Second-Tier Spotlight: Xi'an's Young Luxury Consumers

Spending Power Rising In China's Ancient Capital Xi'an's Zhongda International Shopping Mall It might not be as cosmopolitan as Shanghai or as culturally relevant as Beijing, but Xi'an, capital city of Shaanxi Province and former seat of power to several imperial dynasties, is rapidly becoming an important second-tier destination for major luxury brands. Despite per capita income far lower than top-tier cities in China's east coast, Xi'an is a highly concentrated retail market with attractive demographics: a population of around 7.4 million, a male-to-female ratio of nearly 1:1 (though females outnumber males by a hair), and a comparatively young consumer base. In terms of the city's luxury market, central Xi'an -- surrounded by 600-year-old city walls originally built during the Ming Dynasty -- has only two international-level luxury malls, Century Ginwa (世纪金花) and Zhongda International (中大国际), the latter of which boasts specialized Louis Vuitton, Prada, and Ferragamo boutiques. But aside from these macro-level details, what do we really know about the Xi'an luxury market? This week, CNTV's fashion channel looks into some of the trends making this second-tier city a prime target for more global brands (translation by Jing Daily team): "Now we have more than 200 members in our club," a salesman at the men's brand AutaSon told me, adding that the brand's average monthly sales have increased from 680,000 yuan (US$104,000) in 1998 to more than 3 million yuan ($460,000) today. AutaSon's membership club has increased from only 30 members in 2004 to more than 200 today. He said that the club has a relatively high membership threshold, with interested parties expected to have spent 10,000 yuan (US$1,500) at AutaSon just to apply. Still, membership has gone up more than 700 percent in just a few years. According to a representative at Century Ginwa, the mall's discount club currently has around 100,000 members, with more than 4,000 of them being Diamond Card members -- a distinction that requires the shopper spend over 300,000 yuan (US$46,000) in the mall within two years. Club members now account for around 60 percent of sales at Century Ginwa, and with new members increasing more quickly every year, the number of cardholders who have been "promoted" to higher membership levels has risen rapidly as well. So who are these people buying luxury goods in Xi'an? After interviewing salespeople from several luxury brands, I can say that it's possible to divide these consumers up by profession: on one side there's the business owner or executive (most of whom run privately owned companies); on the other is the high-income, fashion-conscious white collar worker. In terms of age, most luxury consumers range in age either from 28-35 or over the age of 40. It's worth noting, however, that the general impression of sales staff is that in the next two years, enthusiasm towards luxury consumption among young consumers around 20 years of age will outpace that of other age groups. As a salesperson from one Italian womenswear brand told me, young shoppers now account for 25 percent of her sales. As I interviewed her, in rapid succession I noticed two shoppers around the age of 20 buying cosmetics at the nearby Dior cosmetics counter. While sales staff is bullish, it bears noting that major brands will have to take a long view in a city like Xi'an, where spending power is growing but consumer education remains far lower than in cities like Shanghai or even Qingdao. For one thing, like we've seen in other emerging second-tier cities like Chengdu, most consumers are unclear about brand origin, with the market saturated by brands claiming to be European. (Such as the aforementioned AutaSon.) While awareness of some of the flashier luxury brands at Zhongda International mall is high, it will be far more difficult for "low-key luxury" brands to crack the market than it has been for, say, Louis Vuitton.

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Second-Tier Spotlight: Xi'an's Young Luxury Consumers