In 2009, China surpassed the U.S. to become the world's second-largest luxury market, with Japan, the longtime #1, firmly in its sights. The luxury market in Greater China has grown rapidly in recent years, despite heavy luxury tax burdens in the mainland, and 2009 was a very good year for major luxury brands with significant presence -- particularly stalwarts like Louis Vuitton and Gucci, but also relative newcomers like Balenciaga and Coach.
As a Shanghai Daily article illustrated today, Chinese luxury buyers have shown themselves to be comparatively immune to lingering global economic woes:
The China Brand Association estimates consumers of top-tier brands account for 13 percent of the total population, or 170 million people.
Whether it is yachts, limousines, haute couture fashion or hand-crafted watches, China's appetite for luxury goods has surged despite the global economic downturn.
A report by consulting firm Bain & Company in November showed consumption of luxury goods in China was expected to grow 12 percent in 2009 to reach US$9.6 billion at year's end, compared with a 16-percent slump in the US market, a drop of 10 percent in Japan and 8 percent in Europe.
Earlier this year, China's consumption reached US$8.6 billion, accounting for 25 percent of the world total, surpassing the United States to become the second largest market for luxury goods, according to the World Luxury Association.
Goldman Sachs has predicted that China will continue the spending spree and consume about 29 percent of the world's total luxury goods in 2015, leapfrogging Japan as the world's biggest luxury buyer.
We've covered the Chinese luxury buyer extensively this year, and seen plenty of indications that 2010 should be another good year for luxury retailers in the mainland. With hints that luxury taxes should be lowered at least a tiny bit, and more signs that popular shopping destinations like Hong Kong and Macau will be recipients of more luxury brand investment and store construction (along with the mainland itself), the year ahead should be good for retailers in the mainland, although some are concerned that sales in Hong Kong could slow along with its economy.
For many industry-watchers, China will keep its place as the hottest luxury market in 2010. Evelyn Rusli, writing for Forbes, forecasts that brands like Louis Vuitton -- which she refers to as "king" in mainland China -- will stay on top (although we feel it will slip in China's biggest and most cosmopolitan cities), while more luxury brands struggle to build stronger presence there:
It's all about China in 2010, as luxury retailers divert resources to the country and emerging economies in Asia and the Middle East. The recession accelerated this transition, amid slumping North American and European sales, but the movement will go into overdrive in the year ahead. Far from a long march, this will be a fast scramble, so expect a flurry of retailers to announce or plan store openings. Everyone is strategizing. Just look at Versace, in October the retailer closed its last store in Japan, freeing up resources to focus on the build-up in China, where it has 26 stores to date.
This should all be key in 2010 -- keep an eye out for a scramble among large (but not dominant) foreign luxury brands in China, as they struggle to gain a foothold among fickle consumers, while the big names continue their current strategies of build-and-wait (with an increase in digital outreach). Also watch for Beijing and Shanghai luxury buyers, at least the female buyers, to increasingly favor lesser-known brands, as a protracted shift away from dominant luxury brands continues in earnest.