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SpirE-Journal 2013 Q1

Side Click: Chinese consumers – The sunrise market for global luxury brands

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Side Click: Chinese consumers – The sunrise market for global luxury brands

With Chinese consumers becoming an important driver for business growth in the luxury goods industry globally, how should global brand owners react? What is the future outlook for a China-fuelled global luxury market? 

Chinese consumers are the top luxury spenders worldwide, accounting for 25% of total luxury purchases globally. In 2012 alone, Chinese luxury spending overseas grew by 37%, overtaking Japanese and United States consumers to become the key segment for global luxury brands.

Chinese shoppers, primarily from Beijing and Shanghai, have become truly global luxury customers. Consumer preferences are shifting away from the typical preference for logos and towards a more global mindset of “uniqueness, high-quality, and understatement in luxury items”.

A number of socio-economic factors explain this startling trend:

A weaker Euro combined with high Chinese taxes mean that luxury products are almost a third of the price in Europe in comparison with the prices in China itself, the United States and elsewhere.
The rising affluence of Chinese consumers has generated a greater disposable income, with which they spend about USD6,000 per visit in Europe – versus the USD4,000 that consumers from other countries spend.

Overseas travel by the Chinese is growing. In 2011, a record number of nearly 1.1 million visited the United States. This, coupled with an expanding middle-class population, signifies that Chinese shoppers now make 60% of their luxury purchases outside the mainland

However, research has shown that Chinese shoppers have expressed unhappiness about their shopping experiences abroad, as they were let down by factors such as bad service, a lack of Mandarin speakers, restrictive opening hours and inappropriate sizing for the Chinese body shape. 

Some luxury brands are making alterations to their products and marketing collateral to reach out to Chinese shoppers. For example, in 2012 Montblanc sold Year of the Dragon pens, and deployed personnel who were fluent in both Mandarin and Cantonese to reach out to Chinese shoppers in Hong Kong. 

Non-European global brand owners are following in the foot-steps of European luxury stores which have been catering to Chinese tourists for years, by employing salespeople who speak Chinese. US luxury players Saks Fifth Avenue and Bloomingdale’s are urging the government to tap onto this lucrative market by hastening the visa processing procedure.

In the near future, the demand for luxury goods by Chinese consumers appears positive. The number of Chinese visitors to the United States is expected to almost double by 2014, and the number of overseas trips made by Chinese consumers will reach 100 million by the end of the decade. With President Obama’s recent announcement to increase visa processing capacity from emerging markets like China by 40% this year, it appears ever more pertinent that luxury brands should brace themselves to alter their product offerings and marketing strategies to cater to this profitable segment.

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