Luxury Dives Deeper into China

on July 28 2011 | in Retail Trends | by | with 3 Comments

luxury shopping, Miu Miu, Hong Kong

As the euro depreciates and the U.S. faces more economic turbulence, luxury brands are upping prices—and looking to Chinese, on the mainland and abroad, for market growth.

The total of domestic and foreign purchases by Chinese consumers for 2010 came in at about $10.7 billion—and that’s excluding private jets, yachts, and limousines. The nation is second only to Japan as the largest spender in the global luxury market: Japan held a solid 34 percent in 2010, and China came in at about 25 percent. The WLA expects that China will overtake Japan in 2012. China’s predicted 2012 expenditure is $14.6 billion.

“More than 70 percent of brands will try to accelerage a shift in their development focus from Japan to China this year,” said Ouyang.

Brands such as Louis Vuitton have already started this shift. The company opened only 10 Chinese stores in 2005; by the end of 2010, the brand had 36 stores in 29 first- and second-tier cities.

Maserati, also, is turning toward China. In 2010, Chinese accounted for over 14 percent of Maserati’s new auto sales, making China the company’s fourth-largest market. By the end of this year, China is expected to become its second-largest; accordingly, Maserati is slated to open four new dealerships in China: in Wuhan, Wenzhou, Tianjin, and Xiamen.

As second- and third-tier cities like these become saturated with luxury products, brands are also looking to enter into even less-known regions. Cartier, for example, has established itself in Yiwu, in east Zhejiang province– a county-level city. But brands less familiar with the area than Cartier are expected to, for now, focus on the second tier.

Last year, Chinese tourists in Europe purchased a total of $50 billion in luxury goods. As a result, European companies are devoting resources to this growing market.

“More than 80 percent of the luxury stores in Europe are providing a Chinese translation service now. This service, specifically catering for Chinese consumers of luxury products, will make the brands even more attractive. And shopping overseas will grow into a habit in the future,” said Michael Ouyang, CEO of the World Luxury Association (WLA) China office.

Domestically, the Chinese government is not averse to the increase in luxury traffic. In the past few months, the government established the China Luxury Trade Commission to promote the growth of the luxury industry.

“With the establishment of this commission, the purchase of luxury goods will hopefully increase. It will also help to further internationalize the luxury industry in China,” said Yang Xiadong, director of the commission.

A spokesman for the Ministry of Commerce said that China plans to reduce import tariffs, which for luxury items are currently between 20 and 50 percent, in the near future.

photo credit: ik

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3 Responses to Luxury Dives Deeper into China

  1. The Chinese economic juggernaut is no doubt going to continue to grow, and companies need to be mindful that there are increasing numbers of Chinese consumers who want their products. However, it’s important not to neglect traditional American, European, and Japanese markets either. Diversifying is the key to future retail success, in my opinion.

  2. Calvin says:

    Just wanted to drop a comment about this blog, I stop by often to read your articles and it helps keeps certain things in perspective for China. Keep up the great work!

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