This page contains a Flash digital edition of a book.
Chinese consumers will generate 34 per cent of demand for luxury goods worldwide, totalling US$118.2bn, by 2015


stated goods to ones that are emblazoned with popular logos”. But new entrants still prefer “widely-recognisable brands that show off their status”. This presents a dilemma as trying to satisfy all markets “risks diluting their brands’ cachet”. This is a particular problem as 49 per cent of tenured shoppers, who’ve been pur- chasing luxury goods for over 10 years, “like to discover new brands before others, com- pared with only 31 per cent of new entrants”. Brands face the danger that as new entrants become customers, the “loyalty of more ten- ured consumers may weaken… as they seek to differentiate themselves… with a smaller, niche product… and new entrants may even follow [suit] leaving the once-fashionable brand abandoned by both ends of the market.” McKinsey advise brands to “focus on the core and build on heritage… highlighting the skill of craftsmen… the length of history… Brands shouldn’t completely avoid expand- ing into new categories, rather they should do so in a way that enhances their key narrative.” Pricing – should be “based on a strategy


that’s coherent with the branding, merchan- dising and the global image”. McKinsey advises that in general “iconic categories and products that never go on sale should be kept distinct from those that might”. Promotions should also be limited to VIPs it believes. Consistency – outbound tourism by Chi- nese residents is predicted to grow from 57 million trips in 2010 to 94 million by 2015.


Spa Business 3 2013 ©Cybertrek 2013


Proportion of Households in China by Annual Income vs Their Share of Luxury Consumption


50 45 40 35 30 25 20 15 10 5 0


> 1m 500k–1m 250k–500k 50k–250k <50k


Share of luxury consumption in China by annual disposable income (bn RMB) Percentage of urban households by annual household disposable income


As a result, an increasing number of luxury purchases are now made abroad. In 2010, 65 per cent of shoppers purchased luxury goods in mainland China only. By 2012 this had declined to 38 per cent. Macau, Hong Kong and increasingly Europe are the key shopping destinations overseas. However, brand consistency is diffi cult to achieve in different jurisdictions. China imposes taxes ranging from 20-70 per cent on imported luxury goods, leading to wide ranging retail price disparities. This can lead to price differentials on say, a handbag, of up


to 40 per cent. While some luxury operators have recently reacted by increasing prices only outside Asia, and certain government offi cials have expressed the willingness in time to reduce import duties, “the price gap is unlikely to disappear… any reduction in taxes is almost certain to be gradual”. In addition to price consistency, operators are also “obliged to maintain consistency of excellence in their retail establishments around the world… with the importance of the in-store experience for Chinese luxury consumers becoming ever more evident”.


Read Spa Business online spabusiness.com / digital 85


100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%


Luxury consumption – CNY billions


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100  |  Page 101  |  Page 102  |  Page 103  |  Page 104  |  Page 105  |  Page 106  |  Page 107  |  Page 108  |  Page 109  |  Page 110  |  Page 111  |  Page 112  |  Page 113  |  Page 114  |  Page 115  |  Page 116