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China develops growing taste for luxury
August 11, 2009, Tuesday
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EVEN as luxury goods consumption has fallen worldwide, China's appetite for high-end retail has shown a strong upward momentum.
Italian men's brand Ermenegildo Zegna continues to see a steady flow of new customers through the doors of its 60 retail outlets in China. "More than I expected," says Ken Kress, head of Zegna's China operations. "The bottom line is that the overall economy and diversification of wealth have continued to grow."
Zegna isn't alone. Even while Wall Street was still reeling last November, LVMH (the French luxury group with products ranging from accessories to spirits) reported double-digit sales growth during the third quarter of last year, according to its's 2008 Annual Report. The company has seen "dynamic" growth in China, led by high-end leather goods brand Louis Vuitton.
And, while wine and spirit connoisseurs around the world are showing restraint in purchasing pricey bottles, in China LVMH has reported "exceptional" sales of Hennessy cognac - the country was the largest market for the luxury spirit in 2008.
LV and Zegna aren't the only luxury companies to expand in China recently. On July 24, Giorgio Armani cosmetics formally launched its own counter in Isetan, a department store in downtown Shanghai, to target the fast-growing number of women consumers in the city.
German luxury car maker BMW saw sales in China jump by 44 percent in June of this year, while sales in the United States fell by more than 20 percent.
Consumers in China spend well over US$6 billion a year on designer bags, cars, clothes, accessories and cosmetics, with the country recently leapfrogging fashion-conscious Japan to come in second behind the US in consumption of luxury goods, according to World Luxury Association data.
Three demographics
Unlike the singular group often portrayed in media reports, China's newly rich are a varied bunch, but they can be broken down into three general demographics, according to Shaun Rein, managing director of China Market Research, a Shanghai-based consulting firm.
The first are the super-wealthy. With incomes of US$10 million or more, China's super-rich have been buffered from the worst of the current financial storm.
The second group, composed mainly of upper-middle management and white-collar workers making between US$200,000 to US$300,000 per year, are the aspiring rich, and the apple of the mass luxury market's eye. But this category was the worst hit by company restructuring and downsizing, and these consumers are now more cautious about spending cash on Versace dresses or Starbucks lattes during office lunch breaks.
Luxury buyers in the third group have salaries that belie their combined purchasing power and are mainly office workers making roughly US$600 or more a month.
The majority of China's wealthy are young, with 80 percent below 45, compared to 30 percent in the US and 19 percent in Japan, according to McKinsey.
(Reproduced with permission from Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. Trustees of the University of Pennsylvania. All rights reserved. Shanghai Daily condensed the article.)
Italian men's brand Ermenegildo Zegna continues to see a steady flow of new customers through the doors of its 60 retail outlets in China. "More than I expected," says Ken Kress, head of Zegna's China operations. "The bottom line is that the overall economy and diversification of wealth have continued to grow."
Zegna isn't alone. Even while Wall Street was still reeling last November, LVMH (the French luxury group with products ranging from accessories to spirits) reported double-digit sales growth during the third quarter of last year, according to its's 2008 Annual Report. The company has seen "dynamic" growth in China, led by high-end leather goods brand Louis Vuitton.
And, while wine and spirit connoisseurs around the world are showing restraint in purchasing pricey bottles, in China LVMH has reported "exceptional" sales of Hennessy cognac - the country was the largest market for the luxury spirit in 2008.
LV and Zegna aren't the only luxury companies to expand in China recently. On July 24, Giorgio Armani cosmetics formally launched its own counter in Isetan, a department store in downtown Shanghai, to target the fast-growing number of women consumers in the city.
German luxury car maker BMW saw sales in China jump by 44 percent in June of this year, while sales in the United States fell by more than 20 percent.
Consumers in China spend well over US$6 billion a year on designer bags, cars, clothes, accessories and cosmetics, with the country recently leapfrogging fashion-conscious Japan to come in second behind the US in consumption of luxury goods, according to World Luxury Association data.
Three demographics
Unlike the singular group often portrayed in media reports, China's newly rich are a varied bunch, but they can be broken down into three general demographics, according to Shaun Rein, managing director of China Market Research, a Shanghai-based consulting firm.
The first are the super-wealthy. With incomes of US$10 million or more, China's super-rich have been buffered from the worst of the current financial storm.
The second group, composed mainly of upper-middle management and white-collar workers making between US$200,000 to US$300,000 per year, are the aspiring rich, and the apple of the mass luxury market's eye. But this category was the worst hit by company restructuring and downsizing, and these consumers are now more cautious about spending cash on Versace dresses or Starbucks lattes during office lunch breaks.
Luxury buyers in the third group have salaries that belie their combined purchasing power and are mainly office workers making roughly US$600 or more a month.
The majority of China's wealthy are young, with 80 percent below 45, compared to 30 percent in the US and 19 percent in Japan, according to McKinsey.
(Reproduced with permission from Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. Trustees of the University of Pennsylvania. All rights reserved. Shanghai Daily condensed the article.)
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