Prestige 100®: China

Key Takeaways

over the next 15 years the global addressable market for luxury goods is expected to grow by 600 million consumers provoking growth forecast 2.2 times GDP much of this growth is to come from one market China in 2000 the Chinese market accounted for a fraction of luxury sales globally year after year of double digigit growth has resulted in tens of millions of Chinese consumers armed with disposable income and a voracious appetite for luxury goods in 2009 China overtook the United States to become the second largest luxury Market by 2015 it is projected to overtake Japan and become the largest luxury Market the algorithm for success in China is different the Chinese luxury purchaser is much younger McKenzie reports that 73% of Chinese luxury consumers are under the age of 45 and upwards of 45% are under the age of 35 suggesting that the majority of prestige purchasers are digitally native in the US the average female Prestige consumer registers household income of $150,000 and spends $3,000 annually on handbags in contrast the average female Prestige consumer in China makes $177,000 and spends $2,000 annually on handbags often these purchases occur after 2 to 3 months of research and consideration most of it done online with 75 % of wealth creation expected to occur outside tier one cities luxury companies also face huge challenges with brick-and-mortar buildout Expediting the shift to e-commerce finally increasing awareness of counterfeit merchandise coupled with significantly lower prices abroad has led to 56% of Chinese luxury purchases occurring outside of China Brand's digital marketing Investments on the mainland Drive sales not only in Shanghai and Beijing but also in New York Paris and Hong Kong the digital landscape in China is different not a single Global Internet leader is number one Google continues to lose share in the Chinese search Market currently local search engine by's market share stands at 76% versus Google's 19% this is a dramatic shift from 2009 when BYU controlled 58% of the market versus Google's 36% with Facebook and Twitter blocked the social media ecosystem is also different we measure brand efforts on seven native ch social media platforms unlike most markets where Network effects have led to Natural monopolies the proliferation and fragmentation of Chinese social networking sites presents a huge challenge to marketers Chinese micro blogging platform Cena weo launched in August 2009 the platform has added 10 million plus users per month and recently to 200 million registered accounts Cena W has become the platform of choice for Prestige Brands our thesis at L2 is that success in the world's fastest growing luxury Market is inextricably linked to digital competence