Anyone who has visited Chengdu, a second-tier city in western China, cannot miss the ostentatious signs of Louis Vuitton and Cartier in its downtown. According to Chengdu Retail Industry Association, Chengdu is home to 80 percent of international luxury brands and ranked third behind Beijing and Shanghai in luxury sales.
A cover story in Chengdu Today, “Global Luxury Brands Stride Forward in Chengdu,” reveals that 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.” Hurray and hurry, luxury goods companies!
In 2010, Chengdu’s retails 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.
When I left China 20 years ago, I was considered too “bourgeois” because I liked to put on pretty clothes while others still wore Mao suits. Those days are long gone. Today, not being “bourgeois” is a subject of public ridicule. As the cover story describes, Chinese consumers consider buying luxury goods a symbol of “paying attention to details and pursuing quality of life.” You cannot argue with that.
I had an interesting conversation with the magazine’s editor Eureka Wang. Knowing that I have written a book about the Chinese middle class, she asked me if middle class Americans are also fanatically buying luxury goods. I said “very rare.” She was surprised. “Who is buying luxury goods in America then?” she asked. “The very rich,” I said.
This is the difference in luxury consumption between China and the United States.
The magazine has done an excellent job profiling luxury goods shoppers. It’s quite revealing to see Chinese consumers’ attitudes toward luxury brands. Their incomes range from zero to 6 figures. Their occupations are across the board from student to business owner. Their aspirations for luxury products span from “necessities,” to “investment,” and “spiritual satisfaction.”
Below are vignettes from the article:
Mrs. A: “Luxury goods are necessities of life”
Age: 36. Occupation: private business owner. Monthly income: above 400,000 RMB ($62,000).
Q.: What is the most expensive luxury item you have bought so far? And where did you buy it?
A.: Car (BMW x5), 4S store in Chengdu.
Q.: How much do you spend on luxury goods every year?
A: Around 500,000 RMB ($77,000).
Q.: Where does the money spent on luxury goods come from?
A: Personal income.
Q.: What kinds of luxury goods do you buy and what are the brands?
A.: Clothing and handbags: Marc Jacobs, Chanel, Dior, LV, Gucci, Prada, Burberry, Versace, Ferragamo, D&G.
Q.: What is your dream luxury item?
A.: Don’t have any.
Q.: Do you buy luxury goods on the Internet?
A.: No. It can be troublesome.
Ouch. I can imagine why she thinks luxury goods are necessities of life.
Miss B: “Luxury goods are symbols of a quality lifestyle”
Age: 30. Occupation: general manager of a company’s regional office. Monthly income: 50,000 RMB ($7,700).
Q.: What is the most expensive luxury item you have bought so far? And where did you buy it?
A.: If you count the car as a luxury item, then the car is the most expensive item I have bought so far. I bought it in Chengdu.
Q.: How much do you spend on luxury goods every year?
A: Around 100,000 RMB ($15,000).
Q.: Where does the money spent on luxury goods come from?
A: Personal income.
Q.: What kinds of luxury goods do you buy and what are the brands?
A.: Clothing, perfume, beauty products, and handbags: Chanel, Dior, Gucci, Prada, Burberry, Fendi, Miss Sixty, Tod’s, Armani Exchange…
Q.: What is your dream luxury item?
A.: Chanel handbag.
Q.: Do you buy luxury goods on the Internet?
A.: I have used an online purchasing agent once, but the actual product did not meet my expectation so I will not buy luxury goods on the Internet anymore.
A Chanel handbag certainly shows a quality of lifestyle.
Mrs. C: “Consumption of luxury goods is a way to invest as well as a quality lifestyle”
Age: 26. Occupation: journalist. Monthly income: 10,000 RMB ($1,500).
Q.: What is the most expensive luxury item you have bought so far? And where did you buy it?
A.: Diamond wedding ring in Singapore, 800,000 RMB ($123,000).
Q.: How much do you spend on luxury goods every year?
A: Around 300,000-400,000 RMB ($46,000-$61,000)
Q.: Where does the money spent on luxury goods come from?
A: My husband (boss of a private company).
Q.: What kinds of luxury goods do you buy and what are the brands?
A.: Bags, jewelries and watches: LV, Chanel, Tiffany, and Hermes
Q.: What is your dream luxury item?
A.: Black alligator skin bag with gold and diamond-studded from Hermes.
Q.: Do you buy luxury goods on the Internet?
A.: Yes, but not very often. For now I won’t consider buying products worth more than 20,000 yuan on the Internet. But for scarves and other accessories that are less valuable and cost just several thousands yuan, I will consider buying them on the Internet because it’s more convenient.
Not a bad idea – an alligator skin bag with gold and diamond is a great investment.
Miss D: “Buying luxury goods can bring spiritual satisfaction ”
Age: 21. Occupation: student. Monthly income: 0.
Q.: What is the most expensive luxury item you have bought so far? And where did you buy it?
A.: Chanel handbag, Hong Kong.
Q.: How much do you spend on luxury goods every year?
A: Not sure.
Q.: Where does the money spent on luxury goods come from?
A: Pocket money given by parents (I feel ashamed!).
Q.: What kinds of luxury goods do you buy and what are the brands?
A.: Cosmetics, skin care products, and accessories such as bags and jewelries.
Q.: What is your dream luxury item?
A.: Maserati GT
Q.: Do you buy luxury goods on the Internet?
A.: I haven’t tried yet. But some friends have tried and they were very successful. The purchased luxury goods were verified and they proved to be genuine. I will try it and it seems that it is very convenient.
A Maserati GT brings spiritual satisfaction – with parents’ money?
Miss E: “Buying luxury gods is a personal hobby.”
Age: 28. Occupation: staff member of a public institution. Monthly income: 4,000 RMB ($600).
Q.: What is the most expensive luxury item you have bought so far? And where did you buy it?
A.: Prada bag purchased in Australia, worth about 8,000 RMB.
Q.: How much do you spend on luxury goods every year?
A: I always buy perfume. It costs several hundred yuan and the annual expenditure won’t exceed 2,000 RMB ($300). As for bags, I won’t buy them every year and it depends on my income that year.
Q.: Where does the money spent on luxury goods come from?
A: Salary.
Q.: What kinds of luxury goods do you buy and what are the brands?
A.: Burberry perfume.
Q.: What is your dream luxury item?
A.: Currently, nothing specific.
Q.: Do you buy luxury goods on the Internet?
A.: No.
Why even bother. Find a less expensive hobby.
If you cannot put your head around this, never mind. You only need to remember one thing: 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.”
To show how powerful this kind of peer pressure can be, on a recent trip to China I dug out my Omega watch that I almost never wear in the States, polished it, and put it on my wrist. I have always thought that I am more individualistic than many of my Chinese peers. But whenever I go to China, I feel I have to “keep up with the Joneses.” Each time I pack my suitcase for China, I scrutinize my wardrobe and frown at some of my not-so-trendy outfits. In the end, my fragile sense of individuality gave in. In order to keep up with increasingly fashionable Chinese women, I packed Versaces and Guccis. They looked so out of place with my favorite jeans.
McKinsey indicates that China will overtake Japan to become the world’s largest luxury goods market by 2015. I would expect China could take the crown sooner than that. With a supportive government and status conscious crowds pressured to chase their luxury dreams, global luxury brands can be certain to enjoy phenomenal success in China.
(A version of this article is originally published on Forbes).
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[…] Wang discusses with the editor of Chengdu Today the profile of China’s luxury shoppers and analyzes their profiles on her weblog. In 2010, Chengdu’s retails sales reached $5.8 billion. Much of it went to luxury brands such as […]