Hungry for the good life

PUBLISHED : Thursday, 01 October, 2009, 12:00am
UPDATED : Thursday, 01 October, 2009, 12:00am

In a country that until recently regarded the Panda cigarette as the height of luxury, and where the biggest fashion choice was between shades of blue and grey, the mainland's emergence as a key player in the world luxury goods market over the past two decades has been nothing short of astounding.

It was a red-letter day in July when People's Daily reported that China had overtaken the US last year to become the world's second-largest luxury market, behind Japan.

It cited the World Luxury Association as saying that rich mainlanders bought a quarter of the world's luxury goods last year, spending a total of US$8.6 billion.

And with mainland demand expected to grow, analysts forecast that in a few years China will be the world's largest luxury market.

The influx of luxury brands first started in the 1990s, with brands like Louis Vuitton, Dunhill and Gucci opening shops in big cities such as Beijing and Shanghai. In recent years, luxury brands have expanded into other cities to reach more customers.

Louis Vuitton, one of the most successful luxury brands in the mainland market, opened its first shop on the mainland in 1992 and now has 29 shops in 24 cities.

In its annual report last year, LVMH Group said China had become the second largest customer base in the world for the Louis Vuitton brand.

After opening its first shop in 1997, Gucci now has 25 stores in 17 mainland cities. The Florentine brand, which saw mainland sales grow by more than 65 per cent in 2006 and 42 per cent last year, opened a flagship store in Shanghai in May.

Dunhill, which opened its first mainland shop in Shanghai in 1993, now has 73 across the mainland.

Some of that demand has been generated by mainlanders who first encountered luxury brands overseas.

People born after the one-child policy was introduced in 1979 have more knowledge of international brands and Western culture, much of it received while pursuing higher education opportunities overseas.

These young members of the emerging middle and upper classes, seeking to enhance their social status and quality of life with high-end products, have been one of the main forces driving the rapid expansion of the mainland's luxury goods market.

A survey of consumption patterns showed that more than 60 per cent of young Chinese city-dwellers believed that they should 'enjoy life now' and were willing to spend more on luxury items - moving away from the saving culture favoured by earlier generations.

Increasing disposable incomes and continued economic growth have also contributed to the strong growth of luxury goods sales.

In 2006, the China Brand Association estimated that about 13 per cent of China's population, 170 million people, bought top-tier brands.

Cash to spare

Rich mainlanders bought a quarter of the world's luxury goods last year, according to the World Luxury Association, spending a total of, in US dollars,: $8.6b