Sectors and CompaniesThe Rise of the Chinese Luxury Consumer - Fiona Rhodes <[email protected]>, Corporate Communications
12.09.2013 Despite only just emerging from a global financial crisis, the demand for luxury goods continues to rise. The economic downturn hasn't stopped the appeal of luxury and a new breed of wealthy Chinese consumer is taking flight. [image: The Rise of the Chinese Luxury Consumer] They are becoming more and more visible in classic tourist destinations around the globe and have become an important stimulus for local economies. We are talking about Chinese tourists. In 1995, less than one million Chinese tourists travelled overseas. This figure is expected to reach a staggering 88 million by 2013 - a sure implication this trend won't reverse any time soon. Their impact is not only visible in the travel and tourism industry. As Chinese tourists are keen to buy consumer goods in the premium segment, they have become a key driver of the luxury industry – especially in Western Europe, which is still the biggest player in the 302 billion US dollar heavy luxury market, with a share of 32 percent. Chinese taste for European brands Xiao Qianhui, General Manager of the Spring International Travel Agency in Shanghai states that "Most Chinese tourists consider shopping for luxury goods the main purpose of a trip to France." And the trend is set to continue. Credit Suisse analysts expect China to add a total of 18 trillion US dollars to the stock of global wealth within the next five years and surpass Japan as the second-wealthiest country in the world. Not surprisingly, European luxury brands haven't been affected by the Eurozone debt crisis. While overall consumer spending has dampened in Europe, they are reporting record revenue, largely thanks to emerging-market consumers travelling to Europe to buy the latest fashions, be it designer apparel, high-end jewelry or premium cosmetics Designer apparel is at the top of the popularity chart when it is comes to products in demand, followed by luxury jewelry and timepieces. Related Links: - Does China's Slowdown Really Matter?<https://www.credit-suisse.com/ch/en/news-and-expertise/news/economy/asia-pacific.article.html/article/pwp/news-and-expertise/2013/08/en/does-chinas-slowdown-really-matter.html> - Asia in the Fast Lane<https://www.credit-suisse.com/ch/en/news-and-expertise/news/economy/asia-pacific.article.html/article/pwp/en/bankers-business/asia-in-the-fast-lane.html> Seeking out a Bargain Overseas But why is it that Chinese travelers are going abroad to shop for luxury? Price, availability and authenticity are the overarching reasons for this influx of Chinese tourists, according to Johanna Kolerski-Bezerra, Research Analyst at Euromonitor. She goes on to state that tax on luxury goods in China can be as high as 57 percent so consumers actually save money travelling abroad to purchase luxury goods, rather than buying them at home. According to Euromoney research, 33 percent of a Chinese travelers vacation budget is allocated to shopping. That compares to 11 percent for the French. Kolerski-Bezerra points out that the prestige of brands such as Hermès, renowned for quality and craftsmanship, appeals to this new breed of consumers seeking out premium quality and authenticity in their purchases. It is therefore not surprising that France is the most popular destination for Chinese tourists with over 1.2 million travelling there in 2012. Although many fashion houses are expanding to China, it is still an immature market, and for now, the Chinese prefer to shop for luxury overseas. "While we think that first luxury purchases in China are still driven by the desire for social recognition, with logo items remaining important, the Chinese consumer is moving toward more sophisticated and more exclusive products," Credit Suisse's European luxury goods team said in a recent note. Anti-Corruption Campaign Another factor diverting high-end purchases overseas is the introduction of Xi Jinping's anti-extravagance campaign, an attempt to rein in corruption amongst government officials. Sales of luxury goods in first-tier cities has suffered, ranging from various degrees of slowdown to outright decline. A recent Credit Suisse report shows that after many years of consecutive double-digit annual growth rates, the Chinese luxury market experienced its first major setback in 2012, with overall industry growth estimated to have dropped into the mid-single digits. Standing out from the Crowd Luxury boutiques, and the tourism industry in general, are adapting themselves to the changing demographic of travelers and actively employing strategies to appeal to Chinese visitors. European countries that are part of the Schengen visa scheme, which gives the Chinese access to 26 countries in a single process, are at an obvious advantage when it comes to attracting Chinese tourists. Hiring Mandarin-speaking staff, organizing group tours and accepting China UnionPay, the bank card most middle-class Chinese hold, are amongst the tactics deployed by retailers to tap into the lucrative Chinese market. Brands Adapting to Change The rise of the Chinese luxury consumer doesn't end at the bottom line. They are also changing the way these goods are sold. Brands are increasingly looking at ways to create a bespoke, boutique experience for shoppers that goes beyond the norm and appeals to the demand for authenticity. "Luxury is no longer just about the product or object, but an entire experience", says Yaffa Assouline, founder of online luxury magazine Luxuryculture.com. Assouline believes that luxury and culture are codependent, that one cannot exist without the other. "Brands need to understand their clients and appeal to different segments in the market." According to Assouline, luxury brands are no longer marketing only to the super rich, who are becoming more selective, but also to the emerging middle classes who are trading up. It's difficult to predict how luxury brands will adapt to the future needs of their customers. But one thing seems clear: The luxury demand from emerging consumers will continue to grow – and not only from China. The most recent Credit Suisse global Wealth report estimates that the number of millionaires will increase by 18 million over the next five years, reaching 46 million. Whether newly rich, and wanting the finer things in life, or tired of cluttered consumerism and seeking out new experiences, as the world globalizes and the breadth of millionaires increases we will, no doubt, see an evolution in the way brands work with their customers. PROactive Speaker Series Johanna Kolerski-Bezerra and Yaffa Assouline were keynote speakers at the recent Credit Suisse PROactive Speaker Series event, an interactive forum designed to inspire Credit Suisse employees to be more proactive: to be more curious and engaged in new trends and their implications on our business. PROactive connects our people to emerging trendsetters, new entrepreneurial talent, and to one another -- -- NIFTYVIEWS.COM NOW A FREE OPEN SOURCE WEBSITE. http://www.niftyviews.com/ Disclaimer :- "The opinions expressed by the members on this board are based on their individual experience and perceptions and to share information with other members with the best of intentions to help fellow members in investment decisions as equity investment is a risky venture.The administrator of www.Niftyviews.com just provide a platform for the authors to express their opinion and take no gurantee for the genuineness of the same." --- You received this message because you are subscribed to the Google Groups "TEAM STOCKRESEARCHERS" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. For more options, visit https://groups.google.com/groups/opt_out.
