Abstract
The increasing demand for luxury goods can be traced back to two important factors. Firstly the transition of China from a planned economy to a market economy and the opening of borders to foreign trade in 1978 have allowed luxury brands to penetrate the Chinese market. Secondly, this reform of the Chinese economic system has brought about a huge leap in terms of the purchase power within the last 30 years, with the highest boom beginning in the 1990s. As a result of these factors, the Chinese luxury market was worth over $9.4 billion by 2010, which accounts for 27.5% of the world's luxury goods market (Datamonitor, 2010).
Moreover, despite the economic crisis, the demand for luxury goods in China has not declined and sales grew by 30% in 2010. Thereby, in 2010 China has succeeded to bypass Japan as the second luxury market in the world after the United States. In addition, the Chinese market currently represents the world's largest market with 1.3 billion consumers (Xiao Lu, 2011). Looking at the future, it is predicted that the luxury sector in China will continue to grow both in terms of demand and sales: annual growth in demand is estimated at 20% (Degen, 2009), while Datamonitor (2010) predicts that the Chinese luxury goods market will be valued at $14.6 million by 2015. This arises in great part from greater income levels and the changing consumption attitudes of the Chinese customers who place less emphasis on collectivity than in the past, while focusing more on personal success and individuality.
Extract
[...] Luxury goods in China The increasing demand for luxury goods can be traced back to two important factors. Firstly the transition of China from a planned economy to a market economy and the opening of borders to foreign trade in 1978 have allowed luxury brands to penetrate the Chinese market. Secondly, this reform of the Chinese economic system has brought about a huge leap in terms of the purchase power within the last 30 years, with the highest boom beginning in the 1990s. [...]
[...] As far as risks are concerned, the violation of intellectual property rights (IPR) represents one of the greatest threats as 20% of all Chinese goods are subject to counterfeiting (Debnam and Svinos, 2007). Moreover, the Chinese administrative system is still characterised by bureaucracy and rigid system of hierarchy and networks which may be difficult to overcome and certain measures may be necessary to survive on the market (Fang, 2006) . For instance, many Western companies have collaborated with Chinese players to form joint ventures. [...]
[...] Therefore, as the Chinese consumer possesses greater purchasing power, the demand for luxury sector goods is on the rise. In addition, the target market for luxury goods is greatly expanding as today luxury goods are no longer appreciated only by the "traditional" Chinese luxury shopper - typically a male, over 35 years of age who hold a senior position. On the contrary, many varying consumer segments which did not necessarily exist before are also giving their preference to luxury goods. [...]
[...] This can be explained by Hofstede's framework of culture, which characterises China as a collectivist society. In marketing terms this often translates into "opinion leaders" setting new trends regarding certain luxury products which are quickly adopted by their followers. Although more individualistic trends are emerging on the luxury market, opportunities are still plentiful for the "mass-marketing" of luxury products as they are also appreciated by the emerging middle class (Cavender and Rein, 2009). It is also worth to mention that China has the greatest number of internet users in the world at 450 million in 20101, which provides attractive opportunities for the development of e-commerce as more Chinese users opt for online shopping. [...]
[...] The influence of Chinese mentality on customer behavior Firstly, it is evident that a link exists between consumer behaviour patterns and historical events. For instance, China's defeat by the Western powers in the 19th century, the oppression of individualistic values after the victory of the Communist party in 1949, coupled with the "Middle Kingdom" superior mindset of the Chinese, have resulted in the desire to express one's individual identity, superiority and status through purchase of premium luxury goods (Degen, 2009; Yayuan, 2010). [...]
