The British Chamber of Commerce recently interviewed me on the topic of luxury consumerism in China for the Spring-Summer issue of their business publication, the ChamberEye. I follow an interview on China’s middle class consumers with Tom Doctoroff, CEO of JWT Greater China and author of Billions.
I have included selected responses below, but the complete online version will eventually appear on the ChamberEye site here.
What is the current state of China’s luxury consumer market?
China is currently the fastest growing and second largest luxury goods market in the world, second only to Japan. It is expected to reach the number one spot by as early as 2015. In 2009 Chinese consumers purchased 27.5% of the world’s luxury goods at a total of 9.4 billion USD, in comparison to 2004 when the total was only 2 billion USD. The rate at which the luxury market has grown is tremendous having both the world’s second largest diamond market, and the number one automobile market.
It is important to note that luxury goods consumption is not limited solely to tier 1 cities such as Beijing and Shanghai. On the contrary, the majority of luxury consumers are growing in areas outside of China’s major cities.
Can you provide a few examples of Western multinationals that have localized their product for China’s luxury market and achieved success?
While General Motors is not seeing the growth it once experienced home in the US, it is seeing spectacular results in the world’s new largest auto market. In recent years GM fueled its success by localizing automobiles specifically for the Chinese consumer. It has been so successful that much of the innovation in their Shanghai center have been exported into the designs of their cars in developed markets. One example is the Buick LaCrosse in China. GM’s design team in Shanghai completely revamped the original for the China market and enabled the company to sell nearly 110,000 units in just its second year in production.
Pernod Ricard, a French wines and spirits company is achieving great success with it’s Chivas Regal Scotch whiskey. Beyond localizing it’s staff and operations with a vineyard in northern China, the company has embraced the localization of how their product is consumed. Chivas Regal, a premium liquor, has always been looked at as a luxury form of alcohol that drinkers should savor the taste alone. Chinese luxury consumers came up with their own twist of mixing Chivas Regal with green tea. After an initial hesitance, the company has embraced this localized preference and Chivas Regal now sits only behind Rémy Martin cognac on a ranking of premium spirits in China according to a recent report by Credit Suisse.
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