China luxury good market

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Tapping China’s luxury-goods market

By 2015, Chinese consumers will account for more than 20 percent of theglobal luxury market. How is their behavior evolving?
Yuval Atsmon, Vinay Dixit, and Cathy Wu

© Gilles Sabrie

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China will account for about 20 percent, or 180 billion renminbi ($27billion1), of global luxury sales in 2015, according to new McKinsey research. Even during the global recession in 2009, sales of luxury goods in the mainland rose by 16 percent, to about 64 billionrenminbi—down from the 20 percent growth of previous years but far better than the performance of many other major luxury markets. To get a better idea of the dynamics, McKinsey surveyed more than 1,500 luxuryconsumers in 17 Chinese cities in spring 2010.2 Three findings stood out. Shifting attitudes At a time of rapidly rising incomes, widely available luxury products (and information about them), andshifting attitudes toward the display of wealth, more Chinese consumers than ever feel comfortable buying luxury goods. As a result, China’s love for them is moving down the economic ladder, creatingopportunities and challenges for marketers accustomed to serving only the very rich. While wealthy consumers (with incomes above 300,000 renminbi, or about $46,000) will continue to account for a majorityof luxury consumption, our research shows that the 13 million households in China’s upper middle class (incomes between 100,000 and 200,000 renminbi) offer the biggest new growth opportunity. Theyalready account for about 12 percent of the market, and their numbers are growing rapidly: we expect to see 76 million households in this income range by 2015, accounting for 22 percent of luxury-goodspurchases (Exhibit 1). Interest in them is moving beyond handbags, jewelry, fashion, and the like. A growing number of Chinese luxury consumers are also splurging on spas and other wellness...