Why does China love luxury goods?

In 2014 China was the world’s fifth largest consumer of luxury goods, beating the United Kingdom and Germany by spending €15 billion. Chinese consumers are expected to spend around £18.6 billion on luxury goods in 2015, accounting for 20% of global luxury sales, rising to £53.8 billion by 2020. It’s not just at home that the Chinese are spending big: they are expected to spend £62.5 billion abroad by 2020. The fastest growing items in the Chinese luxury market are high-end watches, women’s and men’s clothing, and leather goods (source: Statista).

Why is China so obsessed with luxury goods?

Young money

Traditionally luxury items are seen as products for older consumers, who have most disposable income and highly-paid jobs to justify their spending. In China, however, it is the younger shopper who is increasingly keen to have the latest luxury goods. Shoppers aged 18-34 account for just under half (45%) of the luxury consumers in China. The fast growing Chinese economy is creating more consumers with considerable amounts of disposable income – two thirds of people buying luxury good in 2010 were doing so for the first time. Apparel advertising has now become one of the fastest growing areas of online advertising to keep pace with the demand (source: Business Insider).

 Increased exposure

Chinese people are more aware of luxury brands than they were a few years ago. The internet, in particular social media, has helped to spread awareness, as has the increasing number of luxury retailers opening stores in China. Being able to afford to travel abroad means that Chinese consumers can discover new luxury items and bring knowledge of these back home. Between 2008 and 2010, brand awareness grew quickly, with consumers becoming twice as aware of luxury brands (source: McKinsey).

Great deals abroad

China’s large import duties make buying luxury goods at home very expensive. Chinese consumers are becoming more price savvy, with a falling number of shoppers automatically assuming that the most expensive items are the best quality. Luxury consumers in China now compare products and prices online to find the best deals, and there is an increasing awareness that products are much cheaper overseas than they are at home. This explains why Chinese shoppers are happy to spend £1,700 each per trip on luxury goods when they come to Britain – a figure three times the average for the market (source: Economist).

Making the most of the Chinese obsession with luxury goods

Being one of the fastest growing luxury markets in the world means China is a viable and worthwhile focus for your business. The Chinese middle class is growing fast, and there are a huge number of millionaires in the country (around 2.8million, currently), many of whom are young (source: Economist). From entering the foreign market, or attracting the attention of Chinese tourists visiting the UK, there is plenty you can be doing to benefit from this lucrative market segment. The Chinese demand for luxury goods is going to increase. Are you going to be there to meet it?

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