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FTMG30256 - Chinese Luxury Market, Fashion Management
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Nottingham Trent University
Fashion Management (FTMG30256)
Added on 2020-03-04
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In today’s modern world, incomes are rising rapidly and luxury goods are getting available widely, with the attitudes regarding the display of wealth shifting with time. Due to this, more and more Chinese consumers are feeling more comfortable buying luxury goods. The interest in the Luxury Goods Segment is moving over jewelry, handbags, fashion marketing, and similar products.
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Running head: FASHION MANAGEMENTFashion ManagementName of the studentName of the UniversityAuthor note
FASHION MANAGEMENTAnalysis and DiscussionChinese luxury marketIn today’s modern world, incomes are rising rapidly and luxury goods are gettingavailable widely, with the attitudes regarding the display of wealth shifting with time. Due tothis, more and more Chinese consumers are feeling more comfortable in buying luxurygoods. Because of this, the love for these products in china is moving down the economicladder, meanwhile creating challenges and opportunities simultaneously for the marketerswho are used to serving just the very rich consumers. The upper middle class account for alarge share of the market and their numbers are increasing swiftly. The interest in the luxurygoods segment is moving over jewellery, handbags, fashion and similar products. A largenumber of the Chinese luxury goods consumers are also spending their money on spas andother wellness activities. The consumption for such luxury services are rising faster incomparison with luxury goods (Li, Li & Kambele, 2012). Over the past decade the Chinese have directed the world towards luxury shopping. By2015, China was offering more luxury retail selling space than Japan and was swiftlycatching up on USA, with the Chinese accounting for almost a third of the overall globalluxury spending. Particularly the wealthy Chinese tourists have been the key directors of theinternational luxury goods sales for more than a decade. As stated by the travel data releasedby Euromonitor International, the Chinese tourists made approximately 3 million trips to theUSA in 2015, which was an upsurge of around 8% from 2014 and a huge 206% upsurgeaccounted for in the five years from 2010 to 2015 (Travel in China, 2016). In 2015 itself theChinese made around 5 million trips to Japan, 2 million trips to France and 285 thousand
FASHION MANAGEMENTtrips to the UK, with most of these trips related to shopping expeditions or significant luxuryretailers and shopping hotspots (Economic Impact 2016, 2017).However, in the years 2014 and 2015, the mainland of China recorded its lowest growthof sales of luxury products from the time when records began (Global luxury goods salesgrowth to stabilise in 2015 - Bain, 2014). Among some of the other factors gettinginfluenced, this decrease in growth also implied that China would not be able to overtakeJapan and then go on to become the world’s second largest luxury goods market in the worldin the next consecutive five years and it is anticipated to uphold its current position ahead ofFrance and UK in the short to medium term.China’s grey luxury goods marketChina recently put in an effort of curbing the wrongdoings in the luxury goodsconsumption. The effort became a crackdown on the grey luxury goods market that hadprospered because of the major price variances among luxury goods within and outside ofChina. In cases of some Swiss-made timepieces, the alteration in price can be as high as 90%between Western Europe and China (Hancock, 2017). The major players in the grey market are mainly professional shoppers, who aretravelling abroad in most cases for buying luxury goods in bulk. They take that back withthem home for selling those wares either openly or online, and it has went on to become abusiness that is worth billions of US dollars. Back in 2016, the government stepped in tocombat the grey market by stepping up their customer control and raised penalties for falsedeclarations, which resulted in the increasing numbers of professional shoppers gettingcaught. However, this is just a single part of the crackdown. Beijing has even presentedharsher taxation laws in major categories, with hiking tariffs on watches from 30% to 60%and on jewellery from 10% to 15% (Master & Wendlandt, 2016).
FASHION MANAGEMENTThese tariffs are applicable on the goods that are legitimately purchased through theinternet and delivered in packages to China, and even on goods purchased abroad andbrought back to China. The government also put a cap of CNY100,000 (US$15,473) per cardon yearly withdrawals at foreign UnionPay cash machines. This is a huge issue for well-heeled Chinese tourists who are into shopping at luxury department stores like Barneys inNew York, Galeries Lafayette in Paris and Harrods in London (Lopez, 2016). Several brand leaders in the luxury goods industry were bewailing about the adverseinternational trading conditions for a long time, and their influence on China’s previously fastgrowing luxury goods market. This fresh crackdown over overseas spending by Chineseshoppers is another headwind to face and might be the most disorderly one till date. It was thehope of the Chinese government that higher tariffs would help durable luxury goods demandin the domestic market (Roberts, 2017).Chinese luxury consumer groupThe enormous and creating number of Chinese luxury buyers can be credited to therapidly rising disposable family pay rates in China. The amazingly well off Chinese familiesare clearly exceptional drivers of improvement for luxury and the prime concentration forluxury brands. In any case, the rising Chinese middle-class, including families with pay ratesbetween USD 9,000 and USD 34,000, have transformed into the fast rising buyer divide inChina – they have transformed into the subject of much thought from overall brands (Aroche,2015)These new contenders, whom are generally arranged in second tier urban groups, spend aconsiderable measure of their pay on luxury, using their purchases as pictures to demonstratetheir extending social and money related status, and their desires to accomplish status. Inspite of the way that middle-class customers spend less out and out than their wealthier
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