Luxury giants lure China

12 November 2010

BEIJING: Louis Vuitton, Chanel and Gucci are seen as the most attractive luxury brands by Chinese consumers, a survey has found.

Bain & Co, the consultancy, reported that Chinese shoppers spent 156bn yuan on high-end goods in 2009, a 10% uptick on 2008.

Some 56% of last year's expenditure occurred outside China, demonstrating the importance of the country's travellers to overseas companies.

Key contributors supporting this trend include the better experience, broader product selection, lower prices and greater availability in international destinations.

Buying on impulse and accessing after-sales service were the main reasons for picking up items at home, with "aspiring to be a VIP" constituting another primary driver.

Overall demand is expected to rise 23% in 2010, as watches enjoy a 35% surge, while suitcases and luggage should witness an improvement in the 20% to 25% range.

Womenswear and jewellery are pegged to record 20% leaps, the same figure as cosmetics, perfume and personal care.

Menswear and shoes may generate slightly slower accelerations, yielding a 15% expansion.

Existing customers will deliver 5.3bn yuan of growth in 2010, but new entrants are anticipated to provide 10.7bn yuan of incremental sales.

Based on a survey of 1,471 luxury customers, Bain revealed Louis Vuitton was the "most desired" brand, mentioned by 46% of participants.

Chanel claimed second on 36%, Gucci reached 22% and took third, fourth-placed Armani hit 20% and Christian Dior obtained 17%.

Each of these labels posted increases measured against a similar study last year, with Chanel leading the way, registering 11% growth.

Christian Dior also saw a positive shift among the next five most popular brands, jumping 5% to 17%.

By contrast, Rolex's 14% total had dipped 4%, Cartier was flat on 11%, Hermes dropped 1% to 8%, Prada fell 2% to the same score, and Lancome rose by 1% to 5%.

Chanel led the womenswear and beauty sectors relating to purchase intent, Rolex assumed the equivalent status for watches, as did Louis Vuitton regarding suitcases and handbags.

Giorgio Armani topped the menswear charts and Salvatore Ferragamo headed the rankings concerning shoes.

Overall, 81% of consumers in four Tier 1 cities – Beijing, Shanghai, Guangzhou and Shenzhen – bought luxury goods because they offered superior quality, equalling Tiers 2 and 3.

A further 68% of residents in the largest urban centres believed these items evidenced their "taste and style", falling to 53% in smaller markets.

Ratings stood at 55% in both categories for the "long history" of such brands, while the same proportion thought exclusive products made them "different" in Tiers 2 and 3, decreasing by 1% in Tier 1.

In a bid to enhance their position in China, many luxury specialists are strengthening branded retail networks, with Dunhill operating 93 stores as of August 2010, and Hugo Boss running 89.

Although this is an effective way of stimulating demand, Bain & Co suggested it might come at the expense of improving customer service.

Indeed, 63% of interviewees said manufacturers must prioritise CRM, with 57% citing "professional and warm" staff, 56% referencing after-sales service and 43% the entire purchase "experience".

When discovering information about products in this segment, 72% of those polled afforded magazines a pre-eminent role, 60% name-checked the internet, friends scored 48% and in-store displays received 51%.

Data sourced from Bain & Co; additional content by Warc staff