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Today, luxury consumption is more popular than ever in countries like China, Japan, South Korea and Singapore. Products like fine wine and NFTs not only serve as status symbols, but have also become personal brands of consumers. So who is driving this luxury consumer trend? Millennials. Here are three reasons why Asian millennials have made luxury assets the hottest new investment class.
1. Social status and personal brand image
While I was born in the United States, I spent my formative years internationally. My parents, both Chinese immigrants, traveled for work. As a result, I spent most of my childhood in Hong Kong and Beijing.
One thing that has always stood out to me is the way different people perceive prestige. In the United States, we admire people who are intellectually, artistically, or financially successful. However, many people will downplay the value of a prestigious education, job, or investment portfolio, especially if they don’t have one themselves.
The reverse is true in China. Prestige and hierarchy take center stage. Things Americans keep private, like wages, are public. The lust for success and prestige is much more open.
Fine wines are a perfect illustration of Chinese consumers’ desire for luxury. From 2002 to 2012, the consumption of wine increased by 450%. And were Chinese consumers drinking Two Buck Chuck during this time? Absolutely not. They wanted exclusively Bordeaux, which is widely regarded as the quintessential wine region in France. According to Liv-ex, a wine trading platform, Bordeaux represented 93% secondary wine market in Asia in 2010. (To illustrate this domination, Google has “only” 92.47% of the search engine market.)
If the noose of Bordeaux has faded in recent years, the thirst for luxury products and their prestige has not been. According to Rocky Chi of Battery, “Today’s Chinese consumers demand both aesthetic and symbolic meaning – with elegance, innovation and reputation, all the hallmarks of any true luxury brand. The cachet of brands like Gucci, Rolex and Louis Vuitton function as status symbols while favorably reflecting people’s personalities and social capital.
Chi notes that Asian millennials are a driving force behind modern luxury consumption. Chinese millennials will account for 40% of the personal luxury goods market by 2025. Similarly, China is closing the gap with the United States for largest luxury market in the world.
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China may be one of the major players in the luxury goods market, but it is far from the only one. Korean millennials bought more than 1 million won ($ 853) than their 40-plus peers in the first half of 2021. Meanwhile, Japanese millennials are using luxury goods to showcase their personal style, from wearing handbags to the cutting edge of fashion or designer sports handbags.
It would be easy and misguided to dismiss this trend as entitled and self-centered millennials. Millennials who spend a lot are very knowledgeable. As the demand for personalization increases, consumers want luxury goods that are as unique as they are. To quote Federica Levato, the author of Bain & Company Luxury 2019 study, Asia, “(Millennials) see themselves as key players in creativity and conversations with luxury brands; they come back to products, stores and physical interactions with brands to truly connect and emotionally engage with them. “
2. Diversification of investments
Since the dawn of agriculture, farmers have warned people about the risks of putting all their eggs in one basket. While a teeming egg basket may work well in the short term, in the long term it is a recipe for disaster. (That or omelets.)
Historically, investors have built their portfolios around stocks and bonds. Asian millennials take a different approach because alternative assets become mainstream. Luxury goods offer a way to simultaneously create wealth and diversity in the portfolio, especially as Evergrande threatens to bring down the Chinese economy and the Hang Seng has lost value over the past two years.
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Luxury assets also offer advantages not found in the typical 60/40 portfolio, including low volatility, direct ownership, resistance to inflation, resistance to recession, and low correlation with the market. stock market.
It’s no surprise, then, that digital investments are getting the full attention of overseas investors. China, Singapore, Hong Kong and the Philippines represent four of the top five countries with the most Google searches for “NFT” in the past year. Meanwhile, China and Malaysia have emerged as world powers in the Bitcoin mining industry. Even the Watanabe, financially conservative of Japan, exploit a wider range of asset classes than their predecessors.
3. Combine passion and profit
Modern millennial investors bear little resemblance to investors of the past. They are digital natives. They get annoyed with difficult sales. They want compelling stories that inspire them to invest or diversify their portfolios.
Simply put, Millennials are more value oriented than previous generations. Investment opportunities must align with their personal values and achieve a purpose beyond profit. This is why Vinovest touts its sustainable practices while Stash, a personal finance app, allows investors to allocate funds to women and companies led by BIPOC.
I have seen this transformation from economizers to value enthusiasts happen in fine wine. Part of the reason is that China is one of the fastest growing wine markets in the world, with consumption more than doubling from 1996 to 2018. In a few years, he could even challenge the United States as the first consumer of fine wines.
As more and more people become interested in wine, there has been a corresponding increase in the number of investors in fine wines. People I spoke to mentioned combining their passion for wine with their investment strategy. This merger allows them to refine their personal brand, by putting their money at the service of their interests, their causes and their values. The fact that they can have their benefits and drink them too doesn’t hurt either.
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Asian millennials are redefining investor relationships with luxury assets. Practical, tech-savvy and value-oriented, they increasingly favor investments that increase their social status and personal values. With advancements in technology and the growth of alternative assets, it has never been easier or more popular.