Asia Accounts For Largest Share Of World’s Luxury Market, Even As Global Financial Conditions Remain Grim
The Financial Express writes on the $80 billion global luxury market, which has fallen on hard times in the last year in most markets, yet continues to perform admirably in emerging economies and in East Asia. As the financial crisis wears on, and target markets in developed countries hold back, luxury brands have adapted quickly. Rather than courting reluctant customers, luxury brands have refocused their attention more to the world’s most populous nations, China and India, as consumers with the means to purchase luxury products in these countries continue to do so even as the rest of the world hunkers down for what could be a protracted recession.
Taking a view of the Indian market, the reporter feels that emerging markets like China and India are good targets for luxury brands in the long term, because attendant to a rise in per capita income has come a sophistication in consumer tastes — which in this case has brought increased interest in luxury cars, fine art, fashion, and jewelry:
India is seeing a lot of change; people are becoming more aware of things that were common to their counterparts in the western world. Be it luxury cars or perfumes—the understanding of luxury brands in India is growing slowly but steadily. While most automakers are bullish about the small car market in India, the real action, in growth terms, may be shifting to the creamy layer as the luxe car market revs us in India. Same with many other product categories in personal grooming.
Associations are made on the basis of heritage and how the brand philosophy helps elevate your status in the society. India is one of the few countries where a want is fast transforming into a need.
I think the key figures to watch out for to see the true strength of these luxury brands in emerging markets, particularly in China (which accounts for far more of Asia’s luxury market share than its neighbor to the west), is the spread of luxury brands into the second- and third-tier cities. If this spread continues even in the midst of the worst global economic conditions in 60 years, which appears to be happening in China right now, then luxury brands can be confident that they will continue to grow in these markets for years to come.
Consumers in Beijing, Shanghai, Guangzhou, and Hong Kong have been exposed to luxury brands for roughly 20-25 years — far longer in Hong Kong — and are actually more of a target for domestic luxury brands, since they have become comparatively apathetic about these products. Potential customers in smaller cities, however, have never been reached out to by these foreign luxury brands, and may have only amassed a decent amount of disposable income in the last few years. As retail outlets spread beyond second-tier cities like Xi’an and Chengdu out to third-tier cities like Nanning and Wenzhou, major global luxury brands don’t have to worry so much about ensuring that their profit margings continue to grow — even if not quite as fast as they’d like — in Asia.