China is a hot market for luxury goods. For luxury goods manufacturers who can survive counterfeit products, luxury taxes, and consumer education, great rewards await. Investment plays include not only luxury goods houses like LVMH, Prada, and Armani, but also advertisers to the affluent and retailers focused on up-market clientele.
Despite a populace dominated by peasants on a subsistence income, China is now the third largest luxury goods market in the world, accounting for 12 percent of sales worldwide in 2006. Analysts predict that, as China’s average per capita income grows, it will become the world's second-largest purchaser of luxury goods by 2015, surpassing Japan's vaunted luxury demand and accounting for the sale of 29 percent of all luxury good sales worldwide. The China Daily reports that the market is forecasted to grow 20 percent annually until 2008 and then 10 percent per year until 2015.
Some Chinese spending is driven by people’s desire to enhance their own social status and visibility by an association with famous brand names. Not many years ago, it was not an uncommon sight to see owners of a new suit or that conspicuously “forget” to remove the brand name and price tag that revealed the maker and high price of their new apparel. The China Brand Association recently said about that 13 percent of Chinese, about 170 million people, regularly buy top-tier brands.[1] Meanwhile AC Nielsen believes that, “to succeed, luxury-goods companies must woo the top segment of the Chinese consumer market — the 15 million people who earn 250,000 yuan ($32,000) or more a year
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