U-M research finds it’s not due to Asians becoming more Western and individualistic, but collectivism that enhances luxury consumption

The Asia-Pacific region is the largest consumer of personal luxury goods in the world. Asian consumers shop at home and overseas in cities like New York, Milan and Paris, contributing to the luxury industry’s remarkable growth.

However, many Asian countries are deeply shaped by traditional values and religions, such as Confucianism and Buddhism, both of which advocate modest and even frugal living.

This paradox intrigued Rajeev Batra, professor of marketing at the University of Michigan’s Ross School of Business. Batra and colleagues investigated how these seemingly conflicting phenomena coexist. Their research revealed that collectivism in these Asian markets actually enhances luxury consumption.

The research examined seven less-studied Asian markets including Hong Kong, South Korea, Japan, Singapore, Indonesia, Malaysia and Thailand. Using data from more than 3,000 consumers aged 18-64, the study explored how collectivism, religion-tradition, thriftiness and status/materialist consumption values jointly shape consumption preferences in these markets.

The findings indicate that collectivism plays a key role among the four values. Collectivistic societies, such as those in the seven Asian markets, often place greater importance on religious-traditional values, the researchers say. An increase in religious-traditional values leads to a rise in thriftiness, which subsequently decreases status consumption or luxury consumption.

However, collectivism directly boosts status consumption, and this positive effect is so strong that it overrides all countervailing negative effects. As a result, Asian consumers exhibit a passion for luxury consumption while simultaneously endorsing the moral virtues of thriftiness, Batra and colleagues say.

In collectivist societies, people often care deeply about the opinions of their social groups. Because of this, they might purchase expensive or high-status items to impress their peers and fit in with their group. Additionally, unlike in Western individualist cultures, where status consumption can be viewed negatively as showing off or materialistic, in collectivist cultures, luxury consumption is likely to be supported as it brings honor to valued in-groups.

“The fact that luxury consumption is high and increasing in Asia may not be because Asians are becoming more Western and individualistic, but because collectivists have their own reasons for valuing status consumption and are now more able to indulge in it,” Batra said.

Batra says that it is premature to conclude that only younger, more globally connected consumers are the ones to target with status-oriented appeals. Older, more religious-traditional consumers, tightly connected to their social in-groups, might also be receptive to status-oriented appeals, contrary to common marketing wisdom.

The research also shows that the values consumers hold can influence how they prioritize different features when choosing products. For instance, consumers who place high importance on status consumption values often want their consumption choices to be noticed by others. They prioritize product attributes that are more publicly visible, such as style, brand reputation and origin, and are less price sensitive.

In contrast, thrifty consumers place greater weight on perceived durability and value for money.

“This will help marketers to prioritize which product attributes to emphasize,” Batra said.