Chinese spenders are projected to become the largest luxury consumer group, spending $102 billion on luxury goods for 2013, accounting for nearly half of global luxury sales which is expected to hit a new record of $217 billion, according to the recent China Luxury Report released by Fortune Character Institute in Shanghai.
Although the report points to an easing in the global luxury market, there is optimism about the Chinese market. The luxury market research organization estimated that the Chinese domestic consumption of luxury goods will reach $28 billion, and the overseas consumption will achieve $74 billion.
Among overseas luxury shopping destinations, New York City, Paris, and Tokyo are the most popular destinations. As for purchases, clothes, shoes, bags, jewelry and watches are most sought-after by Chinese consumers.
One of the major reasons for the desire to buy abroad continues to be the authenticity of products at overseas stores, said Zhou Ting, head of the Fortune Character Institute. Other reasons include the price difference between buying at home and overseas, product quality, and the strength of Chinese currency.
The report attributes the growth of the global luxury market to the increase of new purchasing power, emerging markets, and new stores. Although major luxury companies tried to limit the number of new stores, the average growth rate will still reached 9 percent.
The Institute surveyed a total of 4,650 Chinese High Net Worth Individuals (HNWIs), drawing a conclusion that the core consumers of ultra HNWIs have abandoned many top luxury brands. In the study, Fortune Character Institute for the first time defined luxury consumers by “core consumer, edge consumers and potential consumers.”
The number of core consumers with the most assets will further decline, while the amount of edge consumers with moderate assets will grow slowly, according to the report. The Institute predicted that within 3-5 years, the decrease of core consumers will seriously dampen the enthusiasm of edge consumers and potential consumers, and luxury brands will consequently experience a recession.
The study gives a more promising perspective to Chinese brands. As Chinese brands become more competitive and scalable, many of them have actively engaged in investing in or acquiring foreign luxury brands. From Lenovo-IBM, Geely-Volvo, to the Shuanghui-Smithfield acquisition, we have seen China’s overseas investments move beyond natural resources.
photo credit: shanghai tang