China tracker

China Tracker Long-Term Consumer Outlook For China Luxury
Apr. 3 2011 - 11:25 pm | 229 views | 0 recommendations | 0 comments
Posted by Joel Backaler
As investments by companies like Louis Vuitton (LVMH), Gucci and Chanel in China’s luxury market increase, McKinsey continues their ongoing series of Chinese consumer surveys. Vinay Dixit, senior director of Asia consumer centers whom I previously interviewed on The China Observer sent me their latest report entitled “Understanding China’s Growing Love for Luxury,” which summarizes the results of an extensive survey of over 1,500 Chinese luxury consumers during spring 2010. I do not necessarily agree with all of the report’s findings, but McKinsey does provide an interesting framework to analyze luxury consumer behavior.
The report highlighted the following three key findings: * “Rapid increases in wealth, and shifting social mores that sanction the display of that wealth, are driving a growing infatuation for luxury goods among Chinese consumers.” * “Access to an explosion of information on the Internet, an increasing penchant for overseas travel, and first-hand experience purchasing and consuming luxury goods are contributing to a substantial rise in sophistication among luxury consumers in China. Contrary to popular belief, a growing number of Chinese luxury consumers are exhibiting a noticeable trend away from overt displays of wealth, and towards more understated forms of luxury consumption.” * “Rapid urbanization and growing wealth outside of China’s largest cities is driving the emergence of several new geographic markets with sizable pools of luxury goods consumers. Over the next 5 years, [McKinsey] expects that the number of such cities will double from 30 to 60.”
In addition to these three trends, McKinsey classifies Chinese luxury consumers into four broad categories as follows:
1. Core luxury buyers: Affluent households that spend 12 to 20% of their income on luxury goods per year