Goldman Sachs released a report yesterday on China's luxury goods market. It stated that excluding private aircraft and yachts, China's purchase of luxury goods reached 6 billion USD, bringing its share in the global luxury goods market to 12%, but only about 2% of this amount comes from domestic purchases, with Chinese tourists' purchases abroad comprising about 10%. Goldman Sachs predicts that by 2015, China will be first in world consumption of luxury goods.
According to the Economic Reference Journal, the report said that China had already become third in world consumption of luxury goods, contributing to 20% of world consumption. In the next four years, China's demand for luxury goods will reach an annual compound growth rate of 25% and in 2008 will have a 19% market share, in 2015 29%, surpassing Japan. At that time, China's luxury good consumption will be equivilant with that of Japan. At present, Japan makes up 41% of total luxury goods sales and is number one in the world.
Statistics from Goldman Sachs show that in 2003, about 45 million Chinese consumers' purchasing power passed the 30,000USD mark. Purchasers of luxury goods are mostly between 20 and 30 years of age and the number of consumers in this age group is 11 times that of Japan.
Jacques-Franck Dossin, the Managing Director of Goldman Sachs Interional Securities Research Deparment blieves that the growth in Chinese tourists will promote the growth of the luxury item market, because Chinese enjoy spending while they travel and while abroad, their brand recognition will increase.
From the beginning of this year, the amount of money Chinese tourists are allowed to take while travelling abroad is two times the previous number. For this reason, Mr. Dossin bravely preditcts that with more airlines and travel agencies, countries like France and Italy will become favorite destinations of Chinese tourists. This time abroad will also give Chinese tourists time to get to know the brands with which they had previously had little contact.
Consumption by the Young sees a Return of the "Enjoy Now" Phase
Louis Vuitton bags, Carier watches, Dior perfume and Dunhill suits and other common luxury items have found fans among much of China's 30 something crowd.
Purchases of luxury items by young people has already become a strong trend in China. A survey of young China urbanites shows that over 60% believe that one should "enjoy life now," saying that they are willing to spend more on high quality items.
Is there anything that we should consider in this sudden love for the luxurious among young Chinese?
In Five Years Chinese will become the Biggest Consumers of Luxury Goods
Does Chinese love of luxury surpass the French? According to a survey done my Merrill Lynch, Chinese purchasing jewlery, leather goods and women's clothing is already twice that of their French counterparts.
Today, Chinese are the third largest customers of luxury brands, just behind the US and Japan. By 2011, Chinese will be first and their spending will reach 1/4 of the world total from its present 11%. These numbers include Chinese residents of Hong Kong, Taiwan, Macau and Singapore. 13% of Mainland residents make up the mainstream with most in the middle class.
According to the China Business Herald, driving a Rolls Royce, wearing a Rolex, donning Zegna and using a Montblanc to write while having a Louis Vuitton over your shoulder is nothing new to China's big bosses. In some smaller cities in Zhejiang and the northeast, it is no longer just one or two people who have a monopoly on luxury goods. There are more and more rich people and luxury goods from the West are more common. Some people have begun to purchase antique Chinese rosewood furniture, hoping for a new experience of luxury. In China, there is a new group of nouveaux riches whose wealth is far surpassing the level of local GDP.
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