The mainland's luxury goods market is expected to grow 23 per cent to a record 84.3 billion yuan (HK$97.7 billion) this year, making it the fastest growing consumer of leather goods and jewellery worldwide.
The global luxury goods market has continued to improve this year in the wake of the financial crisis, with total sales expected to reach Euro168 billion (HK$1.7 trillion) this year, according to a report by Bain & Company.
The Asia-Pacific region, including China, has recorded a growth rate of 22 per cent, outperforming the other parts of the world. The United States, the number one spender on luxury goods, has also seen a strong rise of 12 per cent. Spending in Japan, the second biggest market, was down for the third year in row, dropping 1 per cent.
Bruno Lannes, a partner with global consulting firm Bain, says China is likely to exceed Japan within five years in terms of luxury spending, thanks to robust economic growth, a rise in middle-class families and an aggressive store-opening strategy by big brands.
The 15 brands surveyed by Bain had opened more than 80 new shops by the end of August this year, with two-thirds of them in second- and third-tier cities.
'The second- and third-tier cities are the new battlegrounds,' Lannes said. 'In fact, people's brand awareness and willingness to spend in these cities are already close to mega-cities like Beijing and Shanghai.'
Compared to most developed countries, luxury goods consumers on the mainland are much younger. The core age group studied by the report is between 25 and 44, while the mainstream buyers in places like Japan and Europe are older than 40.
'The younger generation has a relatively higher education level, better knowledge of brands and increasing personal earnings,' he said. 'Some of them purchase luxury goods not only with their own money, but also with that from their parents or grandparents, which is quite common in China.'
The company surveyed more than 1,470 mainland consumers last year, finding that families with monthly earnings between 5,000 and 15,000 yuan would spend 21,000 yuan annually on luxury goods in first-tier cities and 12,000 yuan in second- and third-tier cities. The families earning 15,000 to 20,000 yuan monthly would spend 29,000 to 31,000 yuan on such products per year.
Louis Vuitton, Chanel and Gucci are the three most sought-after brands on the mainland.
Last year, mainland shoppers spent 87 billion yuan on luxury goods overseas compared to 69 billion yuan at home.
Lannes said shoppers could usually enjoy better prices, broader options and a more up-to-date collection of goods overseas.
'However, we've also noticed that domestic spending is catching up fast, as the brands are making efforts to supply the market with the latest collections, and reduce operating margins to offset tax differences,' Lannes said.