Beauty in the East

July 26, 2009
The 2009 China Luxury Forecast, jointly conducted by Ruder Finn Asia and Albatross Global Solutions, shows that the gap between the tier 1 and tier 2 luxury markets is narrowing. Consumers in tier 2 cities are becoming more maturein areas such as consumer perception and purchasing power. The survey interviewed 1,000 luxury consumers with an average annual income of RMB 240,000. Respondents from tier 2 cities in East, South, West and North China accounted for nearly half of the total sample.
Consumer confidence and purchasing power
Luxury consumption confidence on par: Despite the current economic situation, consumers in tier 2 cities show a strong capacity for luxury consumption, with 54.6% saying that prices have little impact on their optimistic view that their purchasing power will increase. This is only 4.3% lower than the proportion in tier 1 cities. When asked how confident they were about purchasing power over the next year, 36.6% of the respondents in tier 2 cities expressed confidence compared to 38.9% in tier 1 cities.
Smaller gap in purchasing power: In tier 2 cities, 74.9% of the respondents are likely to spend less than RMB 20,000 a year on luxury fashion and accessory items, which is slightly more than in tier 1 cities. Almost a quarter (23.5%) said they would spend between RMB 20,000 and RMB 100,000 a year on luxury fashion and accessory items, which is only 10% less than the number in tier 1 cities. The percentage of respondents spending between RMB 100,000 and RMB 200,000 a year is nearly the same in tier 1 and tier 2 cities.
When it comes to luxury watches and jewelry, 19.1% of respondents in tier 2 cities will spend between RMB 20,000 and RMB 100,000, only 3.7% less than those in tier 1 cities.
Purchasing triggers
Luxury goods as gifts for business: More than 80% of the respondents buy luxury goods for personal use. A small number or respondents purchase luxury goods as business gifts and this is three times more in tier 2 cities (7.6%) than in tier 1 cities (2.2%).
Brand comes first when considering a purchase: The level of luxury brand awareness is narrowing between tier 1 and tier 2 cities. Among all the measured factors, “Brand Reputation” was named as the most important factor by 75.3% of respondents in tier 2 cities, followed by “Brand Heritage”. In addition, some 46.6% of respondents in tier 2 cities said that they are loyal to certain brands, which is close to the percentage in tier 1 cities (47.2%), while Eastern tier 2 cities top the national list with 51.7%. As there are fewer luxury brands in tier 2 cities than in tier 1 cities and Hong Kong, the faster brands tap into the tier 2 markets, the easier it will be for them to build brand loyalty.
Point of Sales
Luxury department stores are the main channel for getting information: 64.5% of respondents in tier 2 cities said they sourced their information on luxury goods from leading department stores, 15% more than in tier 1 cities. The highest incidence of this is in East China where 70% are more likely to obtain information from salespersons in stores. In addition, 61% of the respondents said that a salesperson’s attitude would influence their purchasing decision while 54.6% said they would make a decision after carefully listening to the advice of sales staff.
Information ChannelsUse of information channels similar: The results show that whether in tier 1 or tier 2 cities, the majority of the respondents get brand information from print media articles. Nearly 82% of tier 2 city respondents prefer to learn about new trends among the brands by reading about them in print publications, while some 20% say they get their information from television. Figures are similar for tier 1 city respondents.

http://www.ruderfinnasia.com/util/news/2009-china-luxury-forecast-shows-upward-trend-in-china-s.html