Mainland to be world's top luxury market by 2015
A growing base of vibrant young consumers will see the mainland replace Japan as the world's biggest luxury market by 2015, comprising 20 per cent of the global market, according to a new McKinsey report on China's luxury goods consumption.
The survey found that 45 per cent of luxury consumers on the mainland were aged between 18 and 34, compared with 37 per cent in Japan and 28 per cent in Britain.
'Luxury consumers in China are younger than their global peers. They are not only second-generation rich but also those born in the 1980s who are still saving for buying houses ... but they still have passion for luxury goods,' Yuval Atsmon, a partner in McKinsey's Shanghai office, said yesterday.
'They are different from peer groups in Japan and other countries because they are confident and very optimistic about their financial future. In Japan, young people ... are moving away from luxury goods, while in [South] Korea, the percentage of luxury consumers is declining.'
The report was based on interviews with more than 1,500 consumers in 17 mainland cities last year.
It showed that 72 per cent of wealthy luxury consumers, with annual incomes of more than 250,000 yuan (HK$296,800), believed their earnings would 'increase significantly' in the next five years, 13 percentage points more than the national average.
The report estimated that in the next five years, the number of upper-middle-class households, defined as those with annual incomes of 100,000 yuan to 200,000 yuan, would increase from 13 million to 76 million.
It said luxury sales were expected to reach US$27 billion by 2015, comprising 20 per cent of the world's luxury market and surpassing Japan as the No 1 luxury goods market.
Thirty per cent of respondents indicated they preferred to buy goods abroad to avoid a 20 per cent tariff. But the report said that in the next five years, the top 36 cities and 25 other developed cities would capture 74 per cent of growth in the market.
The McKinsey report also found luxury consumers were willing to buy good-quality brand names, even if they had to pay a premium price, but they were being more rational about their purchases.
'Some luxury consumers would consider their luxury goods as one of their investment tools, with some saying that they prefer to buy luxury goods with lasting value because their price won't drop or [may] even increase,' Atsmon said.
Spending on luxury services such as spas, massages and other wellness activities was growing even faster, the report said. It found 20 per cent of luxury consumers said they had increased spending on such services while 13 per cent spent more on goods.
The survey findings are in line with remarks made by Commerce Minister Chen Deming on Monday. Chen said China would become the world's largest market for luxury goods in five years, adding that it would become the largest retail market in 10 years, surpassing the US.