Luxury goods of China

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The market for luxury goods in China composes a significant proportion of all luxury goods sales worldwide. [1] In 2012, China surpassed Japan as the world's largest luxury market. [2] According to a report by McKinsey in 2019, Chinese consumers are the engine of worldwide growth in luxury spending [3] According to a report by Bain in 2021, China's luxury spending is expected to reach more than half the global market value of luxury goods by 2025. [4] This rapid growth has been explained partly by the luxury consumption habits of the post 1980's generation influenced by the Chinese economic reforms of the 1990s leading to rapid growth in economic conditions and China's one-child policy. [1]

Contents

Market characteristics

Chinese luxury goods consumers are younger than their European counterparts, belonging to the 18-50 age group, compared to Europe's consumers who are generally in the over 40 age group. For this reason, China's luxury goods market is expected to grow faster than that of Europe's. [5] Many of the young luxury goods buyers are self-employed or professionals. According to the consulting firm McKinsey & Company, 80% of Chinese luxury goods buyers are under 45, compared with 30% of luxury goods buyers in the United States and 19% in Japan. [6] Retail sales in China account for only 7% of global retail sales of luxury consumer goods; however, Chinese buyers account for 25% of global retail sales of luxury consumer goods. Many shops in international travel destinations have specialized staff devoted to Chinese customers. [7]

According to 2007 Global Luxury Survey by Time magazine, most luxury goods buyers in China buy luxury products as a status symbol. The top five luxury watch brands in the country are Rolex, Omega, Cartier, Vacheron Constantin, and Breitling. [8]

In a confidential report titled "China Luxury Market study 2010" in November 2010, the management consulting firm Bain & Company noted the top three luxury brands in China are Louis Vuitton, Chanel and Gucci. According to the report, watches and bags led the growth of the luxury market in 2010. The report documented the top three luxury brands in the country for the following products: [9]

Product1st2nd3rd
Cosmetics, perfumes and personal care Chanel Lancôme Dior
Watches Rolex Omega Cartier
Suitcases and handbags Louis Vuitton Gucci Chanel
Menswear Giorgio Armani Ermenegildo Zegna Versace
Jewelry Cartier Tiffany and Co Chow Tai Fook
Shoes Salvatore Ferragamo Prada Chanel
Womenswear Chanel Burberry Giorgio Armani

Following a ban instituted in October, 2012 on government agencies purchasing luxury goods, often used as "gifts", sales of luxury goods in China remained strong, but slowed, even falling slightly for some luxury retailers in the 4th quarter of 2012. [7]

As of February 2014 2/3rds of the luxury goods purchased by the wealthy in the People's Republic of China were purchased by tourists in Europe and the United States where, particularly in Europe, high-end retailers have hired staffed fluent in Mandarin. [10]

Hong Kong and Macau benefit from favorable taxation rules and are favored locations for tourists from elsewhere in China to purchase luxury goods like cosmetics, jewelry, and designer fashion goods. [11] : 116 

Luxury cars

Major global luxury brands like Mercedes-Benz, BMW, Audi, and Lexus have operations in China. Audi, which has dominated China's luxury car market for more than two decades, is the market leader in the luxury car segment, with China being Audi's second largest market in the world. However Audi's market share in this category is gradually falling as BMW and Mercedes-Benz are adopting new strategies to boost sales. According to data from Global Insight, Audi's market share in China decreased from 66% in 2004 to 42% in 2009, while the market share of BMW and Mercedes-Benz increased from 7% to 23%, and 9% to 16%, respectively. BMW is enlarging its current plant in China and building a second one. [12]

Audi is still the dominant choice of car in the government fleet market. [13] BMW sales are growing but is perceived to be for the newly rich. [13] Mercedes is seen to be for old folks. [13] Brands such as BMW and Audi are designing customized cars for the Chinese luxury car market. BMW designed a model with a longer wheelbase especially for government officials in order to give the back seat passenger more space. [14]

According to Stephan Winkelmann, CEO of Lamborghini, "China's super car market is growing faster than our expectations, while the Western markets are declining. The strong demand will soon make China our second biggest market after the United States. If the high taxes on luxury cars are removed, China could very well become the biggest market." [15]

As of 2013 the trend continued as the number of luxury cars and SUVs shown expanded at the Shanghai auto show and plans were announced by both foreign and domestic auto manufacturers to introduce new models in China and increase production of larger cars. [16]

Watches

Swiss shipments of high-end watches, favored as gifts meant to curry favor and caricatured as a symbol of corruption, after peaking in 2012, dropped off in 2013. [17]

Jewelry

In April, 2013 sales of gold and jewelry were 72% higher than in April, 2012. [18]

Other luxury goods

Porcelain has long been one of China's most important luxury exports. [11] : 226  It was especially important to early trade between China and the West, with much of that trade being conducted through Macau. [11] : 226 

See also

Related Research Articles

Lexus is the luxury vehicle division of the Japanese automaker Toyota Motor Corporation. The Lexus brand is marketed in more than 90 countries and territories worldwide and is Japan's largest-selling make of premium cars. It has ranked among the 10 largest Japanese global brands in market value. Lexus is headquartered in Nagoya, Japan. Operational centers are located in Brussels, Belgium, and Plano, Texas, United States.

<span class="mw-page-title-main">Luxury car</span> Marketing term for a vehicle with increased comfort, amenities, quality, or status

A luxury car is a car that provides above-average to high-end levels of comfort, features, and equipment. Often, more expensive materials and surface finishes are used, and buyers expect better build quality. The usually higher pricing and more upscale appearance are often associated with the users' higher social status compared to low- and mid-market segment cars.

<span class="mw-page-title-main">Infiniti</span> Japanese luxury car brand, a subsidiary of Nissan

Infiniti is the luxury vehicle division of the Japanese automaker Nissan, marketing having begun on November 8, 1989, in North America. The marketing network for Infiniti vehicles included dealers in over 50 countries in the 2010s. As of 2020, there were 25 markets served by new car dealers, primarily North America, China, Taiwan, and the Middle East.

<span class="mw-page-title-main">Volkswagen Phaeton</span> Motor vehicle

The Volkswagen Phaeton is a full-size sedan/saloon manufactured by the German automobile manufacturer Volkswagen, described by Volkswagen as their "premium class" vehicle. Introduced at the 2002 Geneva Motor Show, the Phaeton was marketed worldwide. Sales in North America ended in 2006 and global sales ended in 2016.

<span class="mw-page-title-main">Maybach</span> German luxury car brand

Maybach is a German luxury car brand owned by and a part of Mercedes-Benz AG. The original company was founded in 1909 by Wilhelm Maybach and his son Karl Maybach, originally as a subsidiary of Luftschiffbau Zeppelin GmbH, and it was known as Luftfahrzeug-Motorenbau GmbH until 1999.

<span class="mw-page-title-main">Lexus LS</span> Motor vehicle

The Lexus LS is a full-size luxury sedan serving as the flagship model of Lexus, the luxury division of Toyota. For the first four generations, all LS models featured V8 engines and were predominantly rear-wheel-drive. In the fourth generation, Lexus offered all-wheel-drive, hybrid, and long-wheelbase variants. The fifth generation changed to using a V6 engine with no V8 option, and only one length was offered.

<span class="mw-page-title-main">Executive car</span> British term for a large car

Executive car is a British term for a large car which is equivalent to the European E-segment and American full-size classifications. Executive cars are larger than compact executive cars, and smaller than luxury saloons / full-size luxury sedans.

<span class="mw-page-title-main">European delivery</span> Automobile delivery in Europe

European delivery programs are arrangements that continental European automobile manufacturers make with their dealerships throughout the world, to attract consumers who will combine the purchase of a European-made automobile with a trip to Europe. These are typically aimed at the North American market, which constitutes the most profitable market for Audi, Mercedes-Benz, BMW, Volvo and Porsche.

In the United States automotive industry, the term Big Three is used for the country's three largest motor vehicle manufacturers, especially indicating companies that sell under multiple brand names.

<span class="mw-page-title-main">Compact executive car</span> Car classification

A compact executive car, also known as a compact luxury car, is a premium car larger than a premium compact and smaller than an executive car. Compact executive car is a UK term and a part of the D-segment in the European car classification.

Beijing International Automotive Exhibition, Beijing Motor Show or Auto China is an auto show held biennially in Beijing, China since 1990. China is currently the largest auto market in the world.

<span class="mw-page-title-main">Mercedes-Benz India</span> Automobile manufacturer company

Mercedes-Benz India Pvt Ltd is a wholly owned subsidiary of the German Mercedes-Benz Group founded in 1994, with headquarters in Pune, Maharashtra, India.

<span class="mw-page-title-main">D-segment</span> Car size classification in Europe

The D-segment is the 4th category of the European segments for passenger cars, and is described as "large cars".

<span class="mw-page-title-main">F-segment</span> Car size classification in Europe

The F-segment is the 6th category and largest of the European segments for passenger cars, and always belongs to "luxury cars".

<span class="mw-page-title-main">Auto Shanghai</span> Chinese biennial automobile show

Auto Shanghai, officially known as the Shanghai International Automobile Industry Exhibition, is a biennial international automobile show that alternates with the Beijing Auto Show as China's yearly international automotive exhibition. First held in 1985, Auto Shanghai is the nation's oldest auto exhibition, and is considered as an important major international auto show.

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<span class="mw-page-title-main">BMW India</span> Indian operation of BMW

BMW India is the Indian subsidiary of German car manufacturer BMW. It started operations in January 2007 with a wide range of its activities, including a manufacturing plant in Chennai, a parts warehouse in Mumbai, a training centre in Gurgaon NCR, and development the of a dealer organisation across major metropolitan centres of the country.

Shenzhen BYD New Energy Co., Ltd., trading as Denza, is an automobile manufacturing company headquartered in Shenzhen, China, specialising in luxury electric cars and a joint venture between BYD Auto Industry and the Mercedes-Benz Group. Founded in May 2010, in late 2014 the company introduced its first model, the Denza EV. The car was initially put on sale in selected Chinese cities only. In late 2021, Denza underwent a restructuring as Mercedes-Benz reduced its share to 10%, while BYD held the rest.

Jardine Motors Group, is a multi-national operator of franchised motorcar dealerships in the United Kingdom with international outlets in Hong Kong, Macau and China. Jardine Motors Group market their vehicles under a series of brands worldwide including Zung Fu, Lancaster and Scotthall, and the worldwide group net profit, for the year ended 30 April 2012, was US$61 Million, based on revenue of US$5.128 Billion.

<span class="mw-page-title-main">Coupe SUV</span> Style for motor vehicle

A coupe SUV is a type of sport utility vehicle with a sloping rear roofline similar to those of fastbacks or Kammbacks. The sloping roofline is adopted to offer a styling advantage compared to its standard SUV counterpart, which helps increase profit margins as manufacturers are able to raise the price by marketing it as a more premium model. Since all coupe SUVs ever produced are of the crossover variety, coupe SUVs may also be called "coupe crossovers" or "coupe crossover SUVs".

References

  1. 1 2 Diaz Ruiz, Carlos; Cruz, Angela Gracia B. (2023-01-01). "Unconventional luxury brand collaborations: a new form of luxury consumption among young adults in China". International Marketing Review. 40 (7): 1–21. doi: 10.1108/IMR-04-2022-0099 . ISSN   0265-1335.
  2. ↑ "China bans television ads for bling" . Retrieved February 15, 2013.
  3. ↑ McKinsey (2019). "The Chinese luxury consumer". McKinsey Quarterly.
  4. ↑ D'Arpizio, Claudia; Levato, Federica; Prete, Filippo; Gault, Constance; de Montgolfier, Joëlle (2021-01-14). "The Future of Luxury: Bouncing Back from Covid-19". Bain & Company. Retrieved 2023-05-29.
  5. ↑ Keywords to learn China, The Korea IT Times , May 28, 2010.
  6. ↑ China still has an appetite for luxury goods
  7. 1 2 Qu Yunxu (February 26, 2013). "China's Frills and Posh Market Springs a Leak: Wealthy Chinese consumers continue to drive global demand for luxury goods, but the engine is losing steam". Caixin. Retrieved February 26, 2013.
  8. ↑ Global Luxury Survey: China, TIME .
  9. ↑ China Luxury Market study 2010, Bain & Company.
  10. ↑ "Catering to the Chinese Shopper’s Grand Tour" article by Nicola Clark in The New York Times February 3, 2014
  11. 1 2 3 Simpson, Tim (2023). Betting on Macau: Casino Capitalism and China's Consumer Revolution. Globalization and Community series. Minneapolis: University of Minnesota Press. ISBN   978-1-5179-0031-1.
  12. ↑ Audi’s Two-Decade China Dominance Threatened by BMW, Mercedes, April 21, 2010.
  13. 1 2 3 ANDREW JACOBS; ADAM CENTURY (November 14, 2011). "In China, Car Brands Evoke an Unexpected Set of Stereotypes". The New York Times.
  14. ↑ "Still racing ahead". The Economist. 9 March 2013.
  15. ↑ Rich Chinese fueling luxury car market growth, People's Daily Online , April 29, 2010.
  16. ↑ Keith Bradsher (April 21, 2013). "Chinese Auto Buyers Grow Hungry for Larger Cars". The New York Times. Retrieved April 22, 2013.
  17. ↑ Raphael Minder (April 26, 2013). "Watchmakers Find Gold Rush in China Is Slowing Down". The New York Times. Retrieved April 27, 2013.
  18. ↑ Joe Weisenthal (May 13, 2013). "Chinese Gold Jewelry Sales Went Ballistic In April". Business Insider. Retrieved May 13, 2013.
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