The growing potential of Chinese luxury market makesit impossible for the global luxury product manufacturers to ignore the 'dragonnation'.


Luxury brands thrive in the soil of China. Their luxury market including jewelry, leather products, fashion apparels, perfumesetc. reached around $8 billion USD during 2007. A statistics states that, China accounts to 18% of the global luxury consumption. Almost 80% of the top global luxurybrands have entered into China. Luxury mavens predict that by 2015, luxury consumptionin China will constitute 32% of the global market.


In the recent past many international luxury brands wereattracted by the market potential of China. Numerous luxury brands likeVersace, Rolex, Chanel, Omega, Dior, Prada, and Zegna have dipped their toes inthe country. Lots of luxury brands are manufactured in China. Coach, Prada, Furla, and LV are made in China in big numbers. Numerous factories in Guangdong make a range of brands which are sold in the market for a fortune. Cities such as Shanghai and Beijing have attracted the investments of retail giants likeGiorgio Armani.


II and III tier cities fuel the luxury market:


China has 100 cities with population exceeding one million. With theincreasing number of consumers' disposable income, and their inclination to acquirea social strata, and willingness to express uniqueness in their lifestyle,luxury market is fuelled up even in the II and III tier cities. I tier citieslike Shanghai, Guangzhou, and Beijing have advanced retail infrastructures andhigh per capita GDP. The II and III tier cities are also catching up with theformer ones. Middle class population in China is estimated to grow and reach250 million by 2010. With the growing interest of middle class people towardsluxury products, the market is heating up. Social status is now becomingimperative for middle income people as well. Luxury products enable theconsumers to project a social class. Consumers from II and III tier cities feelthe need to 'close the gap' and build up a I tier image. They go in for buyingbranded items with a hefty price tag only to display their status to others.


Advent of the Chinese 'chuppies':


The young and profligate Chinese generation in between theage group 20-30 known as 'yuppies' or 'chuppies' in China; meaning one tospends all he earns. They are raising a wave of unprecedented commercialism. Thechuppies are young, urban, and middle class consumers who are generally whitecollared, having 100% disposable income. They will be the most powerfulconsumer group; not only in China but all across the globe within the next 15years.


This young generation population has a strong preferencetowards Western brands, and luxury products. They prefer their accessories toreflect their personality and clothes, footwear, and cosmetics occupy a majorportion of their expenditure. They are eager to shop for status enhancingproducts in lavish packaging. Women choose to buy cosmetics in Western orAmerican packing instead of buying plastic packing even if it contains morequantity.

 

To create an image about their product in the minds of the consumers as a prestigious brand, and scoop high profits, manufacturers' must conceal how they are cutting costs in the manufacturing process, and also mask their sales performance. Goods are manufactured with cheaper threads, no linings, glue instead of stitching, and above all; cheap labor. Handbags that are manufactured for $100USD are sold in the market ranging from $1,200USD.


The growing potential of Chinese luxury market makes it impossible for the global luxury product manufacturers to neglect the country. The growing society of upper class people provides the drive in the middle income society to shop for luxury products. China is gradually developing into a major driver of luxury goods market.


References:


  1. &sec=article&uinfo=<%=server.URLEncode(1972)%>" target="_blank">http://www.hktdc.com
  2. "How luxury lost its luster", Dana Thomas.
  3. "Introducing 'Chuppies': Who they are and how they will change the consumer landscape forever", Chris Maloney, 15 June 2009, &sec=article&uinfo=<%=server.URLEncode(1972)%>" target="_blank">http://maloneyonmarketing.com
  4. http://seekingalpha.com