Chinese customers are having an increasing appetite for buying big-ticket items. Global brands are using this attitude to tap Chinas luxury market.

Luxury is a constantly evolving, and a subjective concept, a state of extreme comfort, or indulgence. Luxury brands stand for excellence, and are actually a social code, that motivates the consumers to pay a premium price. This makes the segment more interesting and explorable.

China is expected to become one of the worlds biggest luxury markets in the next 5 years. A 2008 survey states that, the country enjoys having 4, 60,000 HNI (High Net worth Individuals) households, holding an asset value of more than 7 million RMB. Analysts predict, that this would further grow to reach 7, 50, 000 households by the end of 2011. They further predict that the total assets of HNI in China would double from 12 trillion in 2008, to more than 23 trillion by the end of 2011. The country is expected to consume 29% of the global luxury items by 2015. A study by Merrill Lynch study states that by 2014, Chinese customers will account for almost one fourth of the global purchase of luxury products.

Comparatively, the total number of HNI in China is more than other countries such as France, and UK. The affluent population of China is mostly concentrated in the coastal areas of Guangdong, Shanghai, and Shandong. Currently, the trend is spreading in other areas such as Beijing as well, and from I tier to II and III tier cities as well.

Attributes of the HNI population in China:


Chinese customers are exposed to more media awareness, and this makes them more discerning. With a surge of magazines, and websites informing about luxury items, they are well aware of the brands available in the market. The most influencing reason for the purchase of luxury products is as a means of self reward. When shopping for luxury products, shoppers prefer to buy clothes, jewellery, and watches in branded stores, and other accessories such as cosmetics in department stores.

McKinseys research among luxury shoppers in 17 Chinese cities state that there is a shifting attitude among Chinese shoppers towards displaying their wealth and in buying more luxurious items. Rich customers will continue to dominate majority of the luxury segment, while upper middle class segment trails closely. The survey further states that out of the total number of surveyed customers, 50% of them were able to remember brand names, and identify them. This was only 23% until two years before.

The rapid accumulation of wealth in the dragon land is attracting the eyes of global luxury brands. More than 50% of Chinas luxury stores have been opened during the past three years.

Top Luxury brands:

Louis Vuitton, Chanel, and Gucci are the top three brands most preferred by the Chinese customers. Followed by them are other brands such as; Armani, Christian Dior, Rolex, Hermes, Cartier, Lancme and Prada. Emerging middle class population of China is trying to improve quality of their life, and this proves to be the main growth driver of luxury market in China. Brands such as Dunhill, Hugo Boss, Ferragamo, Gucci, Burberry, Versace, Dior, Prada, and Chanel have opened more than 80 stores during 2010. Sales figures in these stores are showing positive signs of consumer spending.


Key Trends of the Chinese Luxury Market:

Chinese customers are now looking for aesthetic and social value instead of just thinking about the basic needs of warmth and protective function of apparels. A research report states that 60% of the surveyed customers expressed their opinion to buy branded apparels. On an average, Chinese consumers buy approximately 600 different branded products including both domestic and international. Some of them also believe that foreign brands are better than domestic brands.

  • Good product selection and low price attracts the consumers. Improved quality and availability of global brands at the appropriate time enhance customer interest for luxury shopping.
  • Consumer attitudes in II and III tier cities are improving, similar to those in I tier cities.
  • Social networking channels and electronic media remains a main source of spreading customer reviews for luxury products.
  • Chinese consumers are getting more sophisticated, and demand more in terms of quality, and performance. They are also willing to pay premium prices for the same.

Focus areas for improving market performance:

Despite all the rosy future ahead, luxury brands still need to focus on some key areas to enhance their market performance in China.

  • Chinese customers tend to depend more on word-of-mouth way of communication and thus, their communication will circulate quickly through the informal channels. They do not complain directly to the shop owners about their dissatisfaction regarding the quality of the apparel purchased. More focus must be place on customer relations management while interacting with the customers, clients, and sales prospects.
  • A more professional after sales service is required.
  • Overall shopping experience needs more enhancements.

While global economy builds a class of creamy segment in the Asian regions, luxury market is booming therein. Traditionally regarded as fickle, this segment currently goes through years of successive growth. Competition between the domestic and international brands in the luxury market is resulting in structural, geographical and institutional renovation of China.





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