 To reflect my taste 47 To feel more confident 37 To reward myself 34 To feel more attractive 34 To reflect my achievement 33 To improve social status 21 To show to other people

19 th Along with more confident consumers comes a as it is the 70 anniversary of founding People's growing demand for products reflecting Chinese Republic of China. More and more Mainland elements. According to the survey, about 72% of Chinese consumers are proud of China because Mainland Chinese consumers and 32% of Hong they witness China become stronger in economic Kong consumers think it is important to embed development, technological advance and global Chinese elements into the product/ services they influence in recent years. buy. 2019 witnessed an increasing national pride

WHEN IT COMES TO LUXURY PRODUCT AND SERVICE, HOW IMPORTANT IS IT TO HAVE CHINESE ELEMENTS EMBEDDED IN THE PRODUCTS OR SERVICES?

32 72 29 20 39 8

Important Important Neither Neither Not important Not important

20 Among all Chinese elements, consumers in Hong Kong prefer products produced with traditional Chinese craftsmanship or materials, while those in Mainland China prefer products with Chinese designed elements.

WHICH OF THE FOLLOWING CHINESE ELEMENTS DO YOU APPRECIATE FOR LUXURY ITEMS?

Using traditional Chinese craftsmanship or materials 33

Chinese designed elements 30

Chinese elements to reflect Chinese heritage 30

Chinese appropriate greeting/ service at hotels/ boutiques/ stores 25

Product with Chinese elements symbolizing good luck 25

Conveying Chinese aesthetics in a positive manner 20

Chinese food and drinks served at stores/ events 20

Animal of the year 16

Chinese designed elements 43

Chinese elements to reflect Chinese heritage 42

Product with Chinese elements symbolizing good luck 42

Conveying Chinese aesthetics in a positive manner 38

Using traditional Chinese craftsmanship or materials 38

Chinese appropriate greeting/ service at hotels/ boutiques/ stores 29

Animal of the year 24

Chinese food and drinks served at stores/ events 23

21 At the same time, Chinese brands are becoming brands over the past year. Some 56% of Mainland better received among Chinese consumers. The China respondents said they will buy more Chinese survey shows that Mainland China consumers fashion brands during the next 12 months. allocated 35% of their fashion spending to Chinese

WHAT PROPORTION DO YOU BUY CHINESE FASHION BRANDS VERSUS INTERNATIONAL BRANDS IN THE PAST 12 MONTHS?

22% 35% Chinese brands Chinese brands

78% 65% International brands International brands

DO YOU THINK YOU WILL BUY CHINESE FASHION BRANDS MORE IN THE NEXT 12 MONTHS?

34 Will buy more 56

41 Will be similar 42

25 Will be less 2

22

E-commerce: Tmall Leads While Official-Brand Websites Gain Momentum Price-Conscious vs Convenience-Focused

ONLINE VS OFFLINE PURCHASES

24 05 E-COMMERCE: TMALL LEADS WHILE OFFICIAL BRAND WEB- SITES GAIN MOMENTUM

Since 2018, Hong Kong consumers have shown a than 70% of Mainland China consumers more greater inclination to shop online, with online comfortable purchasing almost everything online shopping in most of product categories increasing except for automobiles, watches and jewelry. It is slightly. Most online purchases for Hong Kong worth noting that Mainland China consumers are consumers involved wines & spirits, beauty & less comfortable buying watches (58%) and cosmetics, accessories and electronics. Mainland jewelry (64%) than they were (73% and 70% China consumers are more likely to shop online respectively) last year. than their Hong Kong counterparts, with more

FROM WHAT CHANNELS DO YOU FEEL COMFORTABLE BUYING THE FOLLOW- ING CATEGORIES?

White=2019 data

Base (n=) 187 270 294 177 184 154 Online 51% 54% 49%55% 63%67% 55% 63% 66% -59%- 62% Official websites from brands 40% 33% 40% 39% 36% 46% Cross border (international website) 23% 25% 34% 33% 34% 32% Near-border (e.g. Tmall) 8% 15% 18% 12% 18% 10% Ecommerce on WeChat 3% 7% 11% 9% 7% 5% Offline 88% 96% 91% 90% 91% 90% Physical store in your country 79% 80% 65% 68% 60% 80% Outlets in your country 19% 29% 36% 33% 32% 23% Pop-up store in your country 10% 16% 25% 23% 27% 15%

Base (n=) 246 284 162 213 Online 63% 71% 63% 74% 59%75% 64% 68% Official websites from brands 46% 45% 48% 49% Cross border (international website) 32% 38% 33% 29% Near-border (e.g. Tmall) 22% 17% 15% 16% Ecommerce on WeChat 9% 10% 12% 9% Offline 82% 77% 82% 85% Physical store in your country 56% 58% 65% 74% Outlets in your country 35% 26% 22% 22% Pop-up store in your country 23% 21% 25% 16%

05 25 White = 2019 data

Base (n=) 492 1105 1166 789 462 369 Online 73% 58% 70% 64% 74% 72% 78% 75% 73% -75%- 75% Official websites from brands 36% 40% 46% 44% 39% 44% Cross border (international website) 24% 29% 36% 35% 38% 33% Near-border (e.g. Tmall) 17% 16% 24% 30% 27% 21% Ecommerce on WeChat 6% 8% 14% 11% 14% 9% Offline 83% 89% 86% 79% 73% 71% Physical store in your country 72% 70% 54% 50% 46% 50% Outlets in your country 15% 22% 33% 31% 26% 27% Pop-up store in your country 8% 17% 20% 20% 18% 13%

Base (n=) 724 921 194 718 540 Online 77% 79% 80% 80% 57% 50% 74% 78% 73% 82% Official websites from brands 46% 44% 19% 45% 47% Cross border (international website) 36% 42% 21% 38% 37% Near-border (e.g. Tmall) 29% 27% 20% 24% 29% Ecommerce on WeChat 18% 12% 14% 12% 12% Offline 74% 69% 80% 70% 63% Physical store in your country 49% 47% 55% 47% 46% Outlets in your country 31% 25% 25% 24% 20% Pop-up store in your country 18% 13% 15% 14% 12%

26 In terms of e-commerce platforms for luxury, Hong websites has been increasing significantly and now Kong consumers prefer buying through the official ranks number two in Mainland China. Mainland brand websites (55%) while Mainland China China consumers prefer local e-commerce sites like consumers prefer buying through Tmall/ Taobao/ Tmall to official brands’ websites because it Luxury Pavilion (60%), followed by official brand provides a better user experience in terms of mobile websites (48%) and JD.com (44%). It is worth noting application, user-friendly buying processes, and that the rate of shopping through official brand local language. IN THE PAST 12 MONTHS, FROM WHICH E-COMMERCE PLATFORMS HAVE YOU PURCHASED LUXURY GOODS?

55 60 Official brands websites Tmall/ Taobao/ Luxury Pavilion 45 48 Amazon Official brands websites 37 44 Lane Crawford JD.com 37 Official brands 34 Amazon mobile applications 31 33 Vipshop Tmall/ Taobao 27 30 Kaola.com Harvey Nichols 25 27 Official brands APP Net-a-porter/ Mr. Porter 19 23 Secoo Farfetch.com 19 18 XiaoHongShu Matchesfashion 16 18 Offical brands WeChat account Official brands WeChat account

Online purchasing has become the most dynamic merged its luxury platform Toplife into Farfetch growth engine for Chinese luxury spending, China in 2019, which provides JD customers with registering a growth rate of 27% in 2018 to reach access to Farfetch's more than 1,000 luxury 10% of total luxury sales according to Bain & brands. According to Gartner L2, the percentage of Company's“Luxury Goods Worldwide Market luxury brands on Gartner L2's index operating a 2019” . The two e-commerce behemoths Alibaba flagship store on JD.com has grown from 11% in and JD.com have placed a strategic primacy on 2017 to 20% in 2019. the luxury market. In addition to launching the dedicated luxury platform Luxury Pavilion in 2018, In addition to collaborating with these leading Tmall fostered a strategic partnership with Yoox e-commerce platforms, more luxury brands have Net-a-Porter in 2019 and expanded collaboration stepped up their e-commerce businesses by with luxury brands launching their official online launching their own official e-commerce websites stores on Tmall. There are more than 150 official or by driving sales to official e-commerce WeChat online stores offering luxury brands on Tmall's mini-programs. Luxury Pavilion platform. Meanwhile, JD.com has

27 PRICE-CONSCIOUS VS CONVENIENCE-FOCUSED

The reasons for shopping online vary. Hong Kong consumers are price-conscious. They buy online due to cheaper price and because it is easy to compare prices. Mainland China consumers are convenience-focused. They buy online because it saves time and offers an easy way to browse collections.

WHY DO YOU PURCHASE LUXURY GOODS ONLINE?

Less expensive to buy online 43 compared to through retail stores

42 Easier to compare price online

40 Save time from going to physical stores

39 Free shipping

Certain product specifications 34 are not available in HK 34 More convenient

The brand I want to buy 31 is not available in HK

No pressure from salesperson 30 in physical store

Easier to browse through the 30 collection of products from the brand

Specific products that I am 29 looking for are not available in HK

26 Can read reviews from other shoppers

28 46 Save time from going to physical stores

Easier to browse through the 43 collection of products from the brand

More convenient 41 37 Easier to compare price online

33 Can read reviews from other shoppers

Less expensive to buy online 32 compared to through retail stores

Certain product specifications 31 are not available in Mainland China

Specific products that I am looking for 28 are not available in Mainland China

The brand I want to buy 26 is not available in Mainland China 25 Free shipping

No pressure from salesperson 23 in physical store

29 Hong Kong consumers go online to check prices, while Mainland China consumers go online to look for product specifications as well as mix and match advice and product specifications.

WHAT KIND OF INFORMATION ON LUXURY PRODUCTS DO YOU USUALLY LOOK FOR ONLINE?

69 Price Product texture/ 65 specifications Product texture/ 61 60 specifications Mix & match/ styling advice 58 Color 54 Story of the brand 50 Size 51 Price Mix & match/ 49 48 styling advice Color 40 43 Story of the brand Size 39 42 Story of the product Story of the product

While visiting physical stores, customers from both Hong Kong and Mainland China want to touch the product to check its texture and specifications. WHAT KIND OF INFORMATION ON LUXURY PRODUCTS DO YOU USUALLY LOOK FOR IN PHYSICAL STORES?

Product texture/ 70 Product texture/ 68 specifications specifications 64 53 Price Color 62 Size Mix & match/ 52 styling advice 59 Color 52 Size 49 Mix & match/ 49 styling advice Price 28 36 Story of the brand Story of the brand 26 31 Story of the product Story of the product

30 Hong Kong consumers prefer paying with credit cards while Mainland China consumers prefer using Alipay for online purchases. WHAT ARE YOUR PAYMENT METHODS FOR ONLINE PURCHASE?

73 Pay on the websites through credit cards Visa 48% MasterCard 41% American Express 18% UnionPay 15% 45 PayPal 34 Alipay 27 Apple Pay 21 Pay on the websites through debit cards 20 Pay on the websites through bank transfer 18 WeChat Pay 16 Cash on delivery 14 Google Pay 5 UnionPay APP

74 Alipay 46 Pay on the websites through credit cards UnionPay 26% MasterCard 19% Visa 17% American Express 7% 42 WeChat Pay 27 Pay on the websites through debit cards 20 Pay on the websites through bank transfer 16 Cash on delivery 15 PayPal 15 Apple Pay 11 UnionPay APP 4 Google Pay

31

LOCAL AND OVERSEAS SHOPPING06

Preference for Local Shopping Japan Overtakes Hong Kong as Most Favorite Travel Destination

33 PREFERENCE FOR LOCAL SHOPPING

Local consumption has clearly emerged as a rising to narrow the gaps between prices at home and trend over the past three years thanks to the abroad, and by providing better sales and proactive initiatives of the Chinese government to after-sales services. According to the survey, this promote local consumption. These initiatives have year Hong Kong consumers have spent 44% of included reducing import duties and the VAT rate, their luxury spending locally while Mainland China and stricter customs inspections. Meanwhile, the consumers have spent 31% locally in the past 12 owners of luxury brands have taken the initiative months.

CONSIDERING YOUR ANNUAL SPENDING ON LUXURY PRODUCTS, WHAT PROPORTION DID YOU SPEND LOCALLY VERSUS OVERSEAS?

Domestic Overseas

Hong Kong consumers 44% 56%

Mainland China consumers 31% 69%

st 1 -tier 30% 70%

nd 2 -tier 32% 68%

rd 3 -and-lower-tier 31% 69%

34 In terms of shopping destinations, Hong Kong consumers prefer shopping in Hong Kong, Japan and Europe while Mainland China consumers prefer shopping in Mainland China, Hong Kong and Japan.

IN THE PAST 12 MONTHS, WHICH COUNTRIES OR REGIONS HAVE YOU BEEN TO PURCHASE LUXURY GOODS FOR EACH CATEGORY OF LUXURY ITEMS?

Any listed products

500 173 246 250 147 149 Base (n=) Top 5 places to purchase luxury products 70% 58% 54% 53% 54% 48% Hong Kong SAR 54% 16% 22% 38% 25% 26% Japan 53% 41% 30% 38% 40% 39% Europe 35% 10% 15% 15% 18% 19% US 29% 5% 11% 13% 10% 11% S. Korea

22% 5% 11% 13% 12% 8% Mainland China

139 208 245 13* 142 181 Base (n=) Top 5 places to purchase luxury products 55% 51% 55% 62% 51% 70% Hong Kong SAR 21% 28% 45% 0% 23% 24% Japan 45% 36% 19% 8% 28% 12% Europe 14% 13% 14% 8% 19% 15% US 8% 12% 19% 0% 9% 7% S. Korea

1% 8% 11% 0% 8% 6% Mainland China

*Cautions: small bases (n <30)

35 Any listed products

1577 416 955 935 649 348 Base (n=) Top 5 places to purchase luxury products

64% 39% 40% 44% 46% 38% Mainland China 61% 35% 39% 33% 33% 32% Hong Kong SAR 52% 17% 20% 23% 20% 21% Japan 45% 25% 22% 23% 22% 19% Europe 43% 14% 20% 21% 20% 18% US

304 566 760 168 586 395 Base (n=) Top 5 places to purchase luxury products

41% 44% 40% 53% 41% 47% Mainland China 34% 30% 33% 16% 27% 26% Hong Kong SAR 18% 24% 39% 16% 20% 23% Japan 22% 22% 23% 13% 25% 13% Europe 17% 20% 18% 14% 18% 18% US

36 Hong Kong consumers are more likely to buy shopping overseas, Mainland China consumers like electronics, watches, handbags and beauty & to purchase jewelry, watches and handbags in cosmetics locally. In Mainland China, the categories Hong Kong. Both Hong Kong and Mainland China most frequently involving domestic purchases are consumers like to purchase beauty & cosmetics, electronics, shoes, clothing and accessories. When clothing and accessories in Japan.

IN THE PAST 12 MONTHS, WHICH COUNTRIES OR REGIONS HAVE YOU BEEN TO PURCHASE LUXURY GOODS FOR EACH CATEGORY OF LUXURY ITEMS?

DESTINATION CATEGORIES TO BUY

Clothing 13% Shoes 12% Beauty/ Jewelry 11% Mainland China Electronics 47% Shoes 46% Clothing/ Accessories 44%

Electronics 70% Watches 58% Handbags 55% Hong Kong SAR Jewelry 39% Watches 35% Handbags 34%

Beauty 45% Clothing 38% Accessories 28% Japan Beauty 39% Accessories 24% Clothing 23%

Handbags 45% Watches 41% Shoes 40% Europe Watches/ Clothing/ 25% 23% Jewelry/ Shoes/ 22% Fine Wines Beauty Handbags/ Accessories 46%

Jewelry/ Clothing/ Small Goods 19% Shoes 18% Electronics 15% US Jewelry/ Shoes/ Small Goods/ Beauty/ Clothing 21% 18% Accessories 20% Fine Wines/ Electronics

Beauty 19% Clothing 13% Accessories 12% S. Korea

37 As to the reasons why consumers shop locally and Hong Kong consumers prefer buying outside Hong overseas, better communication with the Kong because prices are lower, while Mainland salespeople is the top reason for local purchases by China consumers make purchases outside Mainland both Hong Kong and Mainland China consumers. China mainly because the product quality is better.

WHY DO YOU PURCHASE LUXURY PRODUCTS LOCALLY/ DOMESTICALLY?

52 Better communication with salespersons 50 More comfortable to shop in Hong Kong

Easier to return the product 49

I needed the product and stocks were 45 available at the moment 45 More convenient after-care services 44 More attentive service

The luxury brands in Hong Kong are more 42 centralized in one area, making it easier to shop 42 There is not a large price difference

I worry that problems may 40 arise when I shop overseas

There are promotional activities 39 that targeted the local market

52 Better communication with salespersons 48 More convenient after-care services

More attentive service 47 47 Easier to return product

More comfortable to 46 shop in Mainland China

I need the product and stocks were 44 available at the moment

The luxury brands in Mainland China are more 39 centralized in one area, making it easier to shop 33 I worry that problems may arise when I shop overseas

There are promotional activities 33 that targeted the local market

Limited edition in Mainland China 31 (the product is sold only in Mainland China)

38 WHY DO YOU PURCHASE LUXURY PRODUCTS OVERSEAS?

62 Cheaper prices

Exclusive products - they are not sold in Hong Kong 57 52 The product comes in colors that I like 51 Better qualities 49 There are available stocks 46 There are promotional activities

The product comes with sizes that fit my size 42 41 Recognizable products - famous in Hong Kong

More professional customer services are provided 37

64 Better qualities 55 The product comes in colors that I like 55 Exclusive products - they are not sold in Mainland China 55 There are available stocks 53 Recognizable products - famous in Mainland China 51 Cheaper prices 51 The product comes with sizes that fit my size 51 More professional customer services are provided 44 There are promotional activities

39 JAPAN OVERTAKES HONG KONG AS MOST FAVORITE TRAVEL DESTINATION

On average, Hong Kong consumers made 4.2 trips while Mainland China consumers made 4.7 domestic and 3.6 international trips, respectively, in the past 12 months. Almost one-third of Hong Kong consumers and more than half of all Mainland China consumers were planning to take more than five leisure trips over the next 12 months.

IN THE PAST 12 MONTHS, HOW MANY LEISURE TRIPS DID YOU HAVE BOTH AT HOME AND ABROAD?

Average no. of Average no. of domestic leisure trips international leisure trips in P12M in P12M

- 4.2

4.7 3.6

HOW MANY LEISURE TRIPS DO YOU PLAN TO TRAVEL TO FOR LEISURE IN THE NEXT 12 MONTHS?

I do not have plan to travel I do not have plan to travel

1-2 times 2% 1-2 times 4% 20% 14%

37% 30% 5 times or above 41% 52% 3-4 times 3-4 times 5 times or above

40 On average, Hong Kong consumers spent HKD 35,000 on the last leisure trip while Mainland China consumers spent around RMB 67,000 excluding flights and hotel expenses. IN YOUR LAST LEISURE TRIP, HOW MUCH DID YOU SPEND IN TOTAL THROUGHOUT THE ENTIRE TRIP EXCLUDING FLIGHTS AND HOTEL CHARGES? HOW MUCH DID YOU SPEND ON SHOPPING?

Average spend on Average spend on “Shopping” on the last leisure trip the last leisure trip

HKD 35,000 HKD 14,000

RMB 67,000 RMB 27,000

Hong Kong consumers budget similar amounts on food and beverages (23%), flights (21%) and shopping (23%). Mainland China consumers put a heavier focus on shopping, which comprises 28% of the total budget for a trip.

WHAT IS YOUR BUDGET ALLOCATION FOR THE FOLLOWING ITEMS ON TRAVEL?

28% 23% 23% 21% 21% 19% 18% 17% 15% 15%

F&B Hotels Flights Activities Shopping

41 For both Hong Kong and Mainland China consumers, shopping options are a very important factor for travel destinations preferences. In addition, Hong Kong consumers value transportation convenience while Mainland China consumers value culture and historical elements. WHAT ARE THE TOP THREE FACTORS AFFECTING YOUR PREFERRED DESTINATION WHEN YOU PLAN YOUR TRAVELS?

47 50 Destination's transportation convenience Destination's culture and history 45 49 Destination's shopping options Destination's shopping options 37 44 Destination's culture and history Destination's transportation convenience

36 36 Destination's hotel options Destination's hotel options

34 33 Flight promotions Destination's visa policy

27 29 Destination's family activities Destination's family activities

26 14 Hotel promotions Hotel promotions

20 13 Destination's visa policy Flight promotions

In the past 12 months, outbound travel and South Korea. This marked the first time that destinations preferred by Mainland Chinese Hong Kong has lost its position as the top tourists include Japan, Hong Kong, France and the outbound travel destination for Mainland China United States, while Hong Kong travelers tourists. Moreover, Hong Kong is not regarded as a preferred Japan, Mainland China and Taiwan. top choice for travels planned for the next 12 Japan, France and United States topped the list as months. This can be partly attributed to the destinations for Mainland China tourists over the upheavals in Hong Kong in 2019 and also testifies next 12 months while for Hong Kong tourists the to the fact that Chinese consumers are more destinations are Mainland China, Taiwan, Australia confident about exploring exotic destinations.

42 WHICH LOCATIONS HAVE YOU TRAVELLED TO FOR LEISURE OVER THE PAST 12 MONTHS?

59 38 Japan Japan 33 34 Mainland China Hong Kong SAR 30 25 Taiwan France 25 21 Thailand United States 23 17 UK UK 22 16 S. Korea Macau SAR 22 16 Macau SAR Singapore 19 15 Singapore Thailand 17 13 Australia Australia 16 13 France Switzerland

WHICH LOCATIONS DO YOU PLAN TO TRAVEL TO FOR LEISURE IN THE NEXT 12 MONTHS?

47 26 Japan Japan 23 25 Taiwan France 22 22 Australia United States 22 20 S. Korea UK 21 20 UK Hong Kong SAR 21 19 Thailand Singapore 19 19 Mainland China Canada 19 17 France Australia 17 16 Switzerland Malaysia 16 16 Canada Switzerland

43 When shopping abroad, Mainland China consumers are more likely than Hong Kong counterparts to buy brands about which they previously had not heard (93% vs 82%). Both Hong Kong and Mainland China consumers prefer luxury department stores, followed by standalone brand boutiques and brand outlets.

WHEN SHOPPING ABROAD, WOULD YOU BUY FROM A FOREIGN BRAND THAT YOU HAVE NOT HEARD OF BEFORE?

82% 14% 4%

93% 6% 1%

Very likely / Likely Not sure Not likely / Very unlikely

WHEN SHOPPING ABROAD, WHAT ARE THE TOP THREE PLACES YOU SHOP FROM?

71 Luxury department stores 67

62 Luxury standalone brand boutiques 67

62 Luxury brands outlets 51

41 Airport and city duty free shops 49

15 In-flight duty free 14

6 Multi-brand store 6

4 Online 4

44 Most Hong Kong and Mainland China consumers like to pay for products with credit cards when shopping abroad. However, mobile payment and digital wallet options are gaining popularity in Mainland China, with about 70% of all Mainland China consumers surveyed paying through a mobile payment or digital wallet service compared to 47% of Hong Kong consumers.

WHEN SHOPPING ABROAD OVER THE PAST 12 MONTHS, HOW DID YOU PAY?

99 Credit card 57% Visa 46% MasterCard 23% American Express 18% UnionPay 47 Mobile payment or digital wallet AliPay 23% 23% Paypal 19% Apple Pay 12% WeChat Pay 12% Google pay 41 Cash 13 Prepaid cards

98 Credit card 33% UnionPay 32% Visa 29% MasterCard 9% American Express 70 Mobile payment or digital wallet 53% AliPay 23% WeChat Pay 17% Apple Pay 16% Paypal 8% UnionPay App 41 Cash 15 Prepaid cards

45

INFORMATION AND INFLUENCE

Omni-Channel with Digital Focus KOLs and Celebrities Most Influential in Clothing, Beauty & Cosmetics and Jewelry Paid Cooperation Between Brands and KOLs/ Celebrities Highly Accepted 07 47 OMNI-CHANNEL WITH DIGITAL FOCUS

Digitalization has become fully integrated in China. Celebrity endorsements, boutiques/ stores, almost every aspect of the luxury business, with and the social media accounts of brands are also e-commerce and digital marketing receiving very important in Mainland China. In Hong Kong, focused attention. Luxury goods consumers official websites are the top channel, while mainly use digital channels to obtain brand and recommendations from friends, magazines and product information. The official brand websites newspapers, and social media accounts are still are the top channel for obtaining luxury brand often used for obtaining luxury brand and product information in both Hong Kong and Mainland information.

FROM WHICH OF THE FOLLOWING SOURCES DO YOU OBTAIN LUXURY BRANDS INFORMATION?

49 47 Official websites from brands Official websites from brands 35 40 Friends' recommendations Official mobile app from brands 34 33 Magazines and newspapers Celebrity endorsement

31 32 Official social media accounts from brands Offline stores

29 31 Offline stores Official social media accounts from brands 27 31 Traditional media social platform Friends' recommendations

26 31 Outdoor advertising E-commerce website/ mobile app

22 30 TV WeChat friend circles

22 24 Official mobile app from brands Traditional media social platform

21 23 Celebrity endorsement Outdoor advertising

48 However, when it comes to information channels07 affecting purchasing decisions, friend-sharing, print media ads and TV commercials are the key influencers for purchase decisions among Hong Kong consumers, while advertisements on social media and TV commercials are the key influencers for Mainland China consumers. WHICH OF THE FOLLOWING INFORMATION CHANNELS CAN INFLUENCE YOUR PURCHASING DECISION?

38 Friends’ sharing or recommendations

36 Advertisements in magazines/ newspapers

36 Advertisements on TV

31 Advertisements in social media

29 Recommendations from magazines/ newspapers articles

26 Outdoor advertisements

15 Celebrities

KOL/ Bloggers 13

6 Only my opinion matters

42 Advertisements in social media 40 Advertisements on TV 29 Friends’ sharing or recommendations 29 Advertisements in magazines/ newspapers 26 KOL/ Bloggers 25 Celebrities 25 Outdoor advertisements 25 Recommendations from magazines/ newspapers articles 8 Only my opinion matters

49 China has a unique social media ecosystem. Social consumers. According to the survey, most Hong media is the largest attention grabber and way to Kong consumers obtain information about brands spend time among Chinese consumers. It is no from official Facebook pages, while most Mainland wonder that almost every luxury brand operates its China consumers obtain information from brands own social media accounts to engage directly with through official Weibo accounts.

FROM WHICH OF THE FOLLOWING BRAND OFFICIAL ACCOUNTS DO YOU MAINLY OBTAIN INFORMATION?

62 Brand official Facebook page 18 Brand official Weibo

12 Brand official Instagram 6 Brand official WeChat

1 Brand official Xiaohongshu account

45 Brand official Weibo 32 Brand official WeChat 13 Brand official Facebook page

Brand official Instagram 7

3 Brand official Xiaohongshu account

50 KOL & CELEBRITIES MOST INFLUENTIAL IN CLOTHING, BEAUTY & COSMETICS AND JEWELRY

Key opinion leaders (KOLs) are extremely on which KOLs exert the highest level of influence important in China not only for communicating among Hong Kong consumers. In Mainland China, brand stories and product information, but also the top three are clothing, beauty & cosmetics for directly driving traffic and sales conversions. and jewelry. Clothing and jewelry are the two main categories

IN THE PAST 12 MONTHS, WHICH OF THE FOLLOWING LUXURY ITEMS HAVE YOU BOUGHT AS INFLUENCED BY KOLS OR BLOGGERS?

54 49 Luxury clothing Luxury clothing 40 44 Luxury jewelry Luxury beauty & cosmetics 31 37 Luxury beauty & cosmetics Luxury jewelry

27 33 Luxury accessories Luxury shoes

25 29 Luxury watches Luxury accessories 24 22 Luxury wallets/ small gds Fine wines, liquor & spirits 22 17 Luxury travel Luxury wallets/ small gds

21 15 Luxury shoes Luxury electronics

21 14 Luxury handbags Luxury watches

18 11 Fine dining Fine dining

16 10 Luxury electronics Luxury handbags

15 10 Fine wines, liquor & spirits Luxury travel

51 Luxury clothing is the category that is most highly influenced by celebrities in both Hong Kong and Mainland China, followed by luxury beauty & cosmetics and luxury jewelry in Mainland China, and luxury jewelry in Hong Kong.

IN THE PAST 12 MONTHS, WHICH OF THE FOLLOWING LUXURY ITEMS HAVE YOU BOUGHT AS INFLUENCED BY CELEBRITIES?

38 51 Luxury clothing Luxury clothing

34 42 Luxury beauty & cosmetics Luxury beauty & cosmetics

26 40 Luxury shoes Luxury jewelry 22 33 Luxury jewelry Luxury shoes

21 28 Luxury electronics Luxury accessories

19 16 Luxury handbags Fine wines, liquor & spirits

19 16 Luxury accessories Luxury watches

18 13 Fine dining Luxury wallets/ small gds

16 12 Luxury travel Luxury handbags

16 11 Luxury watches Luxury electronics

15 8 Luxury wallets/ small gds Luxury travel

10 8 Fine wines, liquor & spirits Fine dining

52 In Hong Kong, key channels for KOLs are Facebook, YouTube and Instagram. In Mainland China, Weibo, Xiao Hong Shu, Tik Tok and WeChat are the top four channels.

THROUGH WHAT CHANNELS DID YOU OBTAIN RECOMMENDATIONS FROM KOLS OR BLOGGERS?

67 60 Facebook Weibo

64 49 YouTube Xiao Hong Shu

48 45 Instagram Tik Tok

39 44 Twitter WeChat

36 35 Weibo Zhihu

34 28 WeChat Bilibili

28 22 Tik Tok Facebook

25 22 Xiao Hong Shu YouTube 19 22 Tumblr Kuaishou 21 Twitter

53 Mainland China consumers attach a higher degree of value to KOLs and celebrities compared to Hong rd Kong consumers. Among all Mainland China consumers, 3 -and-lower-tier consumers value KOLs and celebrities the most. DO YOU THINK THE INFLUENCE OF KOLS OR BLOGGERS WILL UNDERGO THE FOLLOWING CHANGES IN THE NEXT 2 YEARS?

61% 31% 8%

76% 21% 4%

st 1 -tier 75% 22% 4%

nd 2 -tier 72% 25% 4%

rd 3 -and-lower-tier 87% 9% 4%

Becomes more important No change Becomes less important

DO YOU THINK THE INFLUENCE OF CELEBRITIES WILL UNDERGO THE FOLLOWING CHANGES IN THE NEXT 2 YEARS?

48% 38% 14%

75% 22% 4%

st 1 -tier 74% 22% 4%

nd 2 -tier 71% 26% 3%

rd 3 -and-lower-tier 83% 14% 4%

Becomes more important No change Becomes less important

54 Celebrity dressing and advertisement endorsements are preferred by Hong Kong consumers while Mainland China consumers are more interested in celebrity dressing.

WHAT CELEBRITY RECOMMENDATION DO YOU THINK IS IMPORTANT?

Celebrity dressing 67

66 Advertisement endorsement 55 Attending brand events 40 Shooting in media

22 Live videos

Personal recommendation 19 on social media

82 Celebrity dressing 65 Attending brand events 62 Advertisement endorsement

38 Shooting in media

25 Live videos

Personal recommendation on 18 social media

55 PAID COOPERATION BETWEEN BRANDS AND KOLS/ CELEBRITIES HIGHLY ACCEPTED

Some 69% of Hong Kong and Mainland China consumers think KOLs/ celebrities are transparent about whether or not payments are received for product recommendations. HOW TRANSPARENT DO YOU THINK KOLS OR BLOGGERS ARE ABOUT WHETHER THEIR PRODUCT RECOMMENDATION IS A PAID PARTNERSHIP OR NOT?

69% 24% 7%

69% 24% 7%

1st-tier 68% 27% 6%

2nd-tier 69% 21% 10%

3rd-and-lower-tier 73% 18% 9%

Very/Rather Transparent Neutral Very/Rather Intransparent

Knowledge of paid cooperation between brands cooperation between brand and KOLs; 4% of Hong and KOLs /celebrities rarely reduces consumer Kong and 1% Mainland China consumers’ purchase intentions. Only 9% of Hong Kong and 4% purchase intentions will decrease based on Mainland China consumer will decrease their knowledge of paid cooperation between brand and purchase intentions based on knowledge of paid celebrities. HOW WOULD YOUR PURCHASE INTENTION CHANGE TOWARDS THE PRODUCT THAT KOLS OR BLOGGERS RECOMMENDED AFTER KNOWING OF THE PAID COOPERATION BETWEEN THE KOL OR BLOGGER AND BRANDS?

Decrease purchase intention

9%

4%

st 1 -tier 3% nd 2 -tier 6% rd 3 -and-lower-tier 6%

56 HOW WOULD YOUR PURCHASE INTENTION CHANGE TOWARDS THE PRODUCT THAT CELEBRITIES RECOMMENDED AFTER KNOWING OF THE PAID COOPERATION BETWEEN CELEBRITIES AND BRANDS?

Decrease purchase intention

4%

1%

st 1 -tier 0% nd 2 -tier 2% rd 3 -and-lower-tier 4%

In Hong Kong, Sammi Cheng and Andy Lau are the most popular celebrities influencing Hong Kong consumers on purchase decisions while Yang Mi, Fan Bingbing, Angelababy, Zhao Liying, and Hugh are top five most influential celebrities in Mainland China.

PLEASE LIST 5 CELEBRITIES WHO HAVE AFFECTED YOUR PURCHASE DECISIONS.

11 33 Sammi Cheng 鄭秀文 Yang Mi 杨幂 11 16 Andy Lau 劉德華 Fan Bing Bing 范冰冰

10 14 David Beckham 大卫·贝克汉姆 Angelababy 杨颖

8 11 Lau Ka Ling 劉嘉玲 Zhao Liying 赵丽颖 8 10 Joey Yung 容祖兒 Hugh 胡歌

57

LOYALTY PROGRAMS

Most consumers think08 loyalty programs are important (91% in Hong Kong and 94% in Mainland China). WHEN YOU PURCHASE LUXURY PRODUCTS, DO YOU THINK BEING A MEMBER OF A LOYALTY PROGRAM IS IMPORTANT?

YES 91% NO 9%

YES 94% NO 6%

59 Both Hong Kong and Mainland China consumers choose to become a loyalty member to enjoy special services. Hong Kong consumers also want to accumulate points or enjoy discounts. WHY DO YOU THINK BEING A MEMBER OF A LOYALTY PROGRAM IS IMPORTANT?

63 Could enjoy special services

61 Could save points or enjoy discounts on my purchase

46 Exclusive purchase on limited items

72 Could enjoy special services 56 Could save points or enjoy discounts on my purchase 54 Exclusive purchase on limited items

60 Both Hong Kong and Mainland China consumers most enjoy birthday greetings and gifts. In addition, Hong Kong consumers enjoy new items or shared discounts, while Mainland China consumers enjoy offline activities.

IN THE PAST 12 MONTHS, WHICH OF THE FOLLOWING CUSTOMER SERVICES HAVE YOU ENJOYED?

59 51 Birthday blessings and gifts Birthday blessings and gifts

51 50 New items or discount sharing Offline activities 37 46 Offline activities New items or discount sharing 36 44 Greetings during festivals Greetings during festivals 29 41 Customized services Customized services 16 25 Aftersales product maintenance Aftersales product maintenance

14 22 Online queries Online queries

61 Hong Kong consumers get the most satisfaction from customized services while Mainland China consumers are best satisfied by after-sales product maintenance. However, Mainland China consumers have the highest expectations for customized services. HOW SATISFIED ARE YOU WITH THE CUSTOMER SERVICES YOU HAVE ENJOYED?

Customized services 86 11 3 Aftersales product maintenance 90 8 2 2 Aftersales product maintenance 81 17 Birthday blessings and gifts 86 10 4 4 Online queries 73 23 Online queries 84 14 2 5 Offline activities 73 22 New items or discount sharing 84 13 3 5 Birthday blessings and gifts 70 25 Customized services 83 15 2 4 New items or discount sharing 70 26 Greetings during festivals 82 14 4 4 Greetings during festivals 64 32 Offline activities 80 14 6

Very Satisfied / Satisfied Neutral Very dissatisfied / dissatisfied

IN THE FOLLOWING CUSTOMER SERVICES, WHICH DO YOU EXPECT TO GET THE MOST?

26 Birthday blessings and gifts Customized services 26 24 18 New items or discount sharing Offline activities 14 17 Offline activities Birthday blessings and gifts 14 16 Customized services New items or discount sharing 10 9 Greetings during festivals Greetings during festivals 8 9 Aftersales product maintenance Aftersales product maintenance

Online queries 4 Online queries 3

None of the above 1 None of the above 2

62 63 WINNING BRANDS, BRAND RECOGNITION, PURCHASES AND PURCHASE INTENTIONS

Watches Jewelry Clothing Handbags & Leather Goods Beauty & Cosmetics Wine & Spirits Travel 64 09 WATCHES

Rolex, Cartier and Omega are the top three watch brands that enjoy the highest awareness in both Hong Kong and Mainland China. Rolex strengthened its leading position in both Hong Kong and Mainland China in 2019. Meanwhile, Longines now almost ties Omega in Mainland China in terms of brand awareness.

IN THE FOLLOWING WATCH BRANDS, WHICH DO YOU KNOW?

63 Rolex 72 Rolex 60 51 Cartier Cartier 58 47 Omega Omega 53 46 Seiko Longines 49 41 Longines Bvlgari 47 40 Tudor Montblanc 46 39 Tiffany & Co. Vacheron Constantin 45 37 Piaget Patek Philippe 39 33 Vacheron Constantin Tiffany & Co. 38 31 Montblanc Piaget 37 25 IWC Boucheron 37 24 Chopard IWC

65 09 In Hong Kong, Rolex enjoys a clear lead, with around 61% of Hong Kong luxury shoppers surveyed saying they had purchased a Rolex product during the past 12 months. Rolex, Cartier, Omega and Longines are the top four brands purchased by consumers in Mainland China. IN THE FOLLOWING WATCH BRANDS, WHICH HAVE YOU PURCHASED IN THE LAST 12 MONTHS?

61 34 Rolex Rolex 14 23 Cartier Cartier 10 19 Omega Omega 9 17 IWC Longines 8 10 Longines Vacheron Constantin 7 9 Seiko Patek Philippe 5 8 Tiffany & Co. Bvlgari 5 7 Tudor Montblanc 4 5 Chopard Jaeger LeCoultre 4 4 Van Cleef & Arpels Tiffany &Co.

Most shoppers in Hong Kong (77%) and Mainland China (73%) prefer buying Swiss luxury watch brands. WHICH COUNTRY OF ORIGIN DO YOU PREFER FOR WATCHES?

77 73 Switzerland Switzerland 12 13 Germany Germany 5 9 Japan China 3 4 China Japan 2 1 Others Others

66 Some 32% of Hong Kong consumers and 34% of Mainland China consumers said they prefer simple, everyday watches, while tourbillon watches are also highly appreciated by Hong Kong consumers (28%).

WHICH STYLE OF WATCHES DO YOU LIKE THE MOST?

32 34 Simple, everyday watches Simple, everyday watches 28 19 Multi-functional watches ‒ tourbillon Jewelry watches 11 17 Jewelry watches Multi-functional watches ‒ tourbillon 10 15 Multi-functional watches ‒ moonphase Multi-functional watches ‒ moonphase 10 11 Sports watches - diving Multi-functional watches ‒ chronograph

Craftsmanship, brand, and design are the top three factors that go into purchases of a luxury watch in both Mainland China and Hong Kong. IN THE FOLLOWING FACTORS, WHICH WOULD AFFECT YOUR PURCHASING DECISION OF WATCHES?

59 68 Craftsmanship Craftsmanship 59 62 Brand Brand 57 Design Design 54 40 46 Functions Functions 32 14 Price Celebrity wearing them 13 Service

67 In term of information that consumers would like to receive, a product's functionality, design and craftsmanship were frequently mentioned by respondents.

WHAT INFORMATION OF WATCHES ARE YOU INTERESTED IN?

66 61 Design Design 54 57 Functions Craftsmanship 53 53 Craftsmanship Functions 50 52 Price History and story of the brand 48 45 Place of origin of the brand Place of origin of the brand 41 33 History and story of the brand Price

In the past 12 months, Hong Kong and Mainland year, when they were 46% in Mainland China and China consumers have spent on average HKD 36% in Hong Kong. Some 15% of Mainland China 74,900 and RMB 88,000, respectively, on watches. consumers and 26% of Hong Kong consumers Some 37% of Mainland China consumers plan to plan to spend less on luxury watches during the spend more on watches in the next 12 months next 12 months, which are much higher than versus 32% of Hong Kong consumers. These those posted last year, namely 7% in Mainland percentages are a bit below those recorded last China and 16% in Hong Kong.

68 JEWELRY

In terms of brand awareness, the top five jewelry brands in Hong Kong are Chanel, Cartier, Tiffany, Gucci and Dior, while Chanel, Cartier, Tiffany, Dior, Gucci, Tiffany and Bvlgari are leaders in Mainland China.

IN THE FOLLOWING JEWELRY BRANDS, WHICH DO YOU KNOW?

62 56 Chanel Chanel 60 54 Cartier Cartier 57 52 Tiffany & Co. Dior 56 47 Gucci Gucci 55 46 Dior Bvlgari 52 46 Louis Vuitton Tiffany & Co. 44 44 Piaget Louis Vuitton 39 37 Montblanc Montblanc 39 31 Bvlgari Van Cleef & Arpels 35 28 Chopard Boucheron 34 27 Van Cleef & Arpels Dolce & Gabbana 27 Piaget 27 Forevermark

69 Cartier, Chanel and Tiffany are the top three Jewelry brands purchased by consumers in both Hong Kong and Mainland China last year. Meanwhile, Mainland China consumers surveyed said they like to purchase Dior and Bvlgari as well.

IN THE FOLLOWING JEWELRY BRANDS, WHICH HAVE YOU PURCHASED IN THE PAST 12 MONTHS?

35 39 Cartier Cartier 31 28 Chanel Chanel 22 23 Tiffany & Co. Tiffany & Co. 17 22 Gucci Dior 14 20 Dior Bvlgari 13 16 Louis Vuitton Gucci 10 13 Bvlgari Louis Vuitton 9 9 Piaget Forevermark 8 8 De Beers Montblanc 8 Boucheron 7 Van Cleef & Arpels

70 Diamond is the most preferred jewelry material for both Hong Kong (63%) and Mainland China consumers (65%). However, Hong Kong consumers also prefer white gold (40%) while Mainland China consumers prefer platinum (42%). WHICH TYPES OF MATERIALS FOR JEWELRY DO YOU LIKE?

63 65 Diamond Diamond 40 42 White Gold Platinum 36 35 Yellow Gold Yellow Gold 34 33 Rose Gold White Gold 29 28 Pearl Rose Gold 27 28 Platinum Pearl 25 27 Jade Jade 19 17 Silver Colored gemstones 10 Colored gemstones 17 Silver

Craftsmanship, design, materials, and brand name are the top factors to consider when purchasing luxury jewelry. WHICH OF THE FOLLOWING FACTORS WOULD AFFECT YOUR PURCHASING DECISIONS OF JEWELRY?

62 60 Craftsmanship Craftsmanship 52 58 Design Materials 50 51 Materials Design 44 48 Brand Brand 20 19 Price Celebrity wearing them 15 10 Celebrity wearing them Service 8 Service 13 Recommendations from friends 12 6 Recommendations from friends Price

71 In terms of information that is interesting for consumers, Hong Kong consumers are more interested in design while Mainland China consumers are more interested in a brand's story.

WHAT INFORMATION ABOUT JEWELRY ARE YOU INTERESTED IN?

60 Design 67 History and story of the brand 56 58 Place of origin of the brand Design 54 56 Craftsmanship Craftsmanship 50 52 History and story of the brand Place of origin of the brand 49 28 Price Price 19 25 Functions Functions

In the past 12 months, Hong Kong and Mainland 48% of Mainland China consumers plan to China consumers spent on average HKD 53,500 purchase more jewelry during the next 12 months and RMB 68,900, respectively, on jewelry. Some versus 46% of Hong Kong consumers.

72 CLOTHING

Chanel, Hermès, Gucci, Louis Vuitton and Dior are the five fashion brands with the highest brand awareness both in Hong Kong and Mainland China. Giorgio Armani follows closely behind in Mainland China.

IN THE FOLLOWING FASHION BRANDS, WHICH DO YOU KNOW?

62 57 Chanel Chanel 59 55 Gucci Hermès 59 52 Louis Vuitton Gucci 59 51 Hermès Dior 59 49 Dior Louis Vuitton 53 48 Valentino Giorgio Armani 51 44 Prada Versace

Giorgio Armani 50 Balenciaga 44 49 Burberry Givenchy 43 48 40 Fendi Valentino 40 Ralph Lauren 47 Prada

Balenciaga 45

73 In both Hong Kong (35%) and Mainland China luxury clothes, while Mainland China consumers (33%), Chanel is the top fashion brand purchased. also like to purchase Dior, Gucci, Giorgio Armani Meanwhile, Hong Kong consumers also like to and Hermès luxury clothes. purchase Gucci, Burberry, Dior and Louis Vuitton

IN THE FOLLOWING FASHION BRANDS, WHICH HAVE YOU PURCHASED IN THE PAST 12 MONTHS?

35 33 Chanel Chanel 27 24 Gucci Dior 27 24 Burberry Gucci 25 23 Dior Giorgio Armani 20 22 Louis Vuitton Hermès 18 18 Hermès Balenciaga 18 17 Prada Louis Vuitton 18 14 Ralph Lauren Prada 18 13 Giorgio Armani Versace 14 12 Balenciaga Givenchy 13 11 Fendi Valentino 9 Chloe 11 Burberry 11 9 Hugo Boss Fendi

Valentino 11

74 Design and the brand are the top two factors considered by consumers when purchasing luxury clothing in both Mainland China and Hong Kong. IN THE FOLLOWING FACTORS, WHICH WOULD AFFECT YOUR PURCHASING DECISION OF FASHION CLOTHING?

66 59 Design Design 53 55 Brand Brand 44 34 Price Designer 29 29 Designer Service 26 25 Service Professional recommendation 21 21 Recommendation from friends Recommendation from friends 21 Professional recommendation 19 Price 18 Celebrity wearing them 15 Celebrity wearing them

In terms of information that consumers are interested in receiving, Hong Kong consumers focus on design and price while Mainland China consumers are interested in design and brand story. WHAT INFORMATION ABOUT FASHION ARE YOU INTERESTED IN?

64 63 Design Design 53 61 Price History and story of the brand 51 49 Place of origin of the brand Designer 44 42 History and story of the brand Place of origin of the brand 44 34 Designer Price

75 Uniqlo is the mostly purchased fast-fashion brand in both Hong Kong and Mainland China. HAVE YOU PURCHASED ANY OF THE FOLLOWING FAST FASHION BRANDS IN THE PAST 12 MONTHS?

59 59 Uniqlo Uniqlo 47 34 H&M H&M 43 33 Zara Zara 31 25 Gap Gap 27 23 Forever 21 Bershka 21 14 Cotton On Forever 21 18 10 Bershka Cotton On

I didn't purchase from 8 I didn't purchase from 14 fast fashion brands fast fashion brands

In the past 12 months, Hong Kong and Mainland China consumers surveyed spent on average HKD 28,600 and RMB 39,800, respectively, on luxury clothing. Some 54% of Mainland China consumers surveyed plan to purchase more luxury clothing over the next 12 months versus 35% of Hong Kong consumers.

76 HANDBAGS & LEATHER GOODS

Chanel and Hermès are the best-known luxury handbags and leather goods brands in Hong Kong and Mainland China, respectively. Overall, Hermès, Chanel, Louis Vuitton, Gucci and Dior are the top five handbag brands with the highest brand awareness in both Hong Kong and Mainland China.

IN THE FOLLOWING HANDBAGS AND LEATHER GOODS BRANDS, WHICH DO YOU KNOW?

59 53 Chanel Hermès 57 51 Louis Vuitton Chanel 57 47 Hermès Louis Vuitton 57 47 Gucci Gucci 54 44 Dior Dior 50 38 Prada Balenciaga 48 37 Coach Prada 46 Burberry Coach 36 44 33 Valentino Valentino 44 32 Fendi Bvlgari 40 28 Balenciaga Montblanc 40 26 Chloe Dolce & Gabbana 40 26 Miu Miu Fendi

77 Chanel, Gucci and Dior were the top three brands purchased by Hong Kong consumers while Chanel, Hermès and Louis Vuitton were top three brands for purchases by Mainland China consumers in the past 12 months. IN THE FOLLOWING HANDBAGS AND LEATHER GOODS BRANDS, WHICH HAVE YOU PURCHASED IN THE PAST 12 MONTHS?

31 27 Chanel Chanel 23 27 Gucci Hermès 20 26 Dior Louis Vuitton 16 23 Louis Vuitton Gucci 16 18 Coach Dior 15 13 Hermès Balenciaga 14 12 Burberry Coach 12 11 Prada Bvlgari 11 11 Celine Prada 11 Chloe

Loewe 11 11 Longchamp

78 Some 68% of Mainland China consumers surveyed purchase a handbag at least once a season, while 51% Hong Kong consumers surveyed do the same. HOW OFTEN DO YOU PURCHASE A NEW HANDBAG?

5 9 Once a month Once a month 19 51 23 68 Once in two months Once in two months 27 36 Once per season Once per season 23 24 Once in half a year Once in half a year 19 6 Once a year Once a year 2 Once in two years 5 Once in two years

Most Hong Kong and Mainland China consumers surveyed purchase handbags that cost between RMB 10,000 and RMB 20,000, and the average amount spent on a single handbag is HKD 28,185 in Hong Kong and RMB 27,221 in Mainland China. WHAT PRICE RANGE OF HANDBAGS WOULD YOU PREFER?

28 28 Below HKD 10,000 Below RMB 10,000 45 64 HKD 10,000 - 19,999 RMB 10,000 - 19,999 26 36 HKD 20,000 - 29,999 RMB 20,000 - 29,999 38 39 HKD 30,000 - 49,999 RMB 30,000 - 49,999 24 HKD 50,000 or above 23 RMB 50,000 or above 28,185 27,221 Average HKD Average RMB

79 Design and brand are the top two factors considered by consumers when purchasing luxury handbags & leather goods. IN THE FOLLOWING FACTORS, WHICH WILL AFFECT YOUR PURCHASING DECISION OF HANDBAGS?

62 56 Design Design 49 47 Brand Brand 41 45 Price Materials 39 38 Materials Craftsmanship 22 Craftsmanship 34 Price 14 18 Recommendations from friends Professional recommendation 14 17 Professional recommendation Celebrity wearing them 12 Celebrity wearing them Service 16 8 Service Recommendations from friends 15

In terms of information that consumers want to know, a product's design and materials are at the top of the list for both Hong Kong and Mainland China consumers. WHAT INFORMATION ABOUT HANDBAGS ARE YOU INTERESTED IN?

59 56 Design Design 50 53 Materials Materials 43 Price Craftsmanship 48 39 39 Craftsmanship History and story of the brand 35 28 Place of origin of the brand Place of origin of the brand 25 25 History and story of the brand Price

In the past 12 months, Hong Kong and Mainland handbags during the next 12 months versus 26% China consumers surveyed spent on average HKD of Hong Kong consumers. It is worth noting that 46,300 and RMB 50,700, respectively, on luxury 26% of Hong Kong consumers plan to spend less handbags, as well as HKD 18,600 and RMB 22,500, on luxury handbags during the next 12 months, respectively, on luxury wallets & small leather which is much more than last year's 11%. In goods. Some 43% of Mainland China consumers Mainland China, the figures are 11% now and 5% surveyed said they plan to purchase more luxury last year.

80 BEAUTY & COSMETICS

Chanel, Shiseido and SKII are the three best-known beauty & cosmetics brands in Hong Kong, while Chanel, Estée Lauder, Dior Beauty, Lancôme and Shiseido top the list in Mainland China.

IN THE FOLLOWING BEAUTY & COSMETICS BRANDS, WHICH DO YOU KNOW?

60 55 Chanel Chanel 55 Shiseido 57 Estée Lauder 52 SKII 55 Dior Beauty 51 51 Sulwhasoo Lancôme 49 48 Lancôme Shiseido 47 43 Estée Lauder Giorgio Armani Cosmetics 46 40 FANCL Givenchy Beauty 35 Shu Uemura 46 Sulwhasoo 34 Dior Beauty 46 Biotherm 44 34 Clinique Guerlain 43 32 Kiehl's Clinique 43 32 Biotherm Clarins 42 32 Clarins Clé de Peau Beauté

81 Shiseido, Chanel and SKII are the three brands that Hong Kong consumers surveyed most often purchased, while Estée Lauder, Lancôme and Chanel are the top three brands for Mainland China consumers surveyed in the past 12 months. IN THE FOLLOWING BEAUTY & COSMETICS BRANDS, WHICH HAVE YOU PURCHASED IN THE PAST 12 MONTHS?

36 41 Shiseido Estée Lauder 31 36 Chanel Lancôme 28 35 SKII Chanel 20 31 Sulwhasoo Dior Beauty 19 29 Estée Lauder Shiseido 18 21 FANCL Giorgio Armani Cosmetics 20 Lancôme 18 SKII

Dior Beauty 17 Givenchy Beauty 16 16 13 Shu Uemura Sulwhasoo 15 11 Kiehl's Clinique 13 11 Clarins Clé de Peau Beauté 10 Guerlain

82 About half of Mainland China and Hong Kong consumers surveyed purchase beauty & cosmetics at least once a month. On average, Hong Kong consumers spend HKD 1,416 while Mainland China consumers spend RMB 1,511 on the most expensive beauty & cosmetics item. HOW MUCH IS THE MOST EXPENSIVE BEAUTY & COSMETICS PRODUCT THAT YOU HAVE PURCHASED IN THE PAST 12 MONTHS?

34 28 Below HKD 1,000 Below RMB 1,000 25 25 HKD 1,000 - 1,499 RMB 1,000 ‒ 1,499 18 20 HKD 1,500 - 1,999 RMB 1,500 ‒ 1,999 23 28 HKD 2,000 or above RMB 2,000 or above 1,416 1,511 Average HKD Average RMB

Most of Hong Kong consumers surveyed purchase from physical stores (66%) while a similar proportion of Mainland China consumers surveyed purchase from physical stores (58%) and official websites (54%). WHICH CHANNELS HAVE YOU PURCHASED BEAUTY & COSMETICS PRODUCTS IN THE PAST 12 MONTHS?

66 58 Physical stores Physical stores 43 54 Official website of the brands Official website of the brands 30 44 International shopping websites International shopping websites

Haitao platform of Chinese 20 Haitao platform of Chinese 41 shopping websites shopping websites

Flagship stores of Chinese 20 Flagship stores of Chinese 35 shopping websites shopping websites

Personal websites/ 17 Personal websites/ 13 small online shops small online shops 13 13 Official WeChat Official WeChat

83 Effects, ingredients and the brand itself are the top factors considered by consumers when purchasing beauty & cosmetics products. IN THE FOLLOWING FACTORS, WHICH WOULD AFFECT YOUR PURCHASING DECISION OF BEAUTY & COSMETICS?

62 60 Effects Effects 51 52 Ingredients Ingredients 44 47 Brand Brand 38 21 Price Professional recommendations 22 Recommendations from friends Price 21 17 19 Service Service 15 18 Packaging Recommendations from friends 14 Professional recommendations Celebrity wearing them 18 10 16 Celebrity wearing them Packaging

In terms of information that consumers want to know, a product's effects and ingredients top the list in both Hong Kong and Mainland China consumers. WHAT INFORMATION ABOUT BEAUTY & COSMETICS ARE YOU INTERESTED IN?

60 57 Effects Effects 54 50 Ingredients Ingredients 41 42 Price Makeup mix and match 37 37 Method of usage History and story of the brand 37 37 Place of origin Method of usage 36 30 Makeup mix and match Place of origin 24 22 History and story of the brand Price

In the past 12 months, Hong Kong and Mainland consumers surveyed plan to purchase more China consumers surveyed spent on average HKD beauty & cosmetics in the next 12 months versus 19,000 and RMB 20,300, respectively, on beauty & 40% of Hong Kong consumers. cosmetics. Some 57% of Mainland China

84 WINE & SPIRITS

Hong Kong consumers are most familiar with five best-known wines & spirits brands in Hong Hennessy, while Mainland China consumers are Kong while Remy Martin, Moutai, Wuliang Yi, Louis most familiar with Remy Martin. Hennessy, Louis XIII and Hennessy are leaders in Mainland China. XIII, Chivas, Martell and Remy Martin are the top

IN THE FOLLOWING WINE & SPIRITS BRANDS, WHICH DO YOU KNOW?

57 53 Hennessy Rémy Martin 55 50 Louis XIII Moutai 53 50 Chivas Wuliang Yi 52 48 Martell Louis XIII 52 47 Rémy Martin Hennessy 46 42 Moutai Royal Salute 43 42 Wuliang Yi Chivas 40 40 Johnnie Walker Martell 39 32 Yamazaki Johnnie Walker 38 32 Macallan Ballantine's 31 29 Hibiki Glenlivet

Royal Salute 30

85 Most Hong Kong consumers purchased high-end that consumers purchased in the past 12 months in red wine (51%) while Mainland China consumers both Hong Kong and Mainland China. What’s more, purchased high-end whiskey (53%). High-end red Chinese baijiu is still popular in Mainland China. wine and high-end whiskey are the top categories WHAT TYPES OF WINE & SPIRITS HAVE YOU PURCHASED IN THE PAST 12 MONTHS?

51 53 High-end red wine High-end whiskey 49 51 High-end whiskey High-end red wine 37 51 High-end champagne Chinese baijiu 36 41 High-end white wine High-end white wine 33 34 High-end brandy High-end brandy 31 High-end cognac High-end champagne 32 26 32 Premium sake High-end cognac 25 31 High-end vodka High-end vodka 19 21 Chinese baijiu Chinese huangjiu 18 13 Chinese huangjiu Premium sake

86 Taste and brand are the top factors consumers consider when purchasing wine & spirits in both Hong Kong and Mainland China. IN THE FOLLOWING FACTORS, WHICH WOULD AFFECT YOUR PURCHASING DECISION OF WINE & SPIRITS?

62 64 Taste Taste 38 52 Brand Brand 36 25 Price Limited Edition

Recommendations 25 Recommendations 21 from friends from friends 24 21 Promotion Package 21 Recommendations by 20 Price bartender/ sommeliers 18 Professional 20 Limited Edition recommendations 14 Package Recommendations by 15 bartender/ sommeliers Professional 14 recommendations Promotion 13

87 Hong Kong consumers are more interested in a product's country or city of origin, while Mainland China consumers are interested in the ingredients, the production year, the country or city of origin, and the production process. WHAT INFORMATION OF WINE & SPIRITS ARE YOU INTERESTED IN?

58 46 Country/ City of origin Ingredients 44 Year 45 Year 43 43 Ingredients Country/ City of origin 37 Production process Production process 43 34 37 Tips on the best way to consume Tips on the best way to consume 34 32 Grade Brand history and brand story 22 26 Types of raw ingredient Grade 22 21 Brand history and brand story Types of raw ingredient

88 Information exchanged among friends is the top channel for wine & spirits information in both Hong Kong and Mainland China. HOW DO YOU OBTAIN INFORMATION OF WINE & SPIRITS?

45 Information exchange amongst friends with similar interests 31 Promotion 29 Recommendations by bartender/ sommeliers 29 Online blogs, forums

Professional recommendations 28 26 Visited vineyard 24 Attended courses organized by professional groups/ organizations 23 Master of Wine 23 Magazines 19 Advertisement

42 Information exchange amongst friends with similar interests 36 Professional recommendations 35 Master of Wine

Online blogs, forums 35

Visited vineyard 32

Recommendations by bartender/ sommeliers 30

Attended courses organized by professional groups/ organizations 24

Magazines 20

Advertisement 19 16 Promotion

In the past 12 months, Hong Kong and Mainland consumers surveyed plan to purchase more wine China consumers surveyed said they spent on & spirits in the next 12 months, versus 29% of average HKD 16,200 and RMB 30,400, respectively, Hong Kong consumers. on wine & spirits. Some 47% of Mainland China

89 TRAVEL

Expedia is the top travel booking website for Hong Kong consumers while Ctrip is the most used website for Mainland China consumers. THROUGH WHICH ONLINE TRAVEL SITE HAVE YOU BOOKED YOUR LAST LEISURE TRIP?

31 47 Expedia Ctrip 19 15 AGODA Quanar 11 15 Booking Hotels.com 11 14 Tuniu Ctrip 7 11 LY.com Trivago 4 AGODA 8 Booking 2 Expedia 2 Autrip

Most consumers stayed at luxury hotels and upscale hotels during their most recent leisure trip. WHAT HOTEL DID YOU STAY DURING YOUR LAST LEISURE TRIP?

48 56 Luxury Hotels Luxury Hotels JW Marriott 14 Shangri-La 17 Grand Hyatt 14 JW Marriott 16 Shangri-La 11 InterContinental 12

51 54 Upscale Hotels Upscale Hotels Hilton 13 Hilton 22 Sheraton 12 Crowne Plaza 15 Marriott 10 Sheraton 12 Marriott Hyatt/ Hyatt Regency 9 10 30 25 Mid-scale Hotels Mid-scale Hotels Holiday Inn 10 Hilton Garden Inn 9 Ibis 8 Holiday Inn Express 6

In the past 12 months, Hong Kong and Mainland 44% of Mainland China consumers surveyed said China consumers surveyed spent on average HKD they plan to spend more on travel during the next 12 38,500 and RMB 46,900, respectively, on travel. Some months versus 33% of Hong Kong consumers.

90 SUGGESTION FOR BRANDS

In view of the fact that Chinese consumers10 are more 3 E-commerce: E-commerce is a must for reaching discerning and segmented, as well as considering the the large numbers of low-tier city consumers in use of digitalization and intensifying competition, luxury China, who are overall younger. For those brands to brands that want to win in the China market must launch an e-commerce presence, it is suggested constantly innovate and work toward setting trends, different approaches are applied in view of brand offer products and services that are unique in every positioning and reputation. It is more appropriate detail, and maintain a distinguished style and image. for an established and higher-end luxury brand to have an official e-commerce website or a mini- Here are some of our suggestions. program WeChat store to maintain its exclusivity 1 Product: Chinese consumers appreciate uniqueness and luxurious brand image. For entry-to-mid-level in products and expect to have more customized brands with limited brand awareness, cooperation services. Moreover, Mainland Chinese consumers with leading platforms such as Tmall or JD.com are more confident about purchasing products with may prove more efficient. Meanwhile, official Chinese elements. Hence, products that offer brand e-commerce websites shall provide a better customization and Chinese elements can be of user experience especially in developing flexible interest to Mainland Chinese consumers. In addition, mobile application, designing user-friendly buying Chinese consumers purchase more often than process and leveraging creative contents for driving before and during short intervals, which makes it e-commerce. 4 important for luxury brands to release new products Offline activation: Physical stores are still important more frequently. for brand image and awareness while frontier sales 2 Digital story telling: New content is becoming more services are regarded as one of the most important important in terms of competing for the average reasons for luxury purchases. Luxury brands will consumer's fragmented attention span. Considering implement a tiered offline store management st that digital channels have undoubtedly become strategy by having flagship stores in 1 -tier cities dominant in obtaining brand information, it is that function as brand showroom and experience rd important to create interesting digital contents with centers, and then test new 3 -and-lower-tier cities good visuals/ videos on brand websites, on brand with popup stores. Meanwhile, brands shall invest social media accounts, and on other digital more in frontier sales training for brand/ product platforms. Also necessary is to collaborate with KOLs information, sales and communication skills, and while leveraging their authenticity, content-creation customer relations management programs. opportunities, and influence over fans while co-creating diversified content for brands.

91 AUTHORS

GAO MING WAYNE CHEN

Gao Ming has almost 20 years of experience in market- Wayne Chen is the senior director and head of luxury ing and communications, ranging from brand position- practice in Ruder Finn Shanghai office. Having more ing to reputation management, from digital communi- than 13 years of marketing and communications cations to channel activations, from PR and marketing experience, Wayne has worked at a wide range of ˚ event to 360 campaign. Gao Ming provides strategic consumer and luxury sectors including Watch, Jewelry, consultation and curates integrated marketing Fashion, Beauty, Wine & Spirits, Sports, Travel. He is communication programs for a wide variety of clients. providing ongoing expertise for Ruder Finn’s lifestyle In the past decade, Gao Ming has successfully built the clients in market and consumer insights, strategic Ruder Finn Luxury team to be the largest and well planning, media and digital communications, content reputed team in the industry in China. marketing and event activation etc.

[email protected] [email protected]

92 SIMON TYE

Simon has over 20 years of research and marketing related experiences and has worked on predominantly regional projects. His experience includes evaluating customer satisfaction with services and quality, consumer segmentation, brand positioning, competi- tive analysis of brands and products, branding, adver- tising tracking, distribution and channel development, new car buyer study, quality assurance Study etc.

[email protected]

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