China now has the means to spend big on luxury goods — which has been endlessly reported.
China also knows exactly what luxury goods it wants.
This week consulting firm Bain & Company released a new report on the Chinese luxury market that showed China is the fastest-growing consumer of leather products and jewelry globally. The Chinese luxury market is expected to grow by 23% this year, reaching 84.3 billion yuan (US$12.7 billion).
According to Bain, Chinese consumers’ taste for high-end brands have made these eight, the most popular brands in China:
1- Louis Vuitton (46%)
2- Chanel (36%)
3- Gucci (22%)
4- Armani (20%)
5- Christian Dior (17%)
6- Rolex (14%)
7- Cartier (11%)
8- Hermes (8%)
Hermes, which we just profiled, is one of the top five brands in China for suitcases and handbags according to Bain.
Bain’s survey of 1,500 mainland Chinese consumers over the past 12 months revealed that most of the luxury spenders are between 25 and 44, a much younger demographic than Japan and Europe where high-end spenders come from those over 40.
“The younger generation has a relatively higher education level, better knowledge of brands and increasing personal earnings,” Bruno Lannes, a Bain partner, told the South China Morning Post.
The report confirmed that China’s obsession with luxury is spreading to more Chinese and to more cities and luxury brands are rapidly opening stores throughout China to make it easier for Chinese shoppers to find coveted luxury goods, like handbags, closer to home.
In fact, their infatuation with luxury have prompted the Chinese, who are traditionally savers, to spend on luxury goods.
It’s telling that families in first-tier cities like Beijing and Shanghai that earn between 5,000 and 15,000 yuan (US$753 and US$2,259) per month, would spend 21,000 yuan (US$3,162) on luxury goods each year.
Consumers in 2-and 3-tier cities like Chongqing and Tianjin show similar traits when it comes to luxury spending. In 2- and 3-tier cities, the wealthiest with monthly income over 100,000 yuan (US$15,000) are spending 186,000 yuan (US$28,000) per year — about two months income — on luxury goods. This is slightly higher than their counterparts in tier 1 cities who spend 166,000 yuan (US$25,000) a year. Even those who earn 5,000-15,000 yuan per month are spending several month’s income – 12,000 yuan (US$1,807) per year on luxury.
Luxury companies perceive the willingness of Chinese consumers to spend robustly and are jumping to open outlets both to meet and to stoke demand.
Of the 15 high-end luxury brands polled in the survey, they have opened 80 new outlets combined throughout China this year. Coach is set to open 30 new stores this fiscal year, while Tiffany’s plans to open four stores soon.
Of course, right now the foreign luxury companies reap all the Chinese luxury spending since there really isn’t any Chinese competition.