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  • China's love affair with luxury

    Post by : expatree

With growing wealth and global influences, Chinese consumers are developing a taste for the finer things in life. The French have a saying: it's impossible to overdo luxury. And for Chinese consumers, that's not from lack of trying. As China's economy powers on, so does its population's appetite for symbols of their growing success.
This is Shanghai, the heart of China's seemingly unstoppable economic miracle. Here, there are few signs of the global financial crisis. In fact, wealthy Chinese are buying up on luxury more than ever before. And global luxury brands are jostling to expand into a country that's producing more millionaires, faster, than anywhere in the world. China is already the number 2 luxury market in the world, and it's growing extremely fast. The other big markets like the U.S. and Japan are of course, not growing as fast, and in some cases even declining. In than 5 years, you'll see the Chinese market transforming into the top world economy.

For China's early adopters, the investment is paying off. After almost two decades in the country, Louis Vuitton's monogrammed handbags are some of the most sought-after items by Chinese women.

And like many luxury brands, it's now bullishly expanding to the so-called second and third-tier cities. From Hangzhou to Harbin, designer stores are shooting up in locations, where booming industrial growth is creating a ready-made luxury market.
Patrick Thomas, CEO of Hermes said "There is this view all over the world that what we do in Europe in 20 years, the Chinese do in 3 years. And learning, they are doing extremely well. So we find more and more of our customers with a very developed, very subtle, very elegant taste. And we have more and more customers in our stores who know about quality, about beautiful objects about also style. "

So, from one of the France's oldest luxury brands, to China's newest. Hermes has lent its 170-year-strong history to Shang Xia, the first luxury venture designed for, and targeted at the high-end Chinese consumer.
As Chinese shoppers demand for luxury grows, the challenge now is to boost domestic consumption. The traditional investment destinations of Beijing and Shanghai are now making way for a wealth boom in China's developing cities. And with luxury consumption linked integrally to urban development, we're in store for phenomenal growth.

What does luxury mean to ordinary Chinese?

With rising consumption power, Chinese consumers are searching for a higher quality of living. Many are looking to luxury products for this fulfilment.

China's luxury market is expanding at a record pace, and helping to power the Global industry recovery. But it's also become a contentious issue that's dividing opinions. China is now the second-largest consumer of luxury goods in the world. Affluent Chinese are playing a key role in shifting China from being the world's factory, to the world's marketplace.

Take luxury handbags as an example. Designer accessories are much more expensive in China than overseas, but many Chinese aren't aware or simply don't care.

For example, Ms. Zhou has chosen a Coach handbag, which is being sold for around 5,000 Yuan on Coach's Chinese website. But on the company's U.S. website, the same bag is priced at around 400 U.S. dollars, or around 2,700 Yuan. These items are much more expensive in China. At this price, you can buy two of these handbags overseas.

But despite the mark-up, there's still flourishing demand for high-end goods. In last year alone, Chinese consumers spent 9.4 billion U.S. dollars on luxury items, more than a quarter of the world's total.

Walking on the streets of China's bustling cities, one can easily witness prosperity and the consumer boom. Retail spending has increased steadily at 15% and more in recent years, China's consumer confidence remained high despite the worldwide recession. Chinese consumers are still less mature in their consumption patterns. There's a distinction in motivation for buying, between Chinese consumers and their counterparts. In China, a large portion of luxury goods purchased is used as gifts, both corporate and personal.
Such robust demand is a windfall for retailers recovering from the financial crisis. But when it comes to spending up big on luxury, ordinary Chinese are divided. These products are worth the price. Most people are just buying them because of vanity. The demand shows Chinese population is getting richer but they don't know what to do with the money. Rather donate their money than to mindlessly spend it on anything they can buy.

As China's economy hurtles along, Chinese consumers are wealthier than ever. For those who buy them, luxury goods represent many things; better living standards, elevated social status, and growing sophistication. But to those who can only dream of owning a 5,000 Yuan handbag, they also symbolize the ever-widening income gap developing in the population.
Date:2014-05-22 20:29:44
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