Growing Demand In China’s Interior, Other Asian Countries Should Counterbalance Tepid Consumption Elsewhere
Although Chinese consumers have shown a taste for foreign luxury brands, domestic labels will present stiff competition in coming years
As a result of the fast-paced development of China’s eastern coastline and special administrative regions, only recently have major luxury brands made it to the country’s vast interior region, where a number of second- and third-tier cities remain relative blank slates. Since so many companies are only reaching these areas now, the spread of luxury brands in China has become a regular news story.
This has only intensified over the last year, as formerly free-spending Japanese and American customers have thought twice about luxury goods while emerging customers in places like the BRIC countries and relatively fast-growing economies like Vietnam become more regular (and brand-loyal) buyers. Nonetheless, the luxury sector is still experiencing only modest growth one year on from the onset of the global economic slowdown despite their best efforts at wooing new customers.
If many recent articles are correct, though, what we’ve seen over the last year — severe as it has been — should only prove to be a blip in the grand scheme of luxury revenues. From Financier Worldwide:
Although this article calls out the BRIC countries as the saviors of the global luxury sector, several other recent articles have put the growing Chinese middle class front in center as the group that will do most of the heavy lifting. From a recent article in Harvard Business:
The idea of a decent proportion of the Chinese middle class — not to mention the Chinese “upper class”, which should be the world’s fourth-largest by 2015 — buying luxury goods on a regular basis is definitely what luxury brands like to hear. But as we’ve written before, this is no reason for foreign luxury brands, even automotive brands, to rest on their laurels.
Domestic Chinese luxury brands are already here, they know their market inside and out, and they are rapidly gaining a reputation for quality that could eventually rival even European brands with impressive pedigrees. Far from being a static, Euro-centric market, the luxury sector has shown that it is always in flux depending on the global economy, emerging consumer groups, and the unpredictability of buyers in developed markets.