Trade Resources Industry Views China Is The No. 1 Luxury Spender Worldwide

China Is The No. 1 Luxury Spender Worldwide

Fang Ying’s December wish list of Louis Vuitton handbags and Chanel perfume is not only for Christmas. Fang, 33, a secretary working in Shanghai, writes one every month for friends and family traveling abroad.

Fang is not alone. More than two-thirds of luxury spending by Chinese mainlanders was made overseas in 2013, an increase from 2012, according to the China Luxury Market Study from consultant Bain & Co released yesterday.

Mainland shoppers often wait for trips abroad, plan shopping sprees to Hong Kong or get friends or specialist “daigou” agencies to bring back luxury items from overseas because they are often cheaper due to the mainland’s high import taxes.

“Sometimes I’ll go to a China store and look online for details about things I’ve liked, or try something on for size I’ve seen online. But when it comes to actually buying it I’ll always get a friend to bring it back from abroad,” Fang said.

China is the No. 1 luxury spender worldwide, making up 29 percent of total global luxury spending this year, according to the Bain report. So Chinese consumers — wherever they may be — are a key battleground for firms from LVMH Moet Hennessy Louis Vuitton SA and Gucci owner Kering Holland NV to trench coat maker Burberry Group Plc, cosmetics giant L’Oreal SA and Cartier watchmaker Compagnie Financiere Richemont SA.

“The store fronts are in Shanghai and Wuhan, but the cash registers are in Los Angeles, New York and London,” said Sage Brennan, CEO of China Luxury Advisors, which helps brands in the Americas and Europe attract Chinese shoppers.

Chinese luxury spending slowed at home in the wake of a crackdown on corruption and shows of wealth, prompting warnings of a sales slowdown from liquor maker Pernod Ricard SA and Volkswagen-owned Bentley Motors and Lamborghini.

Luxury brand store openings dropped significantly in 2013, according to Bain, which estimated China’s luxury market will grow 2 percent this year versus 7 percent a year earlier.

Get prepared

On London’s Bond Street and Fifth Avenue in New York, luxury stores have been getting ready to welcome Chinese shoppers, boosting China know-how ahead of peak seasons such as the weeklong Lunar New Year beginning January 31, 2014.

London’s Harrods department store is planning a themed display for the festival, with special products and menus designed for the occasion, it said.

Chinese visitors spent 300 million pounds (US$488.3 million) in Britain in 2012, while the British government has relaxed visa rules to attract more people from the world’s second-largest economy.

“Having a strategy for Chinese visitors makes a massive difference. Chinese spending in the UK was up 132 percent in the first half of 2013,” said Jeremy Gordon, London-based director of China Business Services, which helps UK firms target Chinese shoppers.

“That’s obviously going to have a massive impact on your bottom line at a time when overall retail sales are not growing at anything like that rate.”

On Fifth Avenue, jeweler Tiffany & Co said it employs Mandarin-speaking staff. Tiffany has seen strong growth in the China market as the allure of diamonds grows, and said last month that sales at its flagship New York store were driven by Chinese and European tourists.

Around 1.5 million Chinese travelers visited the United States in 2012, a more than fivefold increase from 2005, according to the US Department of Commerce.

Chasing the yuan

Saks Fifth Avenue, the department store unit of Hudson’s Bay Co, has a Lunar New Year strategy to focus on beauty products, while the flagship store of Macy’s Inc has a visitor center with Chinese-language material.

Barneys, meanwhile, is launching its first Lunar New Year-themed marketing campaign in 2014. The department store has increased adverts in Chinese magazines and is testing campaigns around Chinese payment system China UnionPay, it said.

Luxury firms are also going online to woo Chinese shoppers. Tiffany has a Chinese engagement ring app while Chanel offers an online makeup “classroom.” Italian fashion house Fendi has held talks on China’s Twitter-like Weibo, while Prada SpA and Christian Dior SA have Chinese videos online.

“Chinese consumers interact a lot more than their Western peers online, even in the luxury sector. They will often check on social media before they make their final decision,” said Arnold Ma, London-based chief executive officer of digital marketing agency Qumin, which helps brands target the China market.
 

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Chinese Make up 29% of Luxury Spending Globally
Topics: Light Industry