China’s luxury market has been driven by gifting and recently, Chinese luxury consumers are making more luxury purchases overseas, but these two trends may change soon.
China’s increasingly affluent and independent female consumers are changing the face of the country’s luxury market.
Although women account for a high percentage of luxury purchases around the world, they are only recently coming to dominate the Chinese market. Until recently, Chinese men, with their greater purchasing power and demand for business-related gifts, were the most frequent luxury buyers. However, in the wake of the country’s new austerity push, which forbids public officials from lavish spending, it is personal consumption by women that is taking precedence.
According to industry consultant Bain & Co., men accounted for 90 percent of luxury purchases in China in 1995; women now account for half of all purchases, exerting considerable influence on the country’s 116 billion yuan ($19 billion) market. Demand for cosmetics, perfume, and women’s wear increased by 10 percent last year as a result.
Mario Ortelli, a senior analyst at Sanford C. Bernstein in London, ascribes the market shift to changing notions of female identity. “It’s a rebalancing of the consumption between females and men. Women are becoming more independent, becoming richer, and so are buying for themselves,” Ortelli said.
Lisa Yan, a 26-year-old finance saleswoman and savvy luxury consumer, echoed Ortelli’s sentiments in an interview with Bloomberg Luxury. “Luxury buying by Chinese women is driven by jobs and peer pressure. [We are purchasing] items we’ve eyed in the past and now are able to afford. We also see friends around us carrying these things,” she said.
The spending power of these “fashion addicts” is also drawing international attention, with companies like Chanel and Louis Vuitton SA (MC) stepping up their game to cater to female consumers. Now, their stores are dedicating more floor space to trendy women’s wear than expensive gifts such as watches, whose sales have dwindled because of the government crackdown, in an attempt to draw in a new demographic of “mostly female, middle-income professionals in larger cities such as Shanghai, Beijing, and Guangzhou, who shop for personal use and are knowledgeable about fashion as well as luxury.”
The Bain report also stated, however, that mainland luxury sales have slowed overall. Chinese consumers now purchase more than two-thirds of their items overseas; prices are up to 25 percent lower in Hong Kong and 30 to 40 percent lower in Europe.
Ortelli believes that refocusing on women’s ready-to-wear apparel can help to counter this trend of international spending and rekindle the domestic market.
“You can postpone the buying of a watch or piece of jewelry,” Ortelli said. “But if you have an important dinner today, you don’t go to Hong Kong to buy your dress.”
photo credit: linda farrow/john-paul pietrus