China’s Smaller Cities Are New Battlefields for Luxury Companies

on May 30 2012 | in Trends | by | with No Comments

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Recently, the advertising firm Publicis Groupe’s Starcom MediaVest Group released a study confirming a trend that we have been writing about all along — that consumers in smaller Chinese cities are becoming more keen on luxury goods.

Many luxury companies, especially the more established ones, have moved onto second- and third-tier cities. Now these cities have become the new battlegrounds where they compete to win more luxury consumers and to grab more market share.

The survey drew from the responses of 1,002 participants living in 43 different first- to third-tier cities. Respondents make a minimum income of at least 20,000 yuan ($3,160) a month and spend more than 10,000 yuan a year on luxury goods. The survey sees new trends not just in third-tier cities, but first-tier cities as well.

“Lower-tier consumers are having their first taste of buying ‘obvious luxury’, that is, prominent and socially accepted status symbols, and are hungry for knowledge in an attempt to move beyond price comparison,” said Jeffery Tan, director of Starcom MediaVest Group China’s National Research and Insights.

The flip side of that, however, is that first-tier Chinese cities are looking for more sophisticated ways of shopping: they no longer want luxury goods just to show off.

“As to the luxury brands themselves, such as Louis Vuitton, they have reached a saturation point in cosmopolitan cities such as Beijing, Shanghai and Guangzhou,” Tan said. “If they want to seek further growth, it becomes a must for them to reach out to second- and third-tier cities.”

The survey also tracked some interesting gift-giving trends: Forty percent of the survey respondents in second-tier cities said they had given luxury goods as gifts to associates or acquaintances, a greater proportion than in first-tier cities.

Celebrities also influence luxury purchases in second-tier cities. 122 respondents from second-tier cities said they would buy a popular brand that they saw endorsed by a celebrity, compared with just 88 respondents from first-tier cities and 101 from third-tier cities.

“The close proximity to first-tier cities has helped second-tier cities to catch up,” said Angie Chan, associate director of Starcom MediaVest Group China’s National Research and Insights.

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image credit: christian

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