21st February 2012
The Chinese consumer is a core target for global luxury brands and is forecast to account for 20% of the global luxury market by 2015. There is plenty of evidence to support this view – Hugo Boss reported a 73 per cent sales growth in China for the first nine months of 2011, while Mulberry says the Chinese consumer is its largest growing group. Prada, Burberry, LVHM, Hermes and PPR all have double digit increases in sales.
The Chinese factor is a structural change in the wider global luxury market, underpinned by the fact that the average age of a Chinese millionaire is only 39; 15 years younger than the average in other parts of the world. In 1999 China had just one US dollar billionaire where as today it has 130. However, many luxury brands are now focussing on the purchasing power of the growing number of the Chinese upper middle class whose households are set to grow from 13 million to 76 million by 2015.
Increasingly, Chinese consumers are shopping abroad to take advantage of weaker currencies and to avoid high import tax which can top 30%. There is also the added cachet of buying a product from the country of its origin – Burberry in Britain or Chanel in Paris. Harrods and Selfridges in London installed Chinese credit card readers in 2011 and have reaped the rewards. Meanwhile in Manchester, Selfridges has begun giving their staff Mandarin lessons, resulting in an increase in the number of Chinese customers visiting their stores by 62% in 2011.
De Beers, the world’s biggest diamond producer managed to generate a 50% increase in profits, with its trading division producing sales of $6.5bn. The company has stated that China is a priority with several high profile store openings in 2012. It’s no accident that Graff, the London jeweller, has decided to float in Hong Kong. The company is raising capital to expand in the region, with two new stores set to open in China.
China may be leading the way in the emergence of global luxury consumer class, but luxury goods companies are casting a wider eye on countries like Brazil and Indonesia, where a burgeoning middle class represents huge potential market.
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