CHINESE LUXURY GOOD SHOPPERS

CHINESE LUXURY GOOD SHOPPERS

20080316-bulgari shanghai bloomberg.jpg
Bulgari in Shanghai
Chinese shoppers account for one-fourth of all luxury purchases globally and in 2012 surpassed U.S. consumers to become the world's top spenders on luxury goods, according to consulting firm Bain & Co. When China's economic growth slowed to a three-year low in the middle of 2012, luxury demand dropped suddenly, sending shudders through a global market worth $280 billion last year according to Bain's estimates. [Source: Yimou Lee and Farah Master, Reuters, January 20, 2013 <>]

Yimou Lee and Farah Master of Reuters wrote: “With 1.3 billion consumers, many with a strong inclination for expensive brands that scream status, China remains a driving force in the luxury market. "The intention to purchase is very high right across the board, from Coach to Bottega Veneta," said Shanghai-based author Paul French, chief China market strategist at Mintel, which specializes in Chinese consumer trends. On a short-lived decline in the market he said: "I think the only reason there was a dip was because the gifting market, the corruption market was of course weak last year because you didn't know who to buy for." [Source: Yimou Lee and Farah Master, Reuters, January 20, 2013 <>]

According to Bain & Company, daigou, or overseas personal shoppers who buy and send luxury goods to customers in China, has grown to an estimated market value of RMB 55-75 billion ($9 billion to $12.5 billion) in 2014, concentrated in cosmetics, followed by leather goods, watches and jewelry. This is nearly 50 percent of the store sales in China. 70 percent of luxury brands bought by Chinese is now bought abroad or through daigou agencies; in terms of travel destinations, Korea and Japan have been the big winners in 2014. [Source: Bain & Company’s 2014 China Luxury Market Study, January 20, 2015 |+|]

According to Bain & Co. and research by The Times the value of luxury goods market in China was $17.2 billion in 2011, up from $12.8 billion the previous year. In addition to that Chinese bought an estimated $16 billion to $20 billion worth of luxury goods outside China. The total value of luxury goods market worldwide is $250 billion.

Three quarters of the luxury goods puchased in China are bought by people under 45. Designer handbags are common sights at elite Chinese universities. Sociologist say that things like sunglasses and handbags serve as indicators of status and wealth the way big houses and luxury cars do in the West. The manager of a Gucci store in Beijing told The Times couples often purchase the same designers products as a sign of commitment.

There are stories of low-paid secretaries living in tiny apartments and subsisting on Cup-O-Noodles so they can save money for a $1,500 Gucci bag. Gucci and Louis Vuitan have opened up shops in second and third tier cities like Zhengzhou, a gritty home of 9 million people known for coal mining, carp farming and cotton. As of 2011, Gucci had 44 stores in China and sales there accounted for 20 percent of the company’s business.

Riots in Beijing have occurred—not over democracy or the plight of the disadvantaged—but because of insufficient supplies of new iPhones. Sensitivity to the feelings of the have nots has led to the banning of the Mandarin words for “luxury,” “royal,” and “high-class” in advertising .

Chinese Shoppers World's Top Luxury Goods Spenders

In December 2012, Bain & Co., the leading advisor to the global luxury goods industry, reported in “Luxury Goods Worldwide Market Study”: Luxury sales in Mainland China will grow seven percent in local currency in 2012, a significant drop compared the 30 percent achieved in 2011 However, expressed in Euro, the growth rate for luxury brand revenues in 2012 will be roughly 20 percent, given the depreciation of the Euro in 2012. According to Bain’s latest analysis, a weaker Euro and growing overseas travel have pushed Chinese shoppers to make 60 percent of their total luxury purchases outside the Mainland. Luxury spending growth in Hong Kong has slowed to approximately 10 percent percent, while Macao remains buoyant. Greater China has bypassed Japan as the sector’s second market, behind the United States. Chinese luxury spending has grown the fastest outside of Greater China, at a rate of 31 percent abroad. The total impact of Chinese spending therefore makes the Chinese consumer the top spender in luxury worldwide, accounting for 25 percent of total luxury purchases globally. [Source: Bain & Co. December 17, 2012 >>>]

“Chinese consumers have gone from a developing market to a global segment that the world’s largest luxury brands must address successfully,” said Bruno Lannes, a Bain partner in Greater China and lead author of the Chinese edition of the study. “Changes in what they want and how they shop are now a central issue for the luxury sector.”

“Among Chinese shoppers, Louis Vuitton, Chanel, and Gucci remain in the position of top brands, according to Bain’s research, which includes a survey of over 4,600 consumers. But it also finds the pace of new store openings has slowed among these and other top brands. The pace of new store openings has been 20 percent slower than 2011. It attributes some of this slowdown to growth concerns, but finds many brands have simply reached their target footprint in China. >>>

Consumers are also becoming more choosy and sophisticated, preferring more inconspicuous luxury goods to logo-centric names such as Louis Vuitton. “In the study, Bain identifies five core trends that brands must now address given the global prevalence of Chinese shoppers: Chinese shoppers from Beijing and Shanghai are shifting to a global mindset of uniqueness, high-quality, and understatement in luxury items. Per Bain’s Chinese consumer survey, 65 percent of luxury shoppers in Beijing and Shanghai intend to buy fewer items with visible luxury branding, versus 10 percent outside these two cities >>>

“ Younger shoppers (age 25-35) now prefer uniqueness, items that fit their own personality, and mobile and internet for brand communication. Older shoppers (age 35-45) remain engaged by status, exclusivity, the in-store shopping experience, and traditional brand marketing Chinese shoppers have increased their expectations for a high service level in stores. They also expect the same consumer experience in China as in France and Italy, or risk further deferral of spending to tourism. Bain finds the store experience challenge to be critical for growth in China, with domestic same-store sales now a perennial issue. >>>

“For Chinese shoppers, the Internet has become an increasingly important as a marketing channel, eclipsing traditional advertising and fashion magazines while the mobile channel is small but growing. Bain also observes many brands trying to enhance their Internet marketing strategy through interaction and virtualization on social media. “Brands can take the best advantage of this cooler growth stepping back creating a holistic strategy for Chinese shoppers as a global consumer segment, and delighting them wherever they shop,” concluded Lannes. “But the rules are changing. They now face much more pressure to make their offer relevant to many segments of Chinese shopper rather than relying on their luxury status alone.” >>>

Chinese Luxury Good Shoppers

Chinese shoppers account for one-fourth of all luxury purchases globally and in 2012 surpassed U.S. consumers to become the world's top spenders on luxury goods, according to consulting firm Bain & Co. When China's economic growth slowed to a three-year low in the middle of 2012, luxury demand dropped suddenly, sending shudders through a global market worth $280 billion last year according to Bain's estimates. [Source: Yimou Lee and Farah Master, Reuters, January 20, 2013 <>]

Yimou Lee and Farah Master of Reuters wrote: “With 1.3 billion consumers, many with a strong inclination for expensive brands that scream status, China remains a driving force in the luxury market. "The intention to purchase is very high right across the board, from Coach to Bottega Veneta," said Shanghai-based author Paul French, chief China market strategist at Mintel, which specializes in Chinese consumer trends. On a short-lived decline in the market he said: "I think the only reason there was a dip was because the gifting market, the corruption market was of course weak last year because you didn't know who to buy for." [Source: Yimou Lee and Farah Master, Reuters, January 20, 2013 <>]

According to Bain & Company, daigou, or overseas personal shoppers who buy and send luxury goods to customers in China, has grown to an estimated market value of RMB 55-75 billion ($9 billion to $12.5 billion) in 2014, concentrated in cosmetics, followed by leather goods, watches and jewelry. This is nearly 50 percent of the store sales in China. 70 percent of luxury brands bought by Chinese is now bought abroad or through daigou agencies; in terms of travel destinations, Korea and Japan have been the big winners in 2014. [Source: Bain & Company’s 2014 China Luxury Market Study, January 20, 2015 |+|]

According to Bain & Co. and research by The Times the value of luxury goods market in China was $17.2 billion in 2011, up from $12.8 billion the previous year. In addition to that Chinese bought an estimated $16 billion to $20 billion worth of luxury goods outside China. The total value of luxury goods market worldwide is $250 billion.

Three quarters of the luxury goods puchased in China are bought by people under 45. Designer handbags are common sights at elite Chinese universities. Sociologist say that things like sunglasses and handbags serve as indicators of status and wealth the way big houses and luxury cars do in the West. The manager of a Gucci store in Beijing told The Times couples often purchase the same designers products as a sign of commitment.

There are stories of low-paid secretaries living in tiny apartments and subsisting on Cup-O-Noodles so they can save money for a $1,500 Gucci bag. Gucci and Louis Vuitan have opened up shops in second and third tier cities like Zhengzhou, a gritty home of 9 million people known for coal mining, carp farming and cotton. As of 2011, Gucci had 44 stores in China and sales there accounted for 20 percent of the company’s business.

Riots in Beijing have occurred—not over democracy or the plight of the disadvantaged—but because of insufficient supplies of new iPhones. Sensitivity to the feelings of the have nots has led to the banning of the Mandarin words for “luxury,” “royal,” and “high-class” in advertising .

Chinese Shoppers World's Top Luxury Goods Spenders

In December 2012, Bain & Co., the leading advisor to the global luxury goods industry, reported in “Luxury Goods Worldwide Market Study”: Luxury sales in Mainland China will grow seven percent in local currency in 2012, a significant drop compared the 30 percent achieved in 2011 However, expressed in Euro, the growth rate for luxury brand revenues in 2012 will be roughly 20 percent, given the depreciation of the Euro in 2012. According to Bain’s latest analysis, a weaker Euro and growing overseas travel have pushed Chinese shoppers to make 60 percent of their total luxury purchases outside the Mainland. Luxury spending growth in Hong Kong has slowed to approximately 10 percent percent, while Macao remains buoyant. Greater China has bypassed Japan as the sector’s second market, behind the United States. Chinese luxury spending has grown the fastest outside of Greater China, at a rate of 31 percent abroad. The total impact of Chinese spending therefore makes the Chinese consumer the top spender in luxury worldwide, accounting for 25 percent of total luxury purchases globally. [Source: Bain & Co. December 17, 2012 >>>]

“Chinese consumers have gone from a developing market to a global segment that the world’s largest luxury brands must address successfully,” said Bruno Lannes, a Bain partner in Greater China and lead author of the Chinese edition of the study. “Changes in what they want and how they shop are now a central issue for the luxury sector.”

“Among Chinese shoppers, Louis Vuitton, Chanel, and Gucci remain in the position of top brands, according to Bain’s research, which includes a survey of over 4,600 consumers. But it also finds the pace of new store openings has slowed among these and other top brands. The pace of new store openings has been 20 percent slower than 2011. It attributes some of this slowdown to growth concerns, but finds many brands have simply reached their target footprint in China. >>>

Consumers are also becoming more choosy and sophisticated, preferring more inconspicuous luxury goods to logo-centric names such as Louis Vuitton. “In the study, Bain identifies five core trends that brands must now address given the global prevalence of Chinese shoppers: Chinese shoppers from Beijing and Shanghai are shifting to a global mindset of uniqueness, high-quality, and understatement in luxury items. Per Bain’s Chinese consumer survey, 65 percent of luxury shoppers in Beijing and Shanghai intend to buy fewer items with visible luxury branding, versus 10 percent outside these two cities >>>

“ Younger shoppers (age 25-35) now prefer uniqueness, items that fit their own personality, and mobile and internet for brand communication. Older shoppers (age 35-45) remain engaged by status, exclusivity, the in-store shopping experience, and traditional brand marketing Chinese shoppers have increased their expectations for a high service level in stores. They also expect the same consumer experience in China as in France and Italy, or risk further deferral of spending to tourism. Bain finds the store experience challenge to be critical for growth in China, with domestic same-store sales now a perennial issue. >>>

“For Chinese shoppers, the Internet has become an increasingly important as a marketing channel, eclipsing traditional advertising and fashion magazines while the mobile channel is small but growing. Bain also observes many brands trying to enhance their Internet marketing strategy through interaction and virtualization on social media. “Brands can take the best advantage of this cooler growth stepping back creating a holistic strategy for Chinese shoppers as a global consumer segment, and delighting them wherever they shop,” concluded Lannes. “But the rules are changing. They now face much more pressure to make their offer relevant to many segments of Chinese shopper rather than relying on their luxury status alone.” >>>

Conspicuous Consumption in China

Barbara Demick wrote in the Los Angeles Times: For some, conspicuous consumption, particularly in the social media era, does not seem to be a problem. Young women post photographs of themselves on microblogs with their Hermes handbags. The son of an auto tycoon uploaded on the Chinese equivalent of YouTube a video made from behind the wheel of his $4.5-million Bugatti Veyron sports car as it wove through traffic in the southern city of Chongqing. [Source: Barbara Demick, Los Angeles Times, January 4, 2012]

"People are more extroverted. They have no problem showing off their wealth," said Klaus Paur, an auto industry analyst and managing director in the Shanghai office of Synovate Motoresearch. He recalls that when he came to China in 2003, the wealthy drove large Mercedeses and Audis, invariably black.

Chinese officialdom has something of a love-hate relationship with luxury goods, officials relishing their own creature comforts while deploring anyone else doing it too flagrantly. China still has 150 million people living on less than $1 a day. And it maintains some of the highest taxes in the world on luxury goods, adding as much as 60 percent to the cost---which is why rich Chinese have become such prodigious shoppers abroad.

The word shechi, or "luxury," is banned in advertising and company names, said Ouyang Kun, who runs a trade group in Beijing called the World Luxury Assn. "The government feels luxury items are only affordable for a few people. They don't want to create unharmonious feelings among the people," he explained.

Chinese Buyers of Luxury Goods

Some urban Chinese have become crazy about designer labels and names. On the streets in fashionable districts in Beijing and Shanghai men wear Zegna suits and women carry Louis Vuitton bags. Burberry is a particularly valued name among the counterfeit makers.

Marketing expert Tom Doctoroff told U.S. News and World Report: “Brands are fueling the rise of the middle class in China. The Chinese have an aching ambition to climb up the ladder of success, and brands are the mark of people who have made it.”

Many buyers are chuppies and people in their 20s and 30s that live at home and have large disposable incomes. Western companies are trying very hard to establish brand loyalty at a time when many Chinese are just developing their sense of taste. A 32-year-old Chinese woman told U.S. News and World Report, “In the U.S. kids know what they like. But in China, no one in the past thought that way---what do I prefer? What do I like to do? I am just starting to figure that out now.”

Barbara Demick wrote in the Los Angeles Times: Chinese buyers of luxury goods are generally young adults, in keeping with the relative youthfulness of the country's millionaires (about 15 years younger than those in the West), according to the Shanghai-based Hurun Research Institute, which maintains a so-called rich list. "Our customers are super-rich, second-generation young people who have inherited money or whose parents buy them cars," said Wilson Ho, whose company, Hong Kong-based Sparkle Rolls, runs the Lamborghini dealership in Beijing. "Chinese parents love their kids. They'll buy them whatever they like." [Source: Barbara Demick, Los Angeles Times, January 4, 2012]

Some of the new rich made their money selling cheap, mass-produced merchandise abroad. For themselves they want only the best. "It's not just about showing off. People have come to appreciate quality," said Liu Lijuan, a young mother who was taking out a Salvatore Ferragamo wallet from a Louis Vuitton bag to pay for a birthday cake for her 2-year-old daughter at the Black Swan.

Unlike Western consumers of high-end goods, who usually buy things for themselves, those in China are shopping for a gift as often as for themselves, according to market research. "I like luxury brands. When you buy it for somebody else, it shows how much care you put into it," said 26-year-old Liang Chunfeng, who carries a large, red Chanel purse that she coyly described as "a gift from somebody."

Chinese sometimes use expensive gifts---whether Montblanc pens or luxury watches or $100-a-pack cigarettes---as a way of greasing the wheels while doing business. Politicians are frequent recipients. In September, an activist published a report on the wristwatches worn by government officials based on publicly released photographs that he blew up and analyzed. Most flashy was the railroad minister, Sheng Guangzu, who appeared to own at least four luxury watches, including a Rolex, worth a total of $62,000. "I can't say there is a direct link between expensive watches and corruption, but you have to ask where they got these items that so obviously exceed in value their ordinary income," said the activist, Daniel Wu.

Superconsuming Chinese Single Women

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Xujiahui Grand Gateway in Shanghai
Single women---or xiaobailing (white-collar princesses)---are arguable the fastest-growing consumer class in China, perhaps the world. Jonathan Watts wrote in The Guardian, “They have high levels of disposable income and a craving for designer labels. For marketing moguls, they are the future face of consumer power. State planners forecast that half the population will be middle class by 2020.”[Source: Jonathan Watts, The Guardian, June 26, 2010, , edited from When A Billion Chinese Jump by Jonathan Watts Faber, 2010 ]

In his book When A Billion Chinese Jump Watts introduces us to Emily Zhang Huijia, a connoisseur of consumption in Shanghai. A fashionista since her teens, she has worked for Gucci, Yves Saint Laurent and Chanel, and says she was brought up on Vogue, Glamour and OK! magazines. [Ibid]

“By western standards, her childhood was not privileged,” Watts wrote. “In 1985, when she was three, her family got its first color television. In 1992, around the time the first Barbies went on sale in China, they bought their first air-conditioner; so did everyone in the neighborhood. The Zhangs had their first fixed phone line installed when Emily was six. By the time she was 16, they were connected to the internet. My family in the UK had a phone three generations before Emily's, but her parents went online four years earlier than mine.” [Ibid]

“Most of her friends are in the industry and they share information about discounts and sample sales. At her first sale, she blew a third of her salary on Fendi sunglasses. “It is like a fever,” she says. “The price is so low, you cannot refuse...Like many a proud shopper, Emily lists how much she saved rather than how much she spent. She is wearing a half-price Dior watch reduced by 2,900 yuan (£286). In her 40 sq m flat near Fuxing Park, she has dozens of other bags, accessories and clothes, including an Armani coat for 999 yuan (£98), discounted from 9,900 (£976). Compared with friends, she says, she is restrained.” [Ibid]

“In the last three years, Emily's monthly salary has increased from 3,000 yuan to just under 20,000, putting her firmly in the middle-class bracket. She eats at restaurants at weekends, has a French boyfriend, plays poker every Thursday. Business and pleasure are mixed. Her favorite after-hours hangout, she says, is the building where she works. “Bund 18 has the coolest nightclub in Shanghai, so it's probably also the coolest in China.”? [Ibid]

China's Metrosexual Men Revive Luxury Shopping

In January 2013, Yimou Lee and Farah Master of Reuters wrote: “China's fashion-forward men are snapping up Gucci and Burberry bags, driving a rebound in the luxury market months after a slow down in spending by the world's biggest luxury goods buyers spooked global investors. Men account for about 55 percent of China's luxury goods market, well above the global average of 40 percent, according to research from brokerage CLSA, partly because businessmen often buy expensive gifts to curry favor with government officials or potential associates. Companies such as Burberry Group Plc which sell luxe clothing and accessories benefit from this gift-giving culture, and wealthy Chinese men's penchant for designer ware. [Source: Yimou Lee and Farah Master, Reuters, January 20, 2013 <>]

“But they are also at risk of big sales swings because men are less likely than women to splurge on discretionary purchases in times of economic uncertainty, CLSA's research shows. "Men are not prone to impulse shopping," said Mariana Kou, CLSA's consumer and gaming analyst in Hong Kong. "They tend to wait a little if the economy is pretty uncertain." <>

“Personal assistant Da Fei trailed behind his boss, a real estate businessman from Mongolia, carrying items from Hermes and Kenzo through the upscale One Central Macau shopping center in China's gambling capital. "He likes to buy everything, particularly Hermes and Gucci," Da Fei said as his boss, decked out in salmon pink trousers and a black and white shirt, browsed inside a Kenzo store. At the Gucci store in Macau's Wynn casino, four men clustered around a glass counter examining leather wallets, while seven other men browsed items such as the 6,000 patacas ($750) shoulder bags. Only two women were in the shop at the same time, while other customers queued up outside, waiting for security guards to let them in.

Chinese Tourists Shopping Outside China

Chinese tourist love to shop. Those traveling abroad have a reputations for scrimping on food and accommodation and spending considerable money for luxury goods and designer clothes. A survey nu A.C. Nielsen and tax Free World found that the average Chinese overseas traveler spends almost $1,000 on shopping, more That the average Japanese.

Many of the Chinese travelers to Hong Kong go on shopping sprees, and spending an average of $790 per person for a total of $1.7 billion. Many also go to Thailand to shop.

A representative of CITS, China's main tourist organization, told the Independent, "Chinese have lots of money to spend. Chinese shopping is shocking. We buy on a family and group basis---if one from a village or work unit is going abroad, everyone gives him money to buy them things. I've seen Chinese visiting Thailand who buy 20 crocodile skin belts each, and 10 gold necklaces."

There are currency controls that limited the amount of money that Chinese can take out of the country. Fo a while the limit was $750. Even so the average Chinese travel spent almost $1,000 on shopping. In France they purchase perfume. In Switzerland it is watches, in Britain a box of shortbreads. Many snap up luxury brands which are much cheaper abroad than they are in China.

Image Sources: Wiki Commons

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Yomiuri Shimbun, The Guardian, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated July 2015


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