China proves to be the market of choice for luxury... | KPMG | CN

China proves to be the market of choice for luxury brands, as consumer demand continues to rise, KPMG report says

China proves to be the market of choice for luxury...

Luxury brands continue to expand their operations and presence in China, driven by rising demand from aspirational consumers, according to a new KPMG survey.

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Luxury brands continue to expand their operations and presence in China, driven by rising demand from aspirational consumers, according to a new KPMG survey.  

As in many other aspects of the global economic crisis, China is bucking the global trend in luxury consumption, as the survey indicates a majority of respondents (44 percent) maintained their spending on luxury items. Seventy-two percent meanwhile said that the downturn has had little or no impact on their spending habits.  

The new report, titled Refined strategies: Luxury extends its reach across China, is based on a survey of consumers in 15 cities across China, conducted by TNS, the market research company.  

Respondents were between 20 to 44 years of age, and earning upwards of RMB 4,500 per month, with a minimum income of RMB 6,500 in the larger cities of Beijing, Shanghai, Guangzhou, and Shenzhen.  

Despite a tougher economic climate, respondents demonstrated their brand loyalty, as they chose to stick with existing brands rather than downgrading to less prestigious options.  

The effects of the downturn were felt most strongly in Shanghai and in the export-sensitive markets of southern China, but far less in Beijing and across other second-tier cities, which were arguably less exposed to global financial instability.  

"While younger professionals and other aspiring consumers may have struggled to command higher salaries over the past year, privately-owned enterprises are increasingly surpassing the former state-owned enterprises as generators of wealth, creating a new consuming elite," says Nick Debnam, head of Consumer Markets with KPMG China.  

The survey also notes a strong potential of outlet malls to expand in China, as retail formats diversify and brands seek new ways to monetise any surplus stock.  

"The survey shows awareness of outlets is relatively low, but the size of the Chinese market means that brands can employ a range of strategies and retail formats. Brands will naturally be vigilant to any negative impact on their brand perception arising from reliance on outlets, but with the tax framework not favouring repatriation of surplus stock to other markets, we do expect this to be looked at seriously," explains Debnam.  

The KPMG report notes changes in attitudes to luxury brands in the past two years. Self-reward (cited by 54 percent) and pampering (cited by 44 percent) have become stronger motivating factors for people buying luxury, compared to 2008 when fewer consumers identified these as factors. The desire to purchase luxury items for formal occasions also continues to rank as a leading motivating factor, identified by 42 percent of respondents.  

The survey highlights scope for greater use of technology to communicate with customers. With the ubiquity of mobile phone usage in China, and the advent of 3G technology, there are more options to engage with customers using mobile communications. While the in-store experience continues to be a key focus, luxury brands are increasingly revising their e-commerce strategies in China, as they view this as an opportunity to win competitive advantage.  

The survey also suggests companies will be able to better leverage mobile marketing communications: 57 percent of respondents said they would be interested in receiving updates on new arrivals or limited editions via SMS; while 64 percent indicated they would be interested in validating the genuineness of their purchases using their mobile phone or other devices.  

- Ends -

 

About the survey 

TNS conducted their survey of luxury consumers in the third quarter of 2009. They conducted interviews with 927 consumers, all of them between 20 and 44 years of age.  

To qualify, respondents in Beijing, Shanghai, Guangzhou and Shenzhen needed to earn RMB6,500 or above. In other cities, it was RMB4,500 or above. These other cities included Fuzhou, Hangzhou, Nanjing, Dalian, Harbin, Shenyang, Tianjin, Wuhan, Xian, Chongqing and Chengdu.  

The female:male ratio was 51:49 and 71 percent of respondents were educated to college/university level or above.  

The consumer research was supported by qualitative research, involving 12 in-depth interviews with high earning consumers.  

 

About KPMG 

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 146 countries and have 140,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International") a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. 

KPMG China has 12 offices (including KPMG Advisory (China) Limited) in Beijing, Shenyang, Qingdao, Shanghai, Nanjing, Chengdu, Hangzhou, Guangzhou, Fuzhou, Shenzhen, Hong Kong and Macau, with more than 9,000 professionals.

Refined Strategies: Luxury extends its reach across China

Refined Strategies: Luxury extends its reach across China

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