This week in the news, wealthy Chinese are taking advantage of the relative stability and affordability of the US real estate market, Chinese buyers are beginning to see local luxury brands on the same level as foreign brands, Ferragamo is slowing its China expansion, fast fashion brands have received scrutiny in China for their quality, and Chinese travelers are becoming more independent and more likely to spend.
Wealthy Chinese Bought 12 Percent of All US Homes Purchased By Foreigners
Many wealthy Chinese are diversifying out of China, and US real estate is a relative bargain for them. Chinese bought 12 percent of all US homes purchased by foreign citizens last year, up from 5 percent in 2007 with more than half the home purchases in California. More than two-thirds of the Chinese buyers paid cash. According to the Hurun Report, more than 60 percent of China’s wealthy have left or plan to leave the country, at least part time, and their top destination is the United States. For the burgeoning middle and upper classes Chinese, the US market seems more stable than the Chinese market, where fears of a property bubble have caused a great deal of concern.
More Wealthy Chinese Think Local Luxury Brands ‘On Par or Above’ Foreign Brands, Says New Study
The sophistication of China’s luxury consumers is evident in a new study from market research firm Mintel that underscores their preference for quality and craftsmanship and desire to seek new brands, including local luxury brands. In certain categories such as watches and cosmetics, foreign brands are still prized for their superiority. For luxury apparel and shoes, about 40 percent of Chinese believe local luxury brands provide the same quality as foreign brands. Among wealthy Chinese, craftsmanship is the most popular word to define luxury according to the study. Almost two-thirds of urban Chinese put the term ahead of ‘expensive’ and ‘status,’ and the portion rises to 71 percent for those with monthly household income of more than 25,000 yuan ($4,000).
Ferragamo Slows China Expansion But Remains Opportunistic
Florence-based luxury retailer Salvatore Ferragamo’s global sales got a boost from China in 2013 with sales in China growing 20 percent. Ferragamo has more than 75 points of sale in China and the company believes the “coverage of territory there is quite well distributed.” There are no plans for major expansion; instead, the company will open three or four stores a year, with “opportunities in airports” given some new terminal openings. In 2013, Asia-Pacific sales grew by 11 percent to 466.5 million euros, or $615.7 million and accounted for 37.1 percent of Ferragamo’s total sales.
Fast Fashion Brands Grow in Popularity and Scrunity in China
In 2013, the China Consumers’ Association conducted its Comparison Test of Apparel & Fashion. International brands tested included Zara, M&S, Guess, and Paul Frank. More than one-third of the tested products didn’t meet national Chinese quality standards. The clothes were tested for formaldehyde and aromatic amine fuel content, PH levels, odd smells, pilling and tear resistance, color fastness, and component makeup. H&M has had similar quality problems. However, international fast fashion brands have no significant domestic competitors, and with demand strong, quality issues have not hurt sales. The four biggest fast-fashion retailers in China, Zara, H&M, Uniqlo, and C&A, have 523 total stores in China as of June 2013.
Chinese Have Strong Desire to Travel in 2014
Chinese have a strong desire to travel in 2014 according to a report by Ctrip. Nearly all the respondents said they would travel. Moreover, Chinese tourists are willing to spend when they travel. About 95 percent of respondents indicated that their travel spending will either increase or remain the same in 2014 compared to 2013. About a third of them will spend 10,000 yuan or more on their travel. Chinese travelers are becoming more independent with 39 percent who indicated that they prefer to do their own booking and travel on their own. About 42 percent said they will travel on their own but book through travel agencies. Only 19 percent said they prefer package tour.