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China Becomes the Worlds Third Largest Consumer of Luxury Goods
12/09/05 — Goldman Sachs released a report yesterday on Chinas luxury goods market. It stated that excluding private aircraft and yachts, Chinas purchase of luxury goods reached 6 billion USD, bringing its share in the global luxury goods market to 12%, but only about 2% of this amount comes from domestic purchases, with Chinese tourists purchases abroad comprising about 10%. Goldman Sachs predicts that by 2015, China will be first in world consumption of luxury goods.
According to the Economic Reference Journal, the report said that China had already become third in world consumption of luxury goods, contributing to 20% of world consumption. In the next four years, Chinas demand for luxury goods will reach an annual compound growth rate of 25% and in 2008 will have a 19% market share, in 2015 29%, surpassing Japan. At that time, Chinas luxury good consumption will be equivilant with that of Japan. At present, Japan makes up 41% of total luxury goods sales and is number one in the world.
Statistics from Goldman Sachs show that in 2003, about 45 million Chinese consumers purchasing power passed the 30,000USD mark. Purchasers of luxury goods are mostly between 20 and 30 years of age and the number of consumers in this age group is 11 times that of Japan.
Jacques-Franck Dossin, the Managing Director of Goldman Sachs International Securities Research Deparment believes that the growth in Chinese tourists will promote the growth of the luxury item market, because Chinese enjoy spending while they travel and while abroad, their brand recognition will increase.
From the beginning of this year, the amount of money Chinese tourists are allowed to take while travelling abroad is two times the previous number. For this reason, Mr. Dossin bravely preditcts that with more airlines and travel agencies, countries like France and Italy will become favorite destinations of Chinese tourists. This time abroad will also give Chinese tourists time to get to know the brands with which they had previously had little contact.
Consumption by the Young Sees a Return of the “Enjoy Now” Phase
Louis Vuitton bags, Carier watches, Dior perfume and Dunhill suits and other common luxury items have found fans among much of Chinas 30 something crowd.
Purchases of luxury items by young people has already