MY TASTE: Chinese urban consumers born in the 1980s have developed their taste for designer brands since their childhood and are displaying a high loyalty to certain brands (CFP)
While people in the developed world are cutting back on luxury items to make ends meet, the big luxury brands are targeting the swelling wallets of China's nouveau riche to boost sales of their jewelry, clothing, purses and other lifestyle accessories.
Still remembering the price of her first luxury watch, a Longines she bought in 1995 at more than 7,000 yuan ($1,025), 42-year-old Lisa Li flashed cash on her 16th watch, a Rolex. She paid more than $8,000 for it last year, the most expensive luxury item she has ever owned.
Li, the owner of a raw material import company in Tianjin, said that she spent more than 200,000 yuan ($29,282.6), approximately 10 percent of her annual income, on luxury items such as suits, shoes and watches last year. Li admitted the ongoing crisis has affected demand for her business because quite a number of export-oriented manufacturers have cut production and in some cases even shut down.
Despite the difficult economic climate Li remained confident about her career and future income growth. "I will surely spend more on them [luxury items] in accordance with my income increase," she said.
Li is an example of China's growing urban elites, the result of a three-decade-old economic boom, who have come to see luxury items as a way of life.
A recent report, The 2009 Report on China's Luxury Goods, compiled by public relations agency Ruder Finn Inc. and Albatross Global Solutions, a marketing services agency for luxury brands in Asia, showed that while the financial crisis caused general decline in demand for luxury brands in Europe, America and Japan, the Chinese luxury goods market is still thriving, indicating the economic impact of the financial crisis on China is relatively limited.
The report said China surpassed the United States to be the world's second largest luxury goods consumer after Japan, from the beginning of 2008 to January 2009, accounting for 25 percent of global sales. The Ministry of Commerce last September predicted China would become the world's largest luxury market by 2014, accounting for 23 percent of global business.
Although Chinese domestic consumers became more sensitive to the prices of luxury goods due to the global economic downturn, they're still confident of the future, according to the report.
The report said more than half of the about 1,000 respondents didn't think the prices will affect their consumption behavior, and nearly 90 percent said that they would not change their preferences for luxury goods just because of the economic weakness.
China's expanding middle class constitutes an important group of consumers who desire and can afford luxury goods. According to Understanding China's Wealthy, a Mckinsey quarterly report released in July 2009, the number of well-off Chinese households, which have more than $36,500 in annual family income, stood at 1.6 million last year and will grow by 16 percent every year to reach 4.4 million by 2015, next to the United States, Japan and Britain.