Beauty in the East

Ruder Finn Asia, part of Ruder Finn’s international network, one of the world’s largest independent public relations firms, together with Albatross Global Solutions, one of the leading market research companies on the luxury industry segment throughout Asia, today jointly released their 2009 China Luxury Forecast. The report shows that theglobal economic downturn has had limited impact on Chinese luxury consumption and that there is widespread confidence in the future among Chinese luxury consumers.

The 2009 China Luxury Forecast interviewed 1,000 luxury consumers with an average annual income of RMB 240,000, from a total of 21 cities including Beijing, Shanghai, Guangzhou, Hong Kong and 17 tier-2 cities in East, South, West and North China. The survey was conducted during April and May this year. By analyzing consumer confidence and purchasing power, purchasing behavior and intention as well as the information channels that influence decision making, the report aims to help marketers better understand the prevailing behaviors among Chinese consumers and foreseeable trends in luxury consumption over the next year.

In Greater China as a whole, more than half (50.3%) of respondents claimed they will not let the global economic downturn affect their purchases of luxury goods; nearly nine out of ten (89.3%) of respondents said they will not change their preferred categories during the crisis. Tier-1 cities showcase their strong sense of consumer optimism, with 58.9% of respondents claiming that price has little impact on their purchasing plans, against54.6% in tier-2 cities, which is only slightly behind. Beijing expressed the highest optimism among all the surveyed cities, with 44.8% respondents feeling “confident” to “very confident” about their future purchasing power. However, in Hong Kong, luxury consumption and consumer confidence are most affected and consumers maintain a cautious approach compared to mainlandcities. Only one out of ten respondents from Hong Kong was confident that his/her purchasing power would likely increase over the next year whilenearly half said they would maintain a cautious attitude. The remaining 40%expressed pessimism about the future.

Other highlights of the report:
· The gap between tier 1 and tier 2 luxury markets is smaller than anticipated. Consumers in tier 2 cities are becoming more mature in areas such as consumer perceptions, behaviors and the use of information channels
· Traditional media remains an essential communication tool for the Chinese luxury market but the increasing use of internet technology is changing the rules. How to leverage various internet applications to strengthen the “word-of-mouth” effect to enhance and maintain brand reputation has become one of the crucial considerations for decision makers in luxury brands.
· International luxury brands such as LOUIS VUITTON, CARTIER that tapped into the Mainland Chinese market as early as the 90’s, remain in the top positions today despite facing a more competitive market. They have benefited from their long-term, localized and mature marketing events and promotions. The tables below show the preferred brands of respondents in different cities: While Hong Kong remains the main luxury hub in China, with 43.2% of respondents selecting the Special Administrative Region as their favorite destination to purchase luxury items, Shanghai is becoming a luxury hub in its own right. This is especially true in East China, where the city is chosen by 33.3% of tier-2 cities respondents. Because of the strong purchasing power of consumers in this region, we anticipate that Shanghai’s position as a hub for luxury consumption in Mainland China will only increase in the future