Time for Chinese Market

In recent years， the Chinese consumers have shown a lasting burst of amazing purchasing power， which makes the Swiss watch industry very excited. From the mid-ranged watches to watches of the top class， the huge“army” of Swiss watches opened their luxurious and elegant stores in China regardless of cost. For instance， Vacheron Constantin， the shining pearl on the crown of the Swiss watch industry， set up 3 stores and counters in Beijing Wangfujing commercial circle. The Chinese are getting richer and richer， and some of them are trying to achieve their dream of luxury in various ways.

Who is the main force of luxury goods?

While the world has not completely got out of trouble from the financial crisis， the Chinese luxury market has shown its amazing purchasing power. Who are those people buying luxury goods? Why are luxury watches so attractive to Chinese consumers?

To answer the above questions， the reporter conducted a detailed market survey. In the Rolex store in Beijing Oriental Plaza， a sales staff told the reporter that “buying luxury goods with about 4% of one’s wealth is the world’s average level in luxury goods consumption. But here in China， according to our sales situation， it is far exceeded the standard level， with a few consumers using even up to 40% of their wealth to buy luxury goods. ”

Sales representative of Emperor Watch and Jewellery in Shanghai Westgate Mall store said， “In western countries， the main group of luxury goods consumer is the middle class between 40 to 70-year-old; and according to our sales experience， the main domestic consumers of luxury goods are those highly educated people aged between 20 to 40-years-old， with their income level between RMB 5，000 to 50，000 per month.”

According to statistics provided by McKinsey Company from the internet， those urban households with an annual income of RMB 250，000 are defined as well-off families in China. They also made prediction that in the next 6 to 7 years， the number of welloff families in China would maintain an annual increase rate of 15.9%， increasing from 2008’s 1.6 million to more than 4 million in 2015， becoming the world’s fourth largest country second only to the United States， Japan and the UK. The definition of luxury goods consumers in China set by the BNP Paribas is with more than RMB 300，000 of household assets and an annual income more than RMB 100，000. In this regard， sales staff of Swatch store in Guangzhou Department Store said that the typical luxury goods consumers were those whose monthly income was between R MB 20，000 to 50，000. Most of them concentrated their interest in personal supplies such as clothing， perfumes and watches， etc.

D o w n t h e crowded subway in metropolis， we can always spot people who hold top class bags and wear luxurious Rado watches. Sales staff of Cartier store in Wuhan New World Department Store said during the interview that with their selling experience， luxury goods consumers could be divided into two categories: one was the wealthy class， who wanted to pursue personalized service as well as purchase the latest and the most popular product; consumer of this category usually

didn’t consider price. But the other category was the more important group， consisted of white-collar office workers who earned several thousand yuan monthly， and were commonly known as “paycheck to paycheck” group. They would buy luxury goods spending their full month’s wages or even at the cost of overdraft.

Sales staff of Vacheron Constantin store in Harmony World Watch Center in Hangzhou specified the “paycheck to paycheck” group as those who were born in the 1980s. They said that the“post-80s” grew up during the era of reform and opening up， and thus they generally respected for freedom. Some of them could earn considerable income and dare to spend money. As time went by， this group of “post-80s” became the backbone of luxury goods consumption in China. While some of them may not earn as much as the wealthy class， they always tried to buy some of their affordable luxury. Particularly for male consumers， the purchase of luxury watches would be their first choice.

Mr. Yuan， who has been working in a trading company in Beijing after graduate school in 2006， already had two luxury watches. He said that

when he found many of his colleagues in his department were using watches and handbags of famous brands， “I just think that I cannot fall behind. In addition， some workplace does have a request for clothing and accessories， so I purchased two high-end watches after long hesitation.” Mr. Yuan also admitted that vanity was included in the cause of his purchase， “In fact， people all have a bit of vanity more or less. For example， when doing business with clients， wearing a high-end watch can show your respect for the opposite side; and it is also a mark of our identity and status.”

Bain Company conducted a survey of 1471 luxury goods consumers in more than ten cities in China’s and found that for those consumers， Rolex， Omega and Cartier were the three most likely to buy watch brands. Consumers receiving the interview believed that watch was an essential item for a man.

Through the above investigation， reporter tends to have the impression that the current domestic consumers of luxury goods are becoming younger， and showing off is one of the factors promoting the growth in luxury consumption. The demand is mainly concentrated in clothing， perfumes， cosmetics and watches. Male consumers are the main force of consuming luxury watches.

High-end consumer boost the fever of luxury collection

“Desired by many， owned by few”. When mentioning luxury goods， people can’t help but will think of status， identity， distinguished luxury and so on. Today， the luxury goods are not only a symbol of the owner’s identity and status， but also considered to be high-quality collection to invest by high-end consumers， who wish to increase the value of their collection.

The rise of luxury goods investment dates back only 20 years ago. Insiders believe that the investment in luxury goods better goes to those with high value for collection， such as jewel- leries， watches， wine and so on. Take watch for example. The reason why luxury watches are priceless is because in addition to being limited edition， they have unique and exquisite design， and manifest excellence in production.

In recent years， the collection of luxury watches gradually becomes hotter and hotter; the size of their auctions is also increasing. This suggests a sharp increase in the number of collectors in high-end watches. During the fall of 2010， auction companies in China have launched special auctions for famousbrand watches， and these auctions for watches always concluded their transactions with high price. For instance， on December 6， the special auction of “Exploitation of the Works of Nature， Creations of Arts Last Forever– expensive watches， antique watches and clocks” conducted by Beijing Poly Auction attracted many collectors. In the auction， there were world famous watches from Vacheron Constantin， Lange， Jaeger-LeCoultre， Breguet， IWC， Rolex and Cartier， a special auction of Patek Philippe， and even a number of very rare watches. According to an executive in the watch department of Beijing Poly， the reason why

luxury watches auction keeps rising is because in addition to the great prosperity of the Chinese watch market， the lasting value， function， technology and culture of the luxury watches are more and more acknowledged. Top classic watch not only has the function of precise timing， it is also an interpretation of time， a transmission of skills， and a product with elegant blend of quality. Altogether， it can achieve the perfect

unity of external and connotation. This is why it is recognized and respected as a value-added product and an investment hedge against inflation.

Zhu Mingxia， a scholar researching luxury consumption， argues that the fundamental reason for consumers to buy luxury goods is their pursuit of the non-functional properties of the luxury goods. Like title， last name and clan badge， which were all once the emblem symbols of aristocracy， luxury brand could give its owner a unique feeling of glory and a remarkable attitude. Therefore， the consumption of luxury goods is not only the consumption of the value in use of the product， but also a consumption of brand culture.

It is said that from the little time machine to the large badge of the successful people， watch has always been a very special product， with its value upgrading over the time. Indeed， when the consumption of luxury goods is no longer just synonymous with luxury， its existence as the symbol of cultural brand investment is increasingly prominent. In this way， it is not difficult to understand why nowadays there are so many high-end consumers starting to invest in luxury goods， including highend watches.

“Time is money”. The current hot situation of luxury watch collection once again confirms the accuracy of this sentence. Collectors can always think of more renewal meaning from the saying.

Unique landscape in China

According to industry research， a country’s growth rate in luxury consumption should be about twice as high as its GDP growth. In other words， the growth of luxury consumption depends on the sound development of national economy. Today， the world can clearly feel the development and changes during the last three decades in China. The data show that in 1980-2009， China’s average annual growth rate of GDP were all over 9.8%， with half of the above-mentioned 30 years rated more than 10%. As a large economy， China’s sustained economic growth can be definitely called a miracle. By 2010， China’s GDP has surpassed Japan to become the world’s second largest economy. China’s fiscal revenue in the first three quarters of 2010 was more than RMB 6.3 trillion. As of September 2010， China’s foreign exchange reserve reached RMB 17.4 trillion， ranking first in the world.

These fancy figures not only mean that China has basically solved the problem of poverty plagued for many years， but also reflect the fact that a considerable number of people have began to live a prosperous life. The latest manifestation is that when consumption of luxury brands in the developed countries declined because of the financial crisis， the Chinese luxury market is still positive. The recently released “2009 China’s Luxury Market Research Report” by Bain Company said even during 2009， a year with the worst economic conditions， China’s luxury market still grew by nearly 12%， reaching RMB 68.4 billion and accounting for 27.5% of the global market share. Among them， the largest sales concentrated in cosmetics， perfumes and personal care products， summing up to about RMB 16.9 billion; the category which ranked second was the luxury watches， with a total sales of about RMB 155 billion. The report predicted that in the next 5 years， the Chinese luxury market would reach US$14.6 billion， occupying a major share of the global luxury market.

“The number of affluent consumers in China is very impressive and it is growing much faster than other countries.” After the study of the Chinese luxury market， the world’s major consulting companies all draw the common conclusion above. According to the studies of the China Brand Strategy Association， the current group of luxury goods consumers in China has reached 13% of the total population， and is still rapidly growing. It is just this picture of prosperity in the Chinese luxury market that makes the international top brands spare no effort to speed up their expansion in China.

In fact， back in the late of the last century， those luxury brands had already begun to test the China market gingerly. Before entering the Chinese mainstream society officially， luxury brands appeared only sporadically in Hong Kong and trading companies along the coastal line of mainland China. In the early 90s of the last century， five-star hotels with foreign background gradually began selling luxury brand merchandise. However， it is until China’s accession to WTO and its promise of not to limit foreign brands to open stores in China that many luxury brands began settling in the Chinese market. During the financial crisis which led to the recession of the global luxury market， the top luxury brands all viewed the Chinese market as their last straw to clutch at. Listing the luxury stores opened in China， it is not difficult for us to find out that more than half of the shops were opened in the last three years. According to incomplete statistics， more that 80% of the world’s top luxury brands have set up their business in China. As of the end of 2009， nearly 300 top brand stores have opened in Beijing. Before the opening of the 2010 Shanghai World Expo， at least 10 top luxury brands opened their flagship stores on Huaihai Road. The expansion of the international luxury brands is also reflected in their increasing penetration of the second and third tier cities in China. Their focuses are now shifting from the three major cities (Beijing， Guangzhou and Shanghai) to the secondary cities and even smaller cities.

There is no doubt that China has become the fastest growing country in luxury consumption. And in accordance with the development goals， by 2020 China will fully realize its aim of becoming a well-off country. Thus the future of the Chinese luxury market is worth expecting. Although in the current context of increasing emphasis on sustainable consumption in the world， China’s luxury market seems a bit of stepping “ahead.”