China to be greatest consumer of luxury goods

Market research company TNS says that China will account for one-quarter of world demand for luxury goods by 2016. With China already taking approximately 12% of world output of luxury goods at the end of 2006, this would amount to a doubling of its share over a decade. Jim Sailor, Managing Director of TNS China, said: "If the sales value in China of top luxury brands grows at the same speed seen in recent years - of between 10% and 20% per annum - by 2016 the nation could be buying up to 25% of the world's luxury goods each year."

Despite China's growing receptiveness to luxury goods, TNS warns marketers of luxury brands not to expect quick and easy returns. It says an extremely strong international presence is required before luxury brands - including watches, fashion apparel, perfumes, cosmetics, jewellery, automobiles and premium spirits - can establish themselves in China. In line with this, the most successful products are those that have already built strong brands around the world, such as Louis Vuitton, Versace, Chanel, Giorgio Armani, Lancôme, Swarovski, Cartier, Tiffany & Co, and others.

"You have to do your homework. Brand-building in China requires the same kind of patience, sustained investment and strong distribution as other markets," said Mr Sailor. "Consumers are savvy. Niche brands especially will need to work hard and certainly cannot assume they are going to be immediately recognisable."

"In China right now, the luxury brands are for the super rich - the people that see them when travelling to New York, London, Paris and Rome, then come back to China and buy them," said Mr Sailor. "But we have shown there is significant market potential among middle-class Chinese. Middle-class demand will boost the success of luxury goods in China, although brand owners may need to create 'affordable luxury' categories to address lower purchasing power."