Header graphic for print
China Law Blog China Law for Business

Understanding China’s Growing Love For Luxury

By Dan Harris on Posted in Recommended Reading

I just read McKinsey & Company’s opulent report on China’s luxury market, entitled, “Understanding China’s Growing Love for Luxury.” The report asks the following questions:

  •  Who are China’s luxury consumers?
  •  What are they looking for?
  •  How do they make decisions?
  •  How do they differ from their counterparts elsewhere?

It then proceeds to answers these questions (and a whole lot more) based on “an extensive survey of over 1,500 luxury consumers across 17 China cities.”

This is an excellent and comprehensive report and if you want to know about China’s luxury market or just Chinese consumers in general, this free report is a must read.  

  • http://chinabystander.wordpress.com China Bystander

    One interesting point in McKinsey’s research is how what would be considered the mass affluent by Western marketers, households with incomes of 100,000-200,000 yuan a year, will be the driving force behind the growth of China’s market for luxury goods and services. That will require some shifts in marketing strategies by foreign luxe companies. We had some thoughts on that at http://wp.me/p5IOc-1nt.

  • Bill Rich

    I would love to see McKinsey analyzing the why’s of luxury consumption:
    1. Need – would be detrimental to the well being of the consumer without it.
    2. Want – would make the consumer happier – through gratification of self or others.
    3. Make other know the consumer has the ability to spend on luxuries.
    4. For the well being of the society by driving up the GDP.
    5. Combinations of above

  • dan berg

    Keep these statistics in mind next time you read about the wonderful increase in “consumption”; just to belabor the obvious, very few of these luxuries are made in China.

  • http://www.samsara-bio.com Bob Walsh

    The “why’s” all boil down to a few things: lack of Chinese brands with luxury appeal or the perception of real quality, and the desire to purchase “face” at whatever cost. That rich Tai-tai in Shanghai does not need that Porsche Cayenne SUV any more than her counterpart on Seattle’s East Side needs it.
    I say this after seeing my first Maserati Quadroport in Nanjing today. The Fat Cat sitting in the back was basking in the attention I gave it, no doubt because he knew that I knew it for what it cost.

  • Cindy Woods

    This is a fantastic resource. Whenever I read something like this that McKinsey gives out for nothing, I always think how amazing their paid product must be, but I guess that is their point.

  • Twofish

    berg: Keep these statistics in mind next time you read about the wonderful increase in “consumption”; just to belabor the obvious, very few of these luxuries are made in China.
    A lot of them are. A lot of things are made in China but branded overseas. One other thing is that much of the cost of luxury goods involves service jobs and those are local.
    Curiously, there is one area of luxury goods in which Chinese brands seem to have more impact than foreign brands, and that is gold jewelry.

  • dan berg

    Twofish: you are right, I should have been more careful: the PROFITS on the BMWs, Mercedes, Audis, fashionable clothes, bags etc. go elsewhere. Obviously, someone in China has to sell the handbag, but I don’t think that employment is sufficient to replace exports.

  • Chris

    The McKinsey report excellent as ever. What is difficult to capture is the enormous amount of purchasing of luxury goods by Chinese travellers that takes place outside China. At a very basic level, Chinese media now reporting long queues in Hong Kong for imported infant formula. iPods / iPads and mid-range consumer goods are also very popular purchases by Chinese consumers when they go overseas (or via online shopping/smuggling services on Taobao). At the luxury end, Chinese tourists head straight for factory outlets for branded goods overseas. They are amazed by the prices (often less than 20% of list price in China) and shop up big. Chinese tourists now driving factory outlet sales in HK, Singapore, Australia, Europe and in some destinations in the USA.
    I do question how long Chinese consumers will tolerate the significant price differential between China specialty retailers and overseas discounters. For cars obviously this is not an issue. For anything portable, the ‘China price’ is often absurdly expensive.

  • http://www.thelifeofluxury.com/ Steven R.

    It is amazing to see how fast the China luxury market has exploded. It seems like new millionaires are sprouting up every day. The key for luxury retailers is how to crack into that exclusive market.
    A key is that many times … the money will find luxury, even if it means sourcing it outside their country. Much harder for low to middle income targeted retailers to effectively sell in China.