China's young rich drive demand for luxuries

14:59, May 16, 2011      

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Recently, according to a luxury goods market report issued by Bain & Company and Italian luxury association Fondazione Altagamma, if considering overseas purchasing power, China has surpassed Japan as the second largest luxury goods consumption country next to America.

China has nearly become the "paradise for luxury goods." China is the second largest market for Porsche, with 14,785 cars sold within a year. The annual sales of Estée Lauder, a top-class brand of cosmetics, increased by 30 percent in China last year. The Piaget brand of watches, considered to be the top choice of China's wealthy men, saw its sales expand 16 times in the past four years. Louis Vuitton is still the most cherished luxury brand in China.

In a country with a per capita income that is one-thirteenth that of America, why does China have such an astonishing buying power for luxury goods and who is supporting this? Is Chinese people's "extravagant consumption" merely a way of showing off or an acceptance of the brand culture?

China's luxury goods increased by 30 percent annually

According to the aforementioned report, the sales volume of luxury goods rose by 12 percent in the United States last year, 6 percent in Europe, 22 percent in Asia and 30 percent on the Chinese mainland.

With the development of the Chinese economy, China still will be the fastest-growing country for luxury goods, with an expected annual rise of 25 percent, Bain predicts.

"The swelling ranks of the Chinese middle class and the high-income class will inevitably lead to a change in the people's concept of consumption," says Sun Xiong, president of Guangdong Chain Store and Franchise Association. He also indicates that the booming scene of China's luxury goods market is also manifested in the upgrade and transformation of the consumption structure.

Revival of luxury goods consumption

Research by the World Luxury Association shows that the average age of luxury goods purchasers in China is 15 years younger than their European counterparts, 25 year old younger than American. Half of these people's monthly income is about 10,000 yuan, and they are aged between 25 and 28.

"In the next three to five years, purchasers aged between 25 and 30 will be the main driving force of luxury goods market," says Ouyang Kun, the chief representative of China's representative office in World Luxury Association. "Chinese buyers of luxury goods are basically (in the market) for personal items, such as clothes, perfume, watches and leather product, while in Western countries, they are top-level luxuries such as real estate, automobiles and valuable jewelry."

From Ouyang's viewpoint, he thinks that the revival of luxury goods consumption is the result of the "keeping up with the Joneses" mentality prevalent among second generation rich youth.

"Blindness has become the feature of Chinese luxury goods buyers." Professor Lin Jiang from Sun Yat-Sen University says, "Luxury goods are regarded by Chinese people as the direct symbol of status and wealth, which comes totally out of the brand's name."

By People's Daily Online

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