22 January 2013, Hong Kong
The number of travelling Mainland Chinese continues to rise and global luxury brands are subsequently adapting their business strategies, both in China and in their home markets, according to KPMG’s sixth annual publication on the sector.
The new KPMG report, titled ‘The Global Reach of China Luxury’ is based on a survey of 1,200 middle class Chinese consumers located across 24 cities in China, and conducted by market research firm TNS. Respondents were between 20 and 44 years of age, with a minimum household income of RMB 7,500 (USD 1,190) per month in tier one cities and RMB 5,500 (USD 873) elsewhere.
One of the key findings of this year’s survey is the rising number of Mainland Chinese consumers travelling overseas. This has increased to 71 percent of survey participants in 2012, from 53 percent in 2008, a significant change. A majority of survey respondents (72 percent) said they purchase luxury items during overseas trips, with cosmetics, watches and bags winning the top spots.
Overseas luxury brands with a presence in China are benefitting from this trend, as are some of the domestic Chinese brands that have or are planning to establish overseas operations.
Nick Debnam, Asia Pacific Chairman, Consumer Markets, KPMG China, says: “As increasing numbers of Chinese travel overseas, brands need to measure the impact of their business strategies both in Mainland China and the travel segment. It is no longer just about doing business in China, as it is also crucial for luxury brands to target the global Chinese luxury segment. Brands need to therefore align their branding and marketing strategies both in China and for those rising number of travelling Chinese consumers.“
For purchases of cosmetics and perfume, a majority (60 percent) of respondents said Hong Kong, Taiwan and Macau were their top locations; this is a significant increase from 43 percent in 2009. Mainland China was voted their second choice, whilst Europe also saw a marked increase due to the rising number of travelling Chinese, up from 3 percent in 2009, to 20 percent in 2012.
Additionally digital media plays an increasingly important role in China, as the survey found that around 70 percent of potential consumers search for luxury brands on the internet at least once a month. It also notes a surge in online shopping intentions, with 40 percent of respondents indicating they are interested in purchasing luxury goods on the internet, a substantial increase from 22 percent in 2011.
Debnam adds: “We also see rising discernment amongst Chinese high-end consumers. As our survey finds, 88 percent of respondents indicated they would be willing to pay a premium for luxury brands that display high quality and durability; 80 percent indicated exclusivity and uniqueness as key factors, while 72 percent said the heritage of the brand plays a significant role. Chinese consumers are also increasingly seeking experiential luxury as well as unique one-of-a-kind luxury brands.”
Brand recognition meanwhile continues to increase as consumers become more discerning. The survey’s respondents said they recognise 59 luxury brands, a figure that continues to rise over our successive annual surveys. Meanwhile, 56 percent of respondents said they prefer to purchase well known luxury brands, whilst 69 percent separately indicated they would pay a premium for well known, popular luxury brands.
Chinese consumers also distinguish among countries of origin and associate certain countries with particular products. The survey highlights a continuing strong association towards European heritage brands: Switzerland came top for watches, France for cosmetics, perfumes, clothes and bags, and Germany for automotives.
Debnam concludes: “China is not without its challenges however we do see continued success in this market. Many of the major luxury brands are continuing with their current investments, despite the ongoing global economic slowdown, to the extent of also holding their biggest global marketing events in China. We also see interesting trends in terms of domestic luxury start-ups developing their own brands.”
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