Chinese appetite for luxury products to reach $14.6 billion by 2015
According to the Chinese Academy of Social Sciences, China is set to become the world’s largest market for luxury goods in five years.
In a blue paper released end-May in Beijing, the institute states that China’s luxury goods market was worth $9.4 billion by the end of 2009, accounting for 27.5% of the world’s luxury goods market.
China has therefore surpassed the US as the world’s second largest luxury goods market, after Japan, and is expected to reach $14.6 billion by 2015, becoming the world’s number one luxury market, predicts the Chinese Academy of Social Sciences”.
China has certainly become a core market of focus for many global luxury companies in recent times. This is unsurprising given that revenue streams elsewhere in the world are stagnating as more traditional markets suffer with uncertainty in light of the economic downturn.
“Emerging from years of restrictions under the socialist regime, Chinese citizens are working hard, motivated by the financial rewards that capitalism and enterprise bring”
“With more cash to spare, they also want to reward themselves for their hard work, whether it is in the form of a brand new BMW, a designer handbag, or a more up-market brand of shampoo.
Chinese consumers are now embracing consumption as a new way of life, driven somewhat by a sense of reclaiming what has been denied from them for years.
Datamonitor research in August 2008 established that emerging market consumers tended to place additional emphasis on being seen with the right brands compared to consumers from more developed markets. Although this was more important to Koreans and Indians at the general level, the Chinese response was significantly higher than the global average. Elsewhere, a KPMG report in 2008 reported that 60% of Chinese consumers were willing to pay a premium for luxury products that are “popular or famous”, implying that a concern with status, or how one appears to others, is a significant driver for consuming luxury goods.
“Indeed, the Chinese are starting to equate the consumption of certain products and services with quality of life improvements, and as benchmarks for having ‘arrived’. Brands reflect a certain status, and to wear premium products is a sign to others of their new-found wealth and progression”.
Underlying all that is an acute sense of optimism and confidence among Chinese consumers, perhaps spurred on by China’s strong economic performance and the newly-discovered joys of capitalism. Datamonitor’s April 2010 ‘Recovery from Recession’ research shows that China, alongside India, displays the highest level of optimism among 19 countries surveyed, with 51% of consumers believing there are “early signs of (economic) recovery” or that the “(economic) recovery is well under way” in their countries. This reflects an ongoing sense of optimism apparent in the country in the last two years, at least relative to other global markets.
“For companies aspiring to do well in the China market, be it in luxury or general consumer goods, their success hinges heavily on delivering good quality and brand messages that are in line with the Chinese consumer’s motivations around consumption as a new way of life, material rewards, lifestyle upgrades and improvements in social status.”
