The KPMG survey Refined Strategies: Luxury extends its reach across China examines prospects for the luxury industry in China, based on interviews with 927 consumers aged 20 to 44, conducted in the third quarter 2009. Several case studies complete the survey, including one of Richard Mille which makes a third of its sales in Asia Pacific. “As in many other aspects of the global economic crisis, China is bucking a global trend in luxury consumption: with sales falling by up to 8% across the globe in 2009, China saw estimated sales growth of 12 percent. By some measures, China is now the second largest luxury market in the world, after Japan,” write Nick Debnam and George Svinos, representing KPMG China and KPMG Australia respectively.
As the introduction to the survey explains: “With decreased business travel expectations, China’s mainland luxury stores may be in a position to capture a greater proportion of Chinese consumers’ luxury spending. Whichever way you look at it, China’s relatively confident consumers are now a key factor for the global luxury market. In particular, the “super rich” segment has continued to grow despite the recent global economic turbulence. While younger professionals and other aspiring consumers may have struggled to command higher salaries over the past year, privately-owned enterprises are increasingly surpassing the former state-owned enterprises as generators of wealth, creating a new consuming elite. The October 2009 launch of ChiNex, China’s Nasdaq-style second board in Shenzen, is an illustration of this, effectively creating dozens of yuan billionaires overnight.”
Richard Mille: a third of sales in Asia
Says KPMG: “There continues to be huge potential for growth and opportunities across China – not merely in the more well-known major cities of Beijing, Shanghai and Guangzhou. To that end, we have highlighted a number of tier-two and three cities that, while not having the same global fame, have large and increasing numbers of wealthy households. There is also clear scope for greater use of technology in communicating with customers. With the ubiquity of mobile phone use in China, and the advent of 3G technology expanding what can be done through mobile communications, there are plenty of options for engaging customers on an ongoing, personal basis. While the importance of the in-store experience continues to trump ideas of major online luxury retailing, customers are looking to the web to research different brands. Luxury companies looking to connect with the public should be making the most of the interactive media available to them.”
As the audit firm concludes, opportunities abound in the China luxury sector with potentially huge rewards. This is confirmed by Denise Lo, Managing Director North Asia for Richard Mille, which has two outlets in mainland China, in Shanghai and Beijing. She says demand for very high-end luxury products has held up well over the past year. The number of millionaires and billionaires in China is growing, and the desire for high-end products is cascading down through society. “In mainland China, there is a sense of peer pressure among the emerging elite,” Ms Lo explains. “People want to be on a par with their contemporaries and display their good taste. Our consumers in Hong Kong tend to be a little more private. They are more like connoisseurs, and tend not to display their wealth on a day-to-day basis. Expectations are now high. For almost any brand globally, the next five years are going to be all about China.”