Insight Into China's Global Luxury Consumer

David Wolf submits:

In an excellent article about luxury retailers going online in China, Laurie Burkitt at The Wall Street Journal drops an interesting little insight halfway through the piece:

China is the worlds second-largest market for luxury brands when counting purchases by Chinese consumers world-wide and is set to overtake Japan for No. 1 in a few years, according to consulting firm Bain & Co. Chinese sales of luxury products surged 20% to 9.2 billion ($12.1 billion) last year, Bain said. [italics mine]

Counting purchases worldwide vs. locally is no small distinction. Chinas consumers know they pay a steep duty on the price of the baubles they buy in China, and those with the means (and the patience) often shop locally but put off their purchases for when they go abroad. Thats important for a couple of reasons.

First, it is impossible to judge the real return-on-investment of a store inside of China based solely on how much product that store sells, because that store is probably winning sales for stores elsewhere in Asia, in Europe, and in the Americas. By extension, it is impossible to judge the profitability of China luxury operations based on retail sales in China. To some degree, the China operations of luxury lines are subsidizing global sales.

That arithmetic is going to get increasingly critical as the cost of labor and prime retail space rises in Chinas second, third, and fourth tier cities, and as more Chinese get comfortable buying their luxury goods direct f! rom the labels

Complete Story