Luxury market starts to evolve in China

18 June 2010

SHANGHAI: The cost of enjoying a luxury lifestyle in China has increased over the last year, a trend that applies across a broad range of categories.

According to estimates from the Hurun Report, which monitors the behaviour and preferences of affluent Chinese shoppers, the price of buying 58 premium items has climbed by 11.3% since June 2009.

This marked an increase from the rate of 4.6% recorded last year, and came in ahead of the uptick of 3.1% registered across the consumer price index as a whole.

As such, the amount of "cash on the table" required for a household to achieve "xinguizu" status – or being able to afford goods at the top end of most product sectors – has grown substantially.

The threshold for a family to attain a "super luxury" standing is 106m yuan ($15.5m; €12.6m; £10.5m) a year at present, a total that had jumped by 22% on 2009.

"It is getting more expensive to buy one's way into China's elite inner circle," said Rupert Hoogewerf, the founder of the Hurun Report.

"Demand, driven by more wealth creators looking for ever more sophisticated luxury products, is far outstripping supply."

This is particularly true for the most exclusive property, where prices rose by 45.1% year-on-year, far outstripping the growth witnessed elsewhere.

While this area of the housing market saw a modest decline of 1.8% on this measure in 2009, this followed on from a leap of 13.9% in 2007 and 29.8% in 2008, and the boom shows few signs of cooling off.

The domestic travel industry has seen a similar surge, with consumers finding this activity is now 13.4% more expensive than in 2009.

In just one example of this development, someone staying in a premier suite in the Peninsula Hotel in Hong Kong would receive a bill that was 47% larger this year than in June 2009.

Such a trend is also applicable to the automotive category, with the funds needed to purchase one of a range of vehicles assessed by the Hurun Report expanding by 1.5%.

This included an increase of 12% for the Rolls-Royce Phantom to 9.2m yuan, with the Porsche 911 Turbo up 5.2% to 2.3m yuan and the Mercedes Benz S500L up 2.6% to 2.2m yuan.

Watches and jewellery posted a corresponding improvement of 3.2%, a total that stood at 9.1% for premium alcoholic drinks and cigars. 

The clothing, skincare and accessories category was largely flat year-on-year, although there was considerable variation between individual products.

Acquiring an offering from Ermenegildo Zegna required an outlay that was 10% higher than the previous year on 23,000 yuan.

In contrast, the Nokia 8800a 4G phone had delivered a decrease of 7.2% to 9,000 yuan, while cosmetics from Lancome and La Mer were unchanged.

Overall, there are 875,000 individuals in China with personal wealth of 10m yuan and 55,000 people valued at 100m yuan, the Hurun Report said.

Data sourced from The Hurun Report; additional content by Warc staff