RESEARCH
MOVING TARGET
China’s luxury consumers are becoming more sophisticated and their spending patterns are changing, according to research by McKinsey. Leonor Stanton analyses the fi ndings
LEONOR STANTON, CONTRIBUTING EDITOR, SPA BUSINESS C
hina. Without doubt one of the biggest emerging markets for spas. The growth is fuelled by its rapid rising economy and unprecedented con-
sumer spending on high-end goods. With a compound annual growth rate (CAGR) of 27 per cent between 2008-2012, the Chinese market for luxury brands is now the largest in the world and is expected to continue on an upward trajectory until 2015. Despite this robust outlook, consumer buying patterns are extremely changeable. A recent report by McKinsey – Luxury Without Borders: China’s New Class of Shoppers Take on the World – identifies significant chal- lenges facing luxury brands including “the globalisation of Chinese luxury shopping,
the rising sophistication of the country’s consumers, and the changing ways in which those consumers make purchases”. While the report isn’t directly focused on
spas, it outlines some interesting parallels for any operator in the luxury business.
MARKET SIZE Based on “interviews with over 1,000 luxury shoppers in 14 cities, extensive data analy- sis and conversations with industry leaders”, McKinsey forecasts that Chinese consum- ers will generate 34 per cent of demand for global luxury goods, totalling CNY726bn (US$118.2bn, €90.2bn, £77.5bn) by 2015. Luxury goods include ready to wear fashion, shoes, handbags, watches and fi ne jewellery. Growth is expected to slow to 12-16 per cent CAGR between 2012-2015 – partly due
to the economic slowdown in China and con- cerns over gifting to government offi cials. Yet the outlook is still positive as a result of: ■ the rising number of those with dispos- able incomes above CNY1m (US$162,500, €124,200, £106,750). McKinsey forecasts that the number of very wealthy people will grow at over 20 per cent annually between 2012-2015. While only accounting for 0.4 per cent of China’s population, this segment is intended to generate 28 per cent of demand for luxury goods in 2015 (see graph); ■ new entrants to the market such as the ris- ing and aspiring middle classes; ■ relatively high levels of fi nancial confi dence; ■ women now account for three fi fths of lux- ury purchases and are a fast growing segment; ■ individual gifting is “embedded in Chi- nese society… seen as a way of nurturing relationships – so it’s not about to diminish in importance anytime soon”, even in the face of increasing concerns about gifting to government offi cials; and ■ changing lifestyles – more socialising among the wealthy provides them with opportunities to wear their luxury purchases
A consistent, quality in-store experience is becoming increasingly important 84 Read Spa Business online
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CHALLENGES IN CHINA Given the positive background, there are the obstacles facing luxury brands in China. Market Splintering – even consumers with just a few years’ experience of buying luxury goods now want “low-key and under-
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