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China Briefings

Reports on China issued by Samsung Economic Research Institute

The Luxury market

The Luxury market

Samsung Economic Research Institute Beijing Office

May 2, 2012

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After rapidly growing for the past two decades, China's luxury goods market has emerged as one of the world's largest, rivaling that of Japan. In 2010, China accounted for 25% of the world's spending on luxury goods. The rapid growth of China's luxury market has mainly been driven by China' income growth, changing perceptions of purchasing luxury goods and showing off social status through the purchase of such goods.

In advanced markets, luxury goods are mainly purchased by rich consumers who have high social standing and luxurious lifestyles. In China, however, three types of consumers, the elite, middle class, new generation, purchase luxury goods. And unlike Japan and Korea, China has a strong demand for diversification and individualization. Accordingly, luxury brand companies should thoroughly analyze Chinese consumers' sentiment, consumption patterns by taking into consideration the type of consumer.

There are certain guidelines for luxury brands who hope to succeed in the rapidly growing Chinese market. First, they should allocate their resources to the second- and third-tier cities, instead of exclusively focusing on larger cities. Second, they should adopt two-pronged strategies targeting both the high-end and mass market. Third, they need to make more efforts to create new consumers. In particular, luxury brands that have already entered the Chinese market should develop personalized and popularized items.

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