China is already the second largest market for luxury goods and it is only a matter of time before it overtakes Japan. Rong Jiaojiao of China Features reports
China has become the most promising market for various luxury brands.
Jane Shi strides into Beijing's Lane Crawford Seasons Place shopping mall, dashes to one of the up-market shops, snatches a bag, glances at the price tag and pulls out her purse, as if she was in a supermarket.
However, the purchase today is a Balenciaga motorcycle bag costing more than $2,000. The owner of one Balenciaga, two Fendi, a Louis Vuitton, a Gucci, and two Vivian Westwood bags, Shi, 32, simply says, "I need them."
"It's not all about the vintage crafted lambskin, the platinum-plated metal, but the feelings and image the luxury bags give me. I feel pampered, and different from common people," says Shi, a manager at a multinational advertising company, earning an annual income of more than $150,000.
Shi is one of a growing army of luxury shoppers in China. The China Brand Association estimates consumers of top-tier brands account for 13 percent of the total population, or 170 million people.
Whether it is yachts, limousines, haute couture fashion or handcrafted watches, China's appetite for luxury goods has surged despite the global economic downturn.
A report by consulting firm Bain &Company in November showed consumption of luxury goods in China is expected to stand at $9.6 billion at year's end representing a 12 percent growth this year, compared with a 16 percent slump in the US market, a drop of 10 percent in Japan and 8 percent in Europe.
Earlier this year, China's consumption reached $8.6 billion, accounting for 25 percent of the world total, surpassing the United States to become the second largest market for luxury goods, according to the World Luxury Association report.
Goldman Sachs has predicted that China will continue the spending spree and consume about 29 percent of the world's total luxury goods in 2015, leapfrogging Japan as the world's biggest luxury buyer.
"China's consumption has changed from increasing quantity to the upgrading of quality. The consumption of refinement and taste is pursued, which is an important invisible value of luxury goods," says professor Li Fei, director of the Department of Marketing at Tsinghua University.
"Luxury goods are products beyond necessary basic living and development needs. They should have a history of more than 100 years, and be made of rare materials and with delicate craftsmanship."
More than 300,000 Chinese already have a net worth of more than $1 million. A study by McKinsey in July indicated China will be home to the world's fourth-largest population of wealthy households by 2015, an estimated 4.4 million.
British carmaker Bentley sells more Mulliner 728 limousines, the world's most expensive car at $1.2 million each, in Beijing than in any other city in the world.
A surge in Chinese travelers abroad has facilitated access to Western brands. By 2008, mainland tourists had spent $30.5 billion on luxury items, thanks to the lower prices and taxes in overseas stores.
The world's leading luxury brands are expanding their China operations. Some are moving out of smaller stand-alone outlets and hotels to set up megastores to educate consumers about the brand and pump up luxury spending. Many brands are accelerating the opening of new boutiques in China's second and third tier cities.
Li suggests that status and self-reward are particularly strong buying motivations for Chinese consumers.
"Luxury in China today is primarily a social statement. The function of luxury counts more for Chinese than the emotional factor," says Li.