Tag Archives: consumer

Diamond Sales Get Huge China Boost

Xinhua Reports 12.7% Rise In Imports In First Half Of 2009 To $300 Million As China Eyes Top Spot In Global Diamond Consumption

Diamonds are becoming more popular -- and accessible -- every year in China

Diamonds are becoming more popular -- and accessible -- every year in China

Good economic news in China this year has translated to good news for diamond producers, if figures released recently by China’s news agency, Xinhua, are correct. This year, following a nearly 50% decline in diamond sales in the US and 24% drop in Japan — according to China’s Global Times — China has become the world’s third largest diamond market with $300 million in sales through the first half of the year. Although this might sound like a lot, particularly in the context of the global economic slowdown, the Chinese market still has a lot of room to grow. Despite rough figures in the US over the past year, the American market still accounts for nearly half of world diamond sales, so the emerging Chinese and Indian markets will take several years of sustained growth to reach the capacity and consumer awareness of the established American and Japanese markets, a prospect that must please diamond producers immensely.

According to the Global Times, less informed middle class Chinese consumers are likely to be the easiest to reach for years to come, as diamonds are still relatively new to the Chinese market (about as new as the middle class itself). As younger Chinese buyers slowly become more informed about diamond grading and quality standards, the market is likely develop and mature:

Diamonds, once a luxury rarely owned by a Chinese family, has now become a must for Chinese newlyweds. According to [Wang Fei, researcher at the Cheungkei Research Center for Luxury Goods and Services (SITE) in the University of International Business and Economics,] the largest population of diamond buyers is newlywed couples born in the 1970s and 1980s.

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Future For Luxury Goods Looks A Little Brighter

Growing Demand In China’s Interior, Other Asian Countries Should Counterbalance Tepid Consumption Elsewhere

Although Chinese consumers have shown a taste for foreign luxury brands, domestic labels will present stiff competition in coming years

Although Chinese consumers have shown a taste for foreign luxury brands, domestic labels will present stiff competition in coming years

As a result of the fast-paced development of China’s eastern coastline and special administrative regions, only recently have major luxury brands made it to the country’s vast interior region, where a number of second- and third-tier cities remain relative blank slates. Since so many companies are only reaching these areas now, the spread of luxury brands in China has become a regular news story. This has only intensified over the last year, as formerly free-spending Japanese and American customers have thought twice about luxury goods while emerging customers in places like the BRIC countries and relatively fast-growing economies like Vietnam become more regular (and brand-loyal) buyers. Nonetheless, the luxury sector is still experiencing only modest growth one year on from the onset of the global economic slowdown despite their best efforts at wooing new customers.

If many recent articles are correct, though, what we’ve seen over the last year — severe as it has been — should only prove to be a blip in the grand scheme of luxury revenues. From Financier Worldwide:

Sales of designer shoes, handbags, and beauty products have weathered the financial storm particularly well. At the end of August, French cosmetics company L’Oréal reported higher than expected profits of €1.37bn for H1 2009. In June, Hermès revealed it was farming crocodiles in Australia to feed demand for its coveted £4000 Birkin bag. Around the same time, Mulberry announced that its handbag sales had recovered, climbing 21 percent in the first 10 weeks of the new financial year. Shoe supplier Kurt Geiger, which operates in upmarket department stores across the UK, also reported double-digit growth in profits for the first five months of the year.

Bain & Company predicts that trading in the developed markets will remain tough for the rest of the year, with growth of around 1 percent in 2010 before a slow recovery. However, despite the recession slowing the pace of development in emerging markets, Bain believes that, as a consequence of increasing personal wealth, growth in global GDP, and rising tourism in Russia, China, India and Brazil, spending will surge between 20 percent and 35 percent over the next five years. This is expected to aid the recovery of the luxury goods sector.

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More American Vintners Looking To Expand In China Market

Growing Interest In “Pú Tao Jiǔ” Among Urban Chinese Spurring Wineries To Intensify Their China Expansion Strategies

By next year, wine imports to China are projected to reach 250,000 tons

By next year, wine imports to China are projected to reach 250,000 tons

China’s growing middle class has emerged over the last 20 years to be one of the world’s most closely-watched demographics, with marketers in virtually every industry keeping a keen eye on every purchasing trend they make. In more recent years, one of the industries that has benefitted the most from this sizeable group’s interest in all things foreign has been wine. Although the vast majority of Chinese are either unfamiliar with foreign wine or simply do not drink it very often (if at all), many vintners see great potential in the market, as target customers in more remote urban areas remain underserved by existing bars, liquor stores or supermarkets, and returnees who’ve traveled, worked or studied abroad often come back to China wine aficionados with a taste for wine.

Although per capita wine consumption in China remains miniscule by comparison, in China’s major cities it is becoming a more popular beverage, particularly in business or family settings, and in recent auctions of fine wine mainland Chinese buyers have increased exponentially, gaining notoriety among seasoned wine investors as intense bidders (and avid drinkers). Trying to maximize their appeal in China while reaching new markets, wineries outside China are working overtime to get their products to the mainland market while promoting wine drinking in China and building sustained brand equity.

As most of these vintners remain completely unknown within China regardless of their size overseas, the Chinese market represents a blank slate of sorts, allowing them to brand themselves at will without the stigmas that may exist in other markets. A good example of this is American wineries, who are often shunned for their European counterparts among American wine aficionados. As the China wine trade has opened up in the last 10 or so years, vintners from California and Washington state in particular have worked to get their bottles in the hands of the emerging Chinese wine drinker, to mixed success. California’s Lodi News-Sentinel, interviewing Van Ruiten Wineries’ Kevin Sherwood, today illustrates some of the opportunities the Chinese market presents for American and other foreign wine producers:

Around 2006 [Sherwood] developed a desire to market to China. It was around the time of the Beijing Olympics that Sherwood started to sense an opportunity. “It’s just as easy to sell to China as it is to go and sell to the restaurants in San Francisco and Walnut Creek,” he said.

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“Something’s Brewing” (Literally) In China

Popularity Of Coffee In the Chinese Market Leads To Rapid “Luxurification” Of The Standard American Coffee Shop

Chinese coffee chains like Ming Tien tend to promote their food and coffee in equal measures, but their comparatively high prices make it difficult for them to rival juggernauts like Starbucks

Chinese coffee chains like Ming Tien tend to promote their food and coffee in equal measures, but their comparatively high prices make it difficult to rival juggernauts like Starbucks

While any visitor to China’s biggest cities will quickly become accustomed to seeing familiar sights like Starbucks on virtually every corner, until recently coffee has remained something of a luxury in the world’s most populous  nation. Although tea has reigned supreme in China for thousands of years, after 30 years of internationalization the country has opened up to new beverages at a never-before-seen rate: whiskey has become the drink of choice for many of China’s business and political elite, Chinese collectors are snapping up prize bottles at fine wine auctions, China consumes more beer than any other country on earth, soft drink companies like Coca-Cola lean on their reliable China profits, and now coffee is quickly becoming less of a niche drink and more of a daily necessity for millions of Chinese.

Though coffee is less widely consumed in China than other beverages, Chinese coffee chains have multiplied in number in the last 20 years, with large mainland companies like Ming Tien Coffee Language and Taiwan’s UBC Coffee becoming somewhat ubiquitous even in smaller second- and third-tier cities that are less westernized than Beijing, Shanghai or Guangzhou. China International Business today looks into the sustainability of this growing interest in coffee in China, and how companies like Starbucks and other major foreign chains have capitalized on their “foreignness” to promote coffee as a sophisticated, “western” drink that stands in stark contrast to tea:

According to the April 2009 Euromonitor International Report, the total volume of coffee sold in China grew over 10% in 2008, a hefty figure compared to the world average of roughly 2%, and Starbucks — which opened their first Chinese mainland coffee shop in 1999 in Beijing — isn’t the only one leading the charge, far from it in fact.

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Luxury Brands Refocus On China

Studies Indicate Sluggish Demand In Established Markets Will Continue As Buyers Remain Motivated In China

According to new studies, Chinese luxury enthusiasts may help buoy the global luxury market for the next few years, if not drive long-term growth

According to new studies, Chinese luxury enthusiasts may help buoy the global luxury market for the next few years, if not drive long-term growth

Luxury brands have had what can conservatively be called a tough year, with the global economic crisis putting a gaping wound in their profits in traditionally high-demand countries like the US and Japan, and recovery lagging behind expectations. These figures have been tempered somewhat by the potential of the Chinese market to soften the blow of falling demand elsewhere, if not counteract it completely. While it is still a bit quixotic to expect China to be the savior of luxury brands everywhere — since it is still very much a developing market — it does benefit luxury brands to plan ahead for the time when China is the world’s biggest luxury market, and start brainstorming on their long-term strategy for sustained growth as well as strong brand loyalty.

This week, Harvard Business looked into the Chinese luxury market, digging through statistics to discern whether this market truly is all it’s cracked up to be. While their findings suggest that hyperbolic enthusiasm about the Chinese consumer is unwarranted — as we’ve written before — they do remain bullish about the potential of this populous and fast-moving market:

New research from McKinsey & Co. indicates that, by 2015, China will be home to the world’s fourth-largest population of wealthy households, an estimated 4.4 million. McKinsey also reports that presently, about 80% of China’s wealthy are between the ages of 18 and 45 (versus 30% in the US). Jing Ulrich, the chairman of China equities at Morgan Stanley, was recently quoted in Forbes as saying of China, “With the global recovery unlikely to be smooth, domestic demand is likely to remain the primary engine of growth in the remainder of 2009.” In a Wall Street Journal op-ed last year, Zachary Karabell argued that “the rise of the Chinese consumer is the only thing standing between them [global companies] and a decline in their business.”

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China’s Luxury Market Expected To Avoid The Worst Of The Economic Crisis

Growth Of Brands Like Gucci, Burberry In The Mainland Shows Growing Faith In Chinese Consumer Among Western Luxury Retailers

Luxury brands like Louis Vuitton have stormed the mainland in the last five years, growing quickly even in second- and third-tier cities, as consumption rates in developed markets slow

Luxury brands like Louis Vuitton have stormed the mainland in the last five years, growing quickly even in second- and third-tier cities, as consumption rates in developed markets slow

As signs that the worst of the economic crisis may have passed are increasingly pointed out by Bloomberg, The Wall Street Journal and others, attention has spread to the beleaguered global luxury market. While growth in this market has come to a screeching halt in traditional markets like Japan and North America as consumers cut back, analysts have predicted that the corresponding rise of the Chinese consumer — a rise that has been expedited by the Chinese government’s rapid shift to promoting a consumer-based, rather than export-based, growth plan — helps luxury brands ride out the ongoing global slowdown. According to many luxury CEOs, the key to their brands’ continued survival and expansion in this market lies solely in emerging markets like Russia and China. So the question has become, will it be enough to keep these brands afloat?

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Coach Appoints New China President, Eyes Rapid Mainland Expansion

Andre Cohen (LVMH, Swatch, Timberland) Responsible For Leadership & Results Of Coach China — Including Mainland, Hong Kong And Macau

Coach opened one of its largest Asian locations in Hong Kong last summer: The company is looking to expand quickly in the lucrative Mainland market as well

Coach opened one of its largest Asian locations in Hong Kong last summer: The company is looking to expand quickly in the lucrative Mainland market as well. Photo © Hong Kong Hustle

It is no secret that American luxury brand Coach has its sights set on the rapidly-growing Chinese luxury market — we have written before on the company’s long-term growth strategy in the Greater China region. As other luxury brands enter the Chinese market, many of them focusing on the country’s burgeoning second- and third-tier cities (where middle-class growth is expected to grow the fastest), Coach is retooling its marketing and brand positioning platform to become even more competitive.

The company’s newly-appointed China Region President, Andre Cohen, who is due to begin his job next month, has a great deal of experience building western brands in the Asia-Pacific region — having spent time in Singapore, Malaysia, and Japan working for Timberland, Swatch, and LVMH — and Mr. Cohen’s plans for the China market are shaped by his successes with these brands in other Asian markets.

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