China is poised to become the world’s largest luxury market by 2020. It is estimated that it will account for 20% of the anticipated $547 billion worth of luxury purchases by that year, according to investment research group CLSA Asia-Pacific Markets.
The people in China are exposed to a massive amount of high-end goods and services through the Internet, by overseas travel, and from first-hand experience. Chinese luxury good buyers’ interest started with Gucci handbags, fashion, and Swatch watches and it extended to other sophisticated hotel services. Lately, consumption of services is actually surpassing the production of high-end goods. There is an increasing demand for spas and wellness activities, and the consumers are putting much value on experience, rather than the product itself.
Some revealing facts of upscale Chinese consumers:
- Mainland Chinese millionaires are 15 younger than their overseas peers. The number of individuals with more than Rmb1,000 million has increased at an annual rate of 50% — it started at 24 in 2000 and increased to 1,363 by 2010.
- Success, wealth and fame/social standing are highly regarded in Chinese culture.
- The luxury market in China is still largely male-dominated, given workforce demographics and the culture of gift giving for business purposes.
- The people in China appreciate high-quality craftsmanship. Foreign luxury brands in particular, with well- known logos and brands, are demanded among Chinese high-end product/service buyers.
- Majority of the Chinese luxury products buyers’ purchasing decisions are based on the rich cultural heritage associated with foreign brands. And some of the consumers in China prefer products that are designed specifically for the country that incorporate Chinese imagery.
Potential luxury goods exporters need to take into account several big challenges before making their entry into this lucrative Chinese market. First, delivering an exceptional service in stores is essential. The in-store experience is by far the most important factor driving buying decisions. Also, the Internet has become the second most important consumer touch point for luxury categories such as fashion. Marketers will need well-designed web strategies; for example, they must work with social media agencies to monitor and shape online conversations among consumers, and they can hire influential bloggers to help educate them about brands.
Several Important Issues to Consider Before Entering the Chinese Market
- Conduct a research of macroeconomic environment, foreign trade development, and dynamics of market movement.
- Identify the right partner. Seek help from the local Department of Commerce, which has a series of services to put you in touch with local buyers.
- Strategize your marketing efforts. Hire a local marketing professional to discuss your marketing goals and promotional efforts.
- Conduct comprehensive research on the credit standing of local partners.
- Fully understand the regulations and restrictions of exports to China.
And finally, remember that the success of your exporting business depends on building up-close and cooperative relationships with your Chinese partners and customers, in both a business and non-business environment. It is time to tap into this powerful and fast growing market.