By Yuval Atsmon, Diane Ducarme, Max Magni, and Cathy Wu
Glowing with optimism about their futures, Chinese consumers have leapt into first place among the world’s spenders on luxury goods. Yet this market is undergoing tumultuous changes that will confront luxury-goods makers with formidable challenges. Here’s what you need to know to stay relevant to China’s globetrotting shoppers.
Growing at a pace far surpassing expectations, spending by Chinese consumers on luxury products now exceeds that of any other country. Having leapt past Japan, China now accounts for over one-quarter of the total global luxury market. And despite China’s current economic slowdown, the nation’s share of global luxury spending will continue to soar, to more than one-third by 2015.
Some of the factors driving this include the rising number of very wealthy consumers, new middle-class entrants into the luxury category, high levels of financial confidence throughout China, and the rising purchasing power of women.
Yet, at the same time sales are booming, this is a fast-changing market evolving in ways that could make it harder and more expensive for luxury brands to win over the nation’s consumers. Here are a few ways the market is changing:
- A rapidly growing share of Chinese luxury shoppers are doing their purchasing abroad where good are often less expensive. This raises the danger that a brand may lose consumers’ trust if its stores or products fail to present a consistent image in both China and elsewhere around the world.
- Chinese consumers’ tastes in luxury products are maturing with surprising speed. Shoppers with just a few years’ experience as buyers of such products increasingly prefer low-key and understated goods to ones that are emblazoned with popular logos. Yet the market is splintering, because the fast-growing numbers of new entrants still favor widely-recognizable brands that show off their status. As tempting as it may be for firms to try satisfying all kinds of consumers, doing so risks diluting their brands’ cachet.
These insights are based on conversations with industry insiders and face-to-face interviews with over 1,000 luxury shoppers in 14 Chinese cities.
To read more details about the Chinese luxury market, download, “Luxury without borders: The 2012 Chinese luxury consumer survey” (PDF–3.68 MB).