Chengdu's Luxury Market: Full Steam Ahead

    Putting priority on attracting major luxury brands and increasing high-end consumption may sound like a strange goal for a municipal government to set, but with demand for premium labels exploding in this second-tier city, it starts to make sense.

    Chengdu Luxury Consumers Relatively Young, Largely Female, More Brand-Savvy Than Most#

    Seibu, one of Chengdu's top luxury malls, where women are the top consumers

    Forbes posted an interesting article today by Helen Wang (Jing Daily Q&A), author of the recent book, The Chinese Dream, in which Wang covers an unusual development currently unfolding in Chengdu, the capital city of Sichuan province. Quoting an article this week in Chengdu Today, Wang writes that "the Chengdu municipal government has set a goal to bring 'twenty famous international brands to Chengdu every year' and 'by 2015, primacy ratio of international first-tier brands will reach 80% or above in western China.'"

    Putting priority on attracting major luxury brands and, ostensibly, increasing high-end consumption may sound like a strange goal for a municipal government to set, but as Wang notes, the government might not have to do much to bring more labels to their city:

    In 2010, Chengdu’s retail sales reached $5.8 billion. Much of it went to luxury brands such as Hermes, Burberry and Prada. Louis Vuitton alone registered record sales of $138 million. Cartier generated more revenue in Chengdu than in any other city in China.

    Going on to profile some of the local luxury consumers who are contributing to Chengdu's nearly $6 billion in luxury sales last year, Wang concludes:

    Chinese are status conscious people. The key driver for luxury consumption is, of course, status. Many people are under considerable peer pressure and feel the need to buy products their friends and neighbors have so as “not to be left behind.”

    The argument can be made that Chengdu's municipal government is simply promoting the development of the city's luxury market as a way to "keep up with the Joneses" and seek status itself -- we can see the same thing happening in places like Guangzhou and Chongqing as well -- but Chengdu's luxury trends are nonetheless interesting to keep an eye on. For one thing, Chengdu's luxury consumers are relatively young, largely female, and fairly knowledgeable about brands. This extends beyond Louis Vuitton and Chanel; the earliest stirrings of the two markers that Jing Daily would say denote a comparatively mature luxury market in China -- a promising number of young and active local designers and strictly curated multi-brand retailers -- are starting to appear in Chengdu. By 2014, Lane Crawford will open its first store outside of Beijing, Shanghai and Hong Kong in Chengdu, and a handful of Chengdu natives, having studied fashion design in Beijing or abroad, are returning home with the intention of launching their own labels.

    A packed luxury market might be a vanity project for the city government, but the demand is clearly there, though we'll have to keep an eye out to see whether that demand will continue to be met by luxury giants like Gucci, LV and Hermes or by smaller labels like Kiton or Bottega Veneta.

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