Chinese luxury consumers are becoming more sophisticated, seeking self-reward and unique brands over status symbols. They have developed expertise in luxury brands' histories. While established brands like Louis Vuitton remain prestigious, new brands are growing in popularity. China has become the top destination for luxury shopping, surpassing Hong Kong and Europe, especially in tier 2 and 3 cities.

1. Changes in luxury shopping behavior among
Chinese consumers
Nov.19. 2012

2. Key Findings
• Connoisseurship and self-reward growing while status declining
• Luxury consumers have started to develop a good knowledge of brands
• Consumers are becoming "more sophisticated" in their tastes
• China itself has become the go-to destination for buying luxury goods in 2012
replacing Hong Kong and Europe
• Popular luxury brands see a slowdown in their China sales as new and chic
brands sales rise
• However, one aspect of the luxury market that has not changed was the status
of established luxury brands in the Chinese mindset.

3. Connoisseurship and self-reward growing while status declining
There has been a continued rise in experiential and connoisseurship
based behaviors. Connoisseurship and self-reward are becoming
stronger motivators and when compared to the findings from KPMG’
2008 study, this is largely at the expense of status seeking.
The strongest single motivation cited by consumers remains self
reward, which over 40 percent also stating that consumed luxury “to
pamper themselves” or “too enjoy the luxury experience”.

4. Source: Luxury Experience in China, KPMG,2011

5. Source: How Consumers Perceive Luxury Brands in China
Grail Research, March 2012

6. Luxury consumers have started to develop a good knowledge of
brands
They are beginning to appreciate the brands heritage and are making
more sophisticated purchase decisions. For example, the British luxury
menswear brand Gieves & Hawkes is particularly appealing to Chinese
customers as they come to know its long history of offering the British
Royal family, British Army and Royal Navy with tailoring and ceremonial
uniforms.
This understanding has actually triggered sales for the brand as Chinese
consumers greatly appreciate the royal association and are more inclined
to view the brand as high-class and high-quality.

7. Source: Luxury Experience in China, KPMG,2011

8. Consumers are becoming "more sophisticated" in their tastes
“A few years ago, it was common for Chinese men to leave the
label sewn to the sleeve of their suits so that people knew what
brands they were wearing, now, he says, these same buyers
are moving into more subtle, albeit high quality, designs”
---according to a report by HSBC's head of consumer brands,
Erwan Rambourg.
http://money.cnn.com/2012/10/03/news/world/china-luxury/index.html

9. Patricia Pao
CEO of the Pao Principle, which
consults with luxury brands in China.
Luxury shoppers in China want to flaunt their wealth but in more
subtle ways, Pao said China's one-child policy has also
contributed to this shift, since it has led to a generation of "little
emperors" among the rich who want to look unique. “ "The luxury
market is still moving very quickly, there's still a lot of money for
people to spend, and they're going to be taking a more
sophisticated approach. They don't want to just walk around with
big LVs anymore.” ----CNN Money
http://money.cnn.com/2012/10/03/news/world/china-luxury/index.html

10. Davy Ye
A 45-year-old managing director of a
foreign communications company
“Louis Vuitton, Gucci, Omega, Versace and Hugo Boss? No!
Although these luxury brands have been admired by some
Chinese people, to others, like me, they are somewhat
synonymous with parvenu - a rich second-generation, or of
graft-taking and bribery bureaucrats in China."
On that day, Ye wore a suit custom-made in a specific tailor's
shop, a Swiss-made and limited-edition Jean Richard watch,
and custom-made shoes, made in an independent shoe studio
in Milan. Concerning bags, he said he likes the Punch series
from Bree, a German bag-and-case brand established in 1970.
http://www.chinadaily.com.cn/business/2012-10/04/content_15796508.htm

11. Rupert Hoogewerf
Chairman and chief researcher of
Hurun Research Institute
"More and more rich Chinese are seeking top luxury
brands that have long history, top prices and a low-key
manner, I met a newly rich Chinese recently who said the
most favorable wine brand is La Tache. I consider myself
as having a great deal of knowledge of luxury products, but
had no idea about La Tache and found out it is a
superpremium brand that originated in Bourgogne, France,
only after researching it on Google.”
http://www.chinadaily.com.cn/business/2012-10/04/content_15796508.htm

12. China itself has become the go-to destination for buying
luxury goods in 2012 replacing Hong Kong and Europe
As retailers and marketers have rushed into China, shoppers there
are responding, triggering a shift particularly among consumers living
in China’s so-called Tier 2 and Tier 3 cities outside the metropolises
of Beijing and Shanghai. Survey respondents said that China will be
their first stop when it comes to all luxury categories, a shift from last
year, when the same survey found that Hong Kong was the first
destination for their purchases of watches, jewelry, cosmetics, shoes
and handbags, and that Europe was their first destination for luxury
wines, spirits and cigars.
The Ruder Finn/Ipsos China Luxury Forecast, June 2012

13. Second-tier cities
Chinese Consumer Report- Luxury, ROLAND BERGER, Oct. 2012

14. Popular luxury brands see a slowdown in their China sales as new
and chic brands sales rise
Burberry Group,Richemont and LV released data showing the
decreasing Asian demand, especially the China market. But not all
retailers are hurting, Paris-based Hermes International SCA reported
on Aug. 30,2012 a 28 percent rise in profits in the first half of its fiscal
year compared to last year and raised its earnings estimate for the
year. PPR that owns Gucci and Bottega Veneta, posted a sales
increase of 24.4 percent in Mainland China. Belgian Fashion house
Maison Martin Margiela is also doing well in China. It planed its newest
and biggest boutique in Beijing last year and see huge increase in
sales.

15. Some brands that are getting popular among Chinese consumers
8000
5,000 Brand Mention
Brand Mention 7000
4,500
# of Taobao listings
4,000 6000
# of Taobao
3,500 listings 5000
3,000
2,500 4000
2,000 3000
1,500
2000
1,000
500 1000
0
0
10'-11' 11'-12'
10'-11' 11'-12'
Goyard Maison Martin Margiela

16. However, one aspect of the luxury market that has not changed
was the status of established luxury brands in the Chinese
mindset.
According to the Ruder Finn/Ipsos China
Luxury Forecast, Louis Vuitton was
ranked No. 1 with a Top of Mind (TOM)
awareness of 39 percent (without
prompting) and a spontaneous recall
(Spon) of 65 percent. The French fashion
icon was followed by nine other
European big-name brands.

17. Chinese Consumer Report- Luxury, ROLAND BERGER, Oct. 2012