Refined Strategies : luxury extends its reach across China

International Kpmg

Description

Much has changed since our previous report on China’s luxury market in 2008 and we face a markedly different global economic landscape. As in many other aspects of the global economic crisis, China is bucking a global trend in luxury consumption: with sales falling by up to 8 percent across the globe in 2009, China saw estimated sales growth of 12 percent.1 By some measures, China is now the second largest luxury market in the world, after Japan.

Sujets

• China
• Luxe
• Consumer Reports
• Trends-Tendances
• Analyse
• KPMG

Informations

• Publié par: kpmg
• Publié le: 01 juin 2011
• Nombre de lectures: 116
• Langue: English
• Poids de l'ouvrage: 2 Mo

Extrait

Refined Strategies: Luxury extends its reach across China consumer markets Luxury v21_output (Europe).indd 1 5/18/10 9:42:48 AM© 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved. Luxury v21_output (Europe).indd 2 5/18/10 9:42:48 AMCONTENTS 2 Introduction 3 Key findings 4 About the survey 5 Effect of the downturn: China’s consumers emerge confident from 2009 12 Luxury consciousness in China 22 Technology: Can mass media be exclusive? 25 Working capital challenges for luxury businesses 30 Strategies in a strengthened transfer pricing environment 33 Customs approaches for luxury companies 38 About KPMG 39 About TNS 40 Contact us Case studies – Tim King, Alfred Dunhill Ltd. – Kent Wong, Chow Tai Fook – Allison Pyrah, Swarovski – Helmuth Henning, Jebsen & Co. – Denise Lo, Richard Mille Asia – Mark Lettenbichler, Ritz Carlton Group Hotels – Andrew Yu, I.T Group – Raphael le Masne de Chermont, Shanghai Tang © 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved. Luxury v21_output (Europe).indd 1 5/18/10 9:42:48 AMIntroduction In particular, the “super rich” segment China – not merely in the more well- has continued to grow despite the known major cities of Beijing, Shanghai recent global economic turbulence. and Guangzhou. To that end, we have While younger professionals and highlighted a number of tier-two and other aspiring consumers may have three cities that, while not having struggled to command higher salaries the same global fame, have large over the past year, privately-owned and increasing numbers of wealthy enterprises are increasingly surpassing households. nick Debnam the former state-owned enterprises as Partner in Charge generators of wealth, creating a new There is also clear scope for greater Consumer Markets consuming elite. The October 2009 use of technology in communicating KPMG China launch of ChiNex, China’s Nasdaq- with customers. With the ubiquity of style second board in Shenzhen, is an mobile phone usage in China, and the Willy kruh illustration of this, effectively creating advent of 3G technology expanding Partner and Global 3dozens of yuan billionaires overnight. what can be done through mobile Head communications, there are plenty of Consumer Markets Our latest survey shows Chinese options for engaging customers on luxury consumers maintaining an ongoing, personal basis. While the reasonable confidence about their importance of the in-store experience economic situation, as well as being continues to trump ideas of major Much has changed since our previous comfortable with the idea of paying online luxury retailing, customers report on China’s luxury market in large sums of money, and ever more are looking to the web to research 2008 and we face a markedly different discerning and sophisticated in the different brands. Luxury companies global economic landscape. As in many retail choices they make. On the back looking to connect with the public other aspects of the global economic of our 2008 report’s focus on different should be making the most of the crisis, China is bucking a global trend city tiers, it is clearer than ever that interactive media available to them.in luxury consumption: with sales China is not simply one luxury market, falling by up to 8 percent across the as it has a wide range of influences, Opportunities continue to abound globe in 2009, China saw estimated 1 drivers and perspectives in different in the China luxury sector, and the sales growth of 12 percent. By some segments across the country. rewards are potentially huge. If you measures, China is now the second are interested in further discussing largest luxury market in the world, 2 Despite the relative optimism about the issues and suggestions raised in after Japan. the Chinese luxury market, many this report, KPMG China’s dedicated respondents expected to decrease Consumer Markets team would be With decreased business travel their spending on luxuries in 2010. delighted to share their knowledge and expectations, China’s mainland Retailers will need to remain alert to insights with you.luxury stores may be in a position potential downward shifts in certain to capture a greater proportion of product sectors. Chinese consumers’ luxury spending. Whichever way you look at it, China’s There continues to be huge potential relatively confident consumers are for growth and opportunities across now a key factor for the global luxury market. 1 “Luxury Goods Worldwide Market” study, Bain & Company, October 2009 2 China becomes world’s 2nd largest luxury market, People’s Daily, 27 July 2009 3 Stocks sizzle as China debuts start-ups market, Reuters, 30 October 2009 2 REfINED STRATEGIES: LuxuRy ExTENDS ITS REACH ACROSS CHINA © 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved. Luxury v21_output (Europe).indd 2 5/18/10 9:43:01 AMREfINED STRATEGIES: LuxuRy ExTENDS ITS REACH ACROSS CHINA 3 Key findings Effect of the downturn • Thirty-eight percent of respondents expect to spend less on luxuries due to the economic downturn. However, 44 percent say they will spend either the same amount or more. • Most of those who are expecting to spend less say they would rather spend less on higher-level brands than switch to cheaper brands. • Brands can consider responding to this environment with more closely- managed working capital strategies. Luxury drivers • Personal reward and pampering rank as the main motivators for luxury spending, closely followed by formal use – clearly demonstrating luxury’s psychological, as well as physical, function. • The in-store experience remains an important driver of the “specialness” of luxury, highlighting the importance of impressive retail spaces and attentive, well-trained service staff. City tiers • Despite some hesitancy from respondents in tier-two and tier-three cities, retailers report bullish expansion plans across China. • Companies looking to extend their footprint to new cities should consider the pros and cons of franchising, direct investment and partnership to enhance their chances of success. Technology • Though respondents were generally positive about paying for general retail purchases by mobile phone, there appears to be less interest in paying for luxury goods this way, highlighting the continued importance of the direct retail experience. • Companies may nevertheless be able to explore mobile marketing communications: 57 percent of respondents would be interested in receiving updates on new arrivals or limited editions by SMS; while 64 percent would be interested in validating the genuineness of their purchases using their mobile phone or device. Tax and customs issues for the luxury sector • The downturn has increased pressure on nations’ tax bases, and Chinese tax authorities are becoming increasingly stringent in their transfer pricing requirements and monitoring. • Luxury retailers should pay particular attention to opportunities for customs savings in their treatment of items such as royalty payments and marketing expenditure. © 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved. Luxury v21_output (Europe).indd 3 5/18/10 9:43:01 AMAbout the survey TNS conducted their survey of luxury consumers in the third quarter of 2009. They conducted interviews with 927 consumers, all of them between 20 and 44 years of age. To qualify, respondents in Beijing, Shanghai, Guangzhou and Shenzhen needed to earn RMB 6,500 or above. In other cities, it was RMB 4,500 or above. These other cities included fuzhou, Hangzhou, Nanjing, Dalian, Harbin, Shenyang, Tianjin, Wuhan, xi’an, Chongqing and Chengdu. The female: male ratio was 51:49 and 71 percent of respondents were educated to college/university level or above. The consumer research was supported by qualitative research, involving 12 in-depth interviews with high- earning consumers. unless stated otherwise, statistics referred to in this report are based on TNS research. © 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved. Luxury v21_output (Europe).indd 4 5/18/10 9:43:42 AMREfINED STRATEGIES: LuxuRy ExTENDS ITS REACH ACROSS CHINA 5 Effect of the downturn: China’s consumers emerge confident from 2009 In the aftermath of the financial crisis of late 2008, it was not immediately clear how deeply China would be affected. Overall, China rebounded better than 4many other nations, with GDP growth of 8.7 percent in 2009. However, the downturn could not help but have an effect on China’s generally confident luxury consumers. TNS survey respondents indicate that their spending plans were affected by the crisis, though confidence rose as the Chinese economy seemed to bear up strongly in the global recession. Luxury retailers in China were further protected by the continuing co