Luxury Market In China A Mixed Bag For Foreign Brands, Who Fight To Get Customers To Buy Inside China Rather Than Traveling Overseas
Although Beijing and Shanghai are China's "crown jewels," second-tier cities like Chongqing may ultimately prove the engines for the creation of a more comprehensive Chinese consumer culture
We’ve discussed recent reports on the rebound of the Chinese luxury market (which didn’t drop that much to begin with, despite global economic woes), and this year’s findings in McKinsey & Company’s Insights China report that China is rocketing towards the top of the list of the world’s biggest luxury markets. Although China remains one of the only bright spots in the world of luxury retailing at the moment, foreign luxury brands — despite rapid growth in the mainland market — often have difficulties convincing many of the country’s highest-potential customers (the wealthy and super-rich urbanites in top-tier cities) to buy their products within the mainland, strangely enough, because of the large luxury tax China levies on high-priced imported goods.
Possibly to combat this problem, as we’ve seen this year, many companies are looking towards second- and third-tier cities as a source of future growth, and perhaps leaving the top-tier cities alone and letting their Beijing or Shanghai boutiques function only as “showrooms” for ultra-rich customers who’ll simply buy the products on their next overseas or Hong Kong/Macau trip. In these smaller urban areas, middle- and upper-middle class customers, who still want to differentiate themselves through conspicuous consumption but are most certainly not part of the economic elite, could be the key for luxury brands who want their China locations to actually sell things rather than simply show them off like a real-life catalog. Middle- and upper-middle class urban professionals in cities like Xi’an, Qingdao, Nanjing and Chongqing — who make a decent living but can’t afford to fly to Hong Kong or Macau (let alone Paris or Tokyo) for luxury shopping sprees — are likely going to buoy luxury brands’ losses in top coastal cities.
Posted in Business, China, Economy, Investment, Luxury
Tagged beijing, China, hong kong, import, London, Luxury, luxury society, macau, Paris, retail, ruder finn, second-tier, shanghai, spending, tokyo
High-End Buyers Unfazed By Government’s Tax Increase, Pushing Luxury Brand To Higher Sales Figures
Porsche debuted its new Panamera at the Shanghai Auto Show this year, indicating its commitment to the Chinese auto market
If Porsche’s top executives were concerned last year when the Chinese government imposed a higher tax on high-end imported European vehicles, they can now breathe a sigh of relief, as sales figures indicate that the tax hike did nothing to slow Porsche’s growth in the mainland — and actually may have had the opposite effect. Among China’s business elite and/or nouveau riche circles, conspicuous consumption has become a way of life, and as such owning a car for which you had to pay upwards of $35,000 in import taxes alone is a good way to flaunt your cash.
As the Globe and Mail points out today, China’s import tax seems to benefit all parties involved — from the car companies who are recording record profits in China, to the government offices collecting mountains of tax revenue, to the conspicuous consumers cruising around Beijing or Shanghai in their pricey sports cars:
Shortly after the Beijing Olympic games last summer, the Chinese government slapped a hefty luxury tax on imported European cars with high-horsepower engines. Klaus Berning, the Porsche executive vice-president of sales and marketing who attended the Frankfurt Auto Show, said the tax added $35,000 (U.S.) or more to the price of a Porsche.
Posted in Automobile, Business, China, Luxury
Tagged canada, China, chinese, germany, globe and mail, import, import tax, porsche, tax, treasury