Understanding Luxury Brands in Hong Kong

ABSTRACT - A survey of 70 residents of Hong Kong on their attitudes, perceptions and buying behaviours towards 40 luxury brands was carried out. Comparisons were made with findings in prior studies completed in Europe and the United States. Additional measurements were included to understand the impact of the Asian economic crisis on the luxury market. Findings showed, in Hong Kong, desire to own luxury goods was mainly generated by brand awareness. Unlike in the United States, the number of luxury goods consumers already own did not affect this desire. Moreover, people in Hong Kong hold a pessimistic view toward the future economy, and therefore they are expected to reduce their spending on luxury goods in the future. In particular, people, who had spent larger amount of money on luxury goods, planned to shrink their budgets on these goods in the future.


Angela Chung Yan Wong and Judith Lynne Zaichkowsky (1999) ,"Understanding Luxury Brands in Hong Kong", in E - European Advances in Consumer Research Volume 4, eds. Bernard Dubois, Tina M. Lowrey, and L. J. Shrum, Marc Vanhuele, Provo, UT : Association for Consumer Research, Pages: 310-316.

European Advances in Consumer Research Volume 4, 1999      Pages 310-316


Angela Chung Yan Wong, Simon Fraser University, Canada

Judith Lynne Zaichkowsky, Simon Fraser University, Canada


A survey of 70 residents of Hong Kong on their attitudes, perceptions and buying behaviours towards 40 luxury brands was carried out. Comparisons were made with findings in prior studies completed in Europe and the United States. Additional measurements were included to understand the impact of the Asian economic crisis on the luxury market. Findings showed, in Hong Kong, desire to own luxury goods was mainly generated by brand awareness. Unlike in the United States, the number of luxury goods consumers already own did not affect this desire. Moreover, people in Hong Kong hold a pessimistic view toward the future economy, and therefore they are expected to reduce their spending on luxury goods in the future. In particular, people, who had spent larger amount of money on luxury goods, planned to shrink their budgets on these goods in the future.


The growth of the luxury market has been substantial for the past 20 years (Echikson, 1995). According to Dubois and Duquesne (1993), the global sales figure of the luxury market in 1993 was $60 million, and this figure has increased at an annual rate of 20 percent. This 20 percent increase is supported by the remarkable performance of some luxury brands. For example, "In 1977, Louis Vuitton was only a small family business with sales under $20 million" (Dubois and Duquesne, 1993, p.36). Eighteen years later, this company attained sales of $4.6 billion, and is now the biggest luxury group in the world - Louis Vuitton Moet Hennessy- having assets of over USD$14 billion (www.lvmt.com, May 1998).

In addition, the rapid economic growth in Asia has increased people's purchasing power and, thus, has opened the market for luxury brands. As people become wealthier, their self-image and lifestyle change. Due to the communist history of some Asian countries, European and North American luxury goods were not allowed in these countries (Keng & Yang, 1993). Now that the political situation has changed, the market potential for luxury business in Asia is strong. The question arises, "Should luxury-brand marketers develop different marketing strategies for Asian markets?"

Prior studies (Dubois & Duquesne, 1993; Dubois & Paternault, 1995; Garfein, 1989) tested the differences in consumer behaviour between luxury purchases and other types of consumption. These studies showed that different marketing strategies are needed to promote and retail luxury goods in different markets. However, these studies took place in the European and North American markets only. Therefore, to understand what kinds of strategies are needed in Asia, it is beneficial to replicate these studies in different Asian markets. For the purpose of this study, Hong Kong was chosen as the test market because of the wide availability of luxury brands and for the apparent strong desire of Hong Kong consumers to own luxury goods (www.irasia.com/listco/hk/joyce/index.htm). It is also important to consider the recent economic crisis in Asia and its impact on the luxury goods market.


The Asian Market for Luxury Brands

Despite the recent economic crisis, the economic growth in Asia introduced tremendous business opportunities for many North American and European companies in the past 20 years (Echikson, 1995). For example, the economic growth for China is approximately 12-13% annually. The unemployment rate in some of the Asian cities is much lower than that of most North American countries (e.g., 2.2% for Hong Kong and 2.7% for Singapore versus 9.0% for Canada in 1997).

The population of Asia is almost four times as large as the population of the rest of the world. In particular, China has a population of 1.2 billion people, which is almost one-third of the world's population. In Asia, the population of the age group from 20 to 40, which makes the greatest contribution to economic growth, is increasing steadily; and the expenditures of this population is estimated to hit $616 million US by the year 2000 (Wedel, 1993). Comparatively, the population of the same age group in Europe will decline from 104 million to 86 million by the year 2010 (Wedel, 1993). This population growth of the highest-spending group in Asia creates tremendous market potential for luxury goods. Thus, it is of marketers' interest to examine if alternative marketing strategies are needed to further the current success. Marketing strategies for luxury brands include specific luxury market segmentation, prestige brand positioning, and appropriate brand diffusion.

Components of Luxury Brands

Before the development of effective marketing strategies for a particular market, it is essential to understanding the basic components and functions of a luxury brand. According to Biel (1992), components of a luxury brand (identity, awareness, perceived quality and loyalty) serve different functions (self-concept congruency, fragmented relationship, and consumption simplification) for different luxury purchases. In addition, the brand image or the identity of a luxury brand, is composed of two sub-images-the image of the manufacturer and the image of the user. These images simplify the purchase-decision-making process. Luxury brands are competing based on the ability to 1) create a well-known brand identity, 2) increase brand awareness and perceived quality, thereby increasing brand preference and purchases, and 3) retain sales levels and customers' loyalty. In other words, luxury brands must not only be good quality, but also be able to fulfill customers' emotional needs.

The International Research Institute on Social Change (RISC) completed a survey to investigate the positioning strategies, on the basis of brand awareness and purchase level, for luxury brands. The purpose of the study was to understand "the sequence of stages luxury brands go through before being fully accepted by consumers (Dubois & Paternault, p.69)". In other words, researchers attempted to understand the secret of successful brand positioning of some luxury brands. The respondents were asked about their buying habits, perceptions, and attitudes toward a set of 34 luxury brands. Researchers analyzed the data and developed a regression equation, which explains the relationship among brand awareness, dream value (desire to own), and purchasing behaviour of luxury brands. Researchers named the equation the "dream formula":

DREAM = -8.6 + 0.58 AWARENESS - 0.59 PURCHASE

(Dubois & Paternault, 1995, p.73).

According to this equation, awareness and purchase of a luxury brand have significant relationships to the dream value. The negative intercept (-8.6) indicates that when the awareness and purchasing variables are equal to zero, the dream value of a brand is negative. That is, the dream value of a new brand, without any promotion or trial, is negative, meaning that consumers do not desire to own the brand at all. The awareness variable holds a positive relationship with the dream value, indicating that the purchasing intention of a luxury brand increases while consumers are more aware of the brand.

In the regression, an increase of the ownership of a luxury brand decreases the purchasing intention of the brand. It is logical to assume that awareness of a brand stimulates consumers to dream of owning a brand, and eventually buying products made by the brand. However, a conflicting argument is that "by making the dream come true, the purchase act itself takes away some of the inaccessible and, therefore, luxury nature of the brand" (Dubois & Paternault, 1995, p.70). This supports the concept of the "rarity principle". According to the principle, scarce products, such as luxury items, when over-diffused, gradually lose their prestigious character" (Dubois & Paternault, 1995).

To measure the dream value of a luxury brand, respondents were asked the following question, "Imagine that you are given the possibility of choosing a beautiful present because you won a contest. Which are the five brands you would like the best?" (Dubois & Paternault, 1995, p.70). The top five brands that they would like to buy without any financial constraint were 1) "Rolex", 2) "Gucci", 3) "Christian Dior", 4) "Estee Lauder", and 5) "Cartier" (Dubois & Paternault, 1995).

Using the regression equation, researchers calculated the "expected dream value" for each brand by subtracting a brand's purchase level from its awareness level. Thus, there is an "expected dream value" of each brand. Brands fell into three categories, 1) "normal", 2) "premium", and 3) "dream deficit". Four situations emerged with different managerial implications. In situation one, the desire to own a brand is limited because the awareness is low. Marketers for this kind of brands should first develop brand awareness. In situation two, the awareness is good but the dream value is low because the purchase level is already high. Researchers recommended marketers "refrain from excessive licensing and maintain highly selective distribution channels in order to protect the brand equity (Dubois & Paternault, 1995)". In other cases (situation three), the awareness level is "normal" but the purchase level is low. These brands are recommended to carefully develop their expansion strategies. Lastly, brands in situation four have very strong awareness and highly controlled brand diffusion, and the desire to own these brands is high. An example of this kind of brands is DeBeers, which has avoided hazardous diversification and limits its buyers to about 200 people worldwide (Dubois & Paternault, 1995).

These findings suggest that marketers are facing a challenge to build their brands without jeopardizing the luxurious appeal. Luxury-brand marketers should develop a high level of awareness and tightly control the supply and distribution of their products in order to maintain a level of scarcity and to control the level of brand diffusion. If these factors are improperly managed, the dream value of their brands will decrease and the purchasing intention will also decline. In addition, the avoidance of hazardous diversification and line extensions is also important to maintain the prestigious identity of a luxury brand.

Strategies for Luxury Brands in Hong Kong

Purchasing luxury items, in a hedonic perspective, assists consumers in projecting their personalities through their possessions. Possessing luxury items reflects self-achievement needs (Dubois and Duquesne, 1993). In other words, desire for and intention to purchase luxury goods are positively correlated with these needs. According to Tai and Tam (1996), people in Hong Kong are very conscious about their public self-image, and this is shown by the strong desire to own luxury brands across different levels in the society.

People in Hong Kong are less optimistic about their future financial situation, leading to an increased importance of education and an increased tendency towards personal development (Tai & Tam, 1996). According to Dubois and Duquesne (1993), people have higher purchasing intentions toward luxury goods if they have strong desire for personal development. It can be concluded that people in Hong Kong have a higher intention to buy luxury goods because they have a strong sense of self-improvement and personal development.

Hong Kong is an ideal city to investigate because of its extensive availability of luxury brands. Marketers should be careful in the follow issues: 1) identifying the target segment in the market, 2) understanding the preferred public-self images of the target consumers, and 3) using the appropriate emphases in marketing communications and promotions. Moreover, the recent downturn of the Asian economy has seriously affected business, including the luxury market. In Hong Kong, the unemployment rate has risen to the highest point in the past fifteen years. Income is no longer increasing, and the economic growth was negative for the first half of the 1998 fiscal year. Under this situation, luxury-brand marketers are facing the challenge of developing new business strategies and surviving the period of economic hardship in Asia.


This study replicated a survey undertaken by the International Research Institute on Social Change (RISC) in 1990 that was designed to measure people's attitudes, perception, and purchasing behaviour of luxury goods in Hong Kong. Changes have been made from the original set of brands developed by RISC to include popular goods perceived to be luxury brands by people in Hong Kong. Sectors included in the list are primarily men's and women's fashions, perfumes, jewelry, and accessories such as watches and pens. The four measurements are as follows:

Aided Awareness: provided with the set of brands, respondents were asked to indicate which ones they know at least by name.

Recent Purchases: respondents were subsequently asked to indicate from which brands they had purchased an item during the past two years.

Dream Value: to measure how strongly respondents desired to own a brand, they were asked to imagine that they were given the possibility of choosing a beautiful present because they had won a lottery. They were allowed to choose five brands from the list.

An additional measurement, "expenditure" (respondents were asked to provide the average dollar amount they had spent) was employed to investigate the relationship between spending on luxury goods in the past with expected spending on these goods in the future. Two questions were also included to measure consumers' propensity to spend on luxury goods during the present economic hardship in Asia ( (1) "strongly disagree" to (7) "strongly agree" scale). The answers were then correlated with people's personal expectations of different future economic situations. These economic situations were: 1) "economic uncertainty", 2) "lowered income", 3) reduced income from other sources", 4) "increased expenses", and 5) "unemployment". The responses were measured on a scale ranging from (1) "very unlikely to happen" to (5) "very likely to happen".



Information was collected by personal interviews with Hong Kong residents in May 1998. These interviews took place on the streets or inside the shopping malls in popular shopping areas (Central, Causeway Bay, and Chim Sha Tsui), where most of the luxury brands are located. Permission to interview people inside the shopping malls was requested by sending a letter and explaining the purpose of the project to the managers.

Interested individuals were first presented with a letter explaining the purpose of the study. If interest was shown, they had to answer a screening question before they completed the questionnaire. The screening question was as follows: "Have you, in the past three years, purchased any product from this list (forty luxury brands in the questionnaire)?" All respondents answered "yes" to the screening question. Each respondent took approximately 20 to 25 minutes to complete the questionnaire. A total of 70 completed questionnaires were collected.


There were 40 male and 30 female respondents in the sample. More than half (61 percent) of the respondents were between 18 to 34 of age. The majority of the sample had a monthly income between $0 to $30,000 Hong Kong dollars (approximately $0 to $6,000CDN). The demographic profile of respondents is summarized in Table 1.

Awareness. The awareness level of various luxury brands in Hong Kong ranged from 20 percent (Todd Oldham) to 97 percent (Chanel). In comparison, the awareness level in Dubois and Paternault's (1995) study varied from 5 percent (Daum) to 92 percent (Revlon). Table 2 shows the awareness scores of brands that were listed in both the US study and the current study. As shown by the results in this study, Hong Kong consumers have a much higher awareness level of luxury brands.

Dream Value. The top six brands which Hong Kong consumers dreamed of are 1) "Rolex" (59%), 2) "Cartier" (53%), 3) "Louis Vuitton" (44%), 4) "Chanel" (33%), 5) "Gucci" (33%) and 6) "Patek Philippe" (29%). No respondents dreamed of owning a product from Celine and Paloma Picasso. Correspondingly, the brands "Rolex", "Gucci", "Christian Dior", "Estee Lauder", "Cartier" and "Pierre Cardin" were the top-six luxury brands that US consumers dreamed to own. The differences could be due to culture or the time lapse between studies. Table 3 summarized the dream scores of the common brands in both studies.

Relationship Between Awareness, Purchase, and Dream Value

People rarely buy brands that they are not familiar with. The brand "Calvin Klein" had the highest purchase score (40 percent) and a relatively high level of brand awareness (93 percent). The least-known brand, Todd Oldham, had an awareness level of 20 percent and purchase score of 1 percent. Forty-eight percent of the variation in brand diffusion was due to awareness.





The brands "Rolex", "Cartier", and "Louis Vuitton" have the highest awareness-dream scores. Awareness explained only 22 percent of the variation in dream value in Hong Kong. Dubois and Paternault (1995) found a much stronger linkage for this relationship with 71 percent of the variation in dream levels due to awareness in the United States.

Eighteen percent of the variation in dream levels was due to the purchasing variable. As Dubois and Paternault (1995) mentioned in their study, the relationship between dream and purchase levels is difficult to analyze since both factors are influenced by awareness. Thus, a partial correlation test was done between dream and purchase levels, with awareness as the controlling factor. Surprisingly, the correlation coefficient was not significant, meaning that the dream value of a luxury brand was largely accounted by its awareness, and the ownership of that brand had minimal impact on its dream value in the market. This finding is completely different from that in Dubois and Paternault's (1995) study, in which the relationship between dream and purchase levels was negative. That is, people dream less of a luxury brand as they purchase more products from that brand.

To ascertain that purchase has a minimal effect on dream value, a regression analysis was run to examine the relationship. In the regression analysis, the tolerance value of the two independent variables (awareness and dream) was 0.52, meaning that 52 percent of the variability of the awareness variable was not explained by the purchasing variable or vice versa. From the results, the purchasing variable did not have a significant impact on dream value. Since no adverse impact of the purchasing variable was found in the analysis, ownership of a luxury brand had no affect on its appeal in Hong Kong. The eagerness to own luxury goods remains high as long as the awareness level of the brands remains high. Appendix I summarized the scores of awareness, purchase, and dream value.

Future Spending on Luxury Goods

A small portion of Hong Kong respondents (27 percent) expected their spending on luxury goods would increase in the next year, 36 percent thought it would decrease, and 37 percent took a neutral position. These figures suggest that Hong Kong consumers were not sure about their future financial condition, and therefore were not able to give certain estimates about their future spending.

Expectations of the Future Economic Situation

Respondents were uncertain about the future economic situation and believed that their income from investments are likely to be reduced. The mean scores of these expectations were 3.61 (uncertain economy), 2.97 (lowered income), 3.54 (reduced income from investments), 3.14 (increase expenses) and 2.46 (unemployment). Fortunately, they still had confidence about keeping their present jobs and salary levels. A correlation analysis was run, showing significant relationships between future spending and the uncertain economy, lowered earned income, and reduced income from investments. The linkages between future spending and expectations of economic-related variables were further examined by a regression analysis. In the regression analysis, "uncertain economy" was the only significant predictor of negative future spending .

The R square value of this equation was 0.15. This result is perfectly reasonable, as people save more money when they are uncertain about future conditions.

Another interesting finding was the relationship between future spending and spending in the past on luxury goods. The two variables were negatively correlated at 0.37, indicting that every dollar a respondent spent in the past causes a 37 cents decrease in future spending on luxury goods. In other words, people who spent more in the past tend to spend less in the future.


The study supports the assumption that Hong Kong consumers have different buying behaviour in relation to luxury purchases. Thus, strategies used in other markets, such as the U.S., may not implement directly in Hong Kong and therefore marketers need to develop different marketing strategies for this market.

Purchase does not have the adverse effect, which appeared in the U.S., on the desire to own luxury brands. Findings show that the "dream" of owning a luxury brand is mainly generated by the popularity (awareness) of the brand in Hong Kong. As people in Hong Kong are pessimistic about the future economy, they feel unsure about their future financial status. Fortunately, they still feel secure with their jobs and salary levels. Among the economic-related factors, "uncertain economy" had the greatest impact on consumers' intention of future spending on luxury goods. Only 27 percent of respondents expected to increase spending on luxury goods in the future, while the rest of the respondents either expected a decrease in spending or took a neutral position.

One possible explanation is that people who spent more on luxury goods in the past were likely people who earned a large portion of their income from the real estate and the stock markets. During the period of the Asian economic turmoil, prices in these markets have dropped significantly and have seen no improvement up to this point in time. However, people who earned "easy" money through the stock market in good times are less likely to spend money than high-paid wage earners, who can at least count on their regular wage in tough times. Thus, these people currently have less money to spend on luxury goods. Nevertheless, there was no difference in dream value between respondents with different purchase levels. In other words, Hong Kong consumers' desire to own luxury brands is not limited by their financial status. Therefore, marketers are facing the challenge to redesign their business strategies without sacrificing the prestigious image of their brands. The image should be well maintained to flourish the brand again when the economy improves.

Marketing Implications

According to Leclerc, Schmitt and Dube (1994), two dimensions determine the demand of a luxury brand. First, the brand must be easy to encode into, retain in, and retrieve from memory (brand awareness). Secondly, the marketing communication must be consistent with the strategic position of the brand in the market. In the Hong Kong luxury market, increasing awareness yields higher levels of brand preference, which generates stronger purchase intentions. Therefore, successful luxury brands are promoted through active-marketing communication in Hong Kong. Communication must focus on strengthening the brand image and delivering benefits that the brands could provide.

As shown in the result section, the brands "Alberta Ferratti", "Baume & Mercier", "J.P. Tod's", and "Todd Oldham" had awareness scores lower than 33 percent and purchase scores lower than 6 percent. The dream values of these brands were also low (smaller than 9 percent). Thus, marketers of these brands should re-evaluate their marketing strategies. They may need to redefine their target segments, increase the awareness level of their brands, and use different emphases in their communication.

To conclude, the main implications of this study are: 1) well-established brands should concentrate their efforts in maintaining current brand image and increasing brand awareness; and 2) all luxury brands (new, well established, and medium) should carefully re-evaluate and redesign their marketing strategies to survive the period of economic uncertainty. However, they should never sacrifice their product quality and prestigious brand image because, in essence, these are what made luxury goods special.




Biel, Alexander L. (1992), "How Brand Image Drives Brand Equity", Journal of Advertising Research, 32(6), 6-12.

Census and Statistics Department, Hong Kong, http:// www.info.gov.hk/censtatd/eindex.htm

Dubois, Bernard and Duquesne, Patrick (1993), "The Market for Luxury Goods: Income versus Culture", European Journal of Marketing, 27(1), 35-44.

Dubois, Bernard and Laurent, Gilles (1993), "Is There a Euro Consumer for Luxury Goods?", European Advances in Consumer Research, 1, Association for Consumer Research, 58-69.

Dubois, Bernard and Paternault, Claire (1995), "Observations: Understanding the World of International Luxury Brands: The "Dream Formula", Journal of Advertising Research, 35(4), 69-76.

Echikson, William (1995), "Luxury Steals Back", Fortune, 131(1), 112-119.

Garfein, Richard T. (1989), "Cross-cultural Perspectives on the Dynamics of Prestige", Journal of Services Marketing, 3(3), 17-24.

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Leclerc, France, Schmitt, Bernd H. and Dube, Laurette (1994), "Foreign Branding and Its Effects on Product Perception and Attitudes", Journal of Marketing Research, 31(5), 263-270.

Louis Vuitton Moet Hesseny website, http://www.lvmt.com

Tai, Susan H. C., and Tam, Jackie L. M. (1996), "A Comparative Study of Chinese Consumers in Asian Markets - A Lifestyle Analysis", Journal of International Consumer Marketing, 9(1), 25-42.

Wedel, Paul (1993), "Chasing the Dragons", International Management, 48(9), 30-31.



Angela Chung Yan Wong, Simon Fraser University, Canada
Judith Lynne Zaichkowsky, Simon Fraser University, Canada


E - European Advances in Consumer Research Volume 4 | 1999

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