In mid October, the Top Marques Shanghai show, held at the Shanghai International Convention Center, attracted some of the world’s most glamorous luxury cars, sports cars, yachts, furniture and fashion brands to show off their wares. Coming just days after the city’s F1 Grand Prix, which attracted thousands of attendees, the show gave exhibitors such as Bentley and Vanity Jewels the opportunity to meet “rich and aspirational Chinese” from all over country, the event website stated. During the four-day exhibition, wealthy consumers splurged US$63 million on luxury items from high-end spirits to automobiles.

As the economy surges ahead, China’s growing urban-affluent segment is luring luxury goods providers worldwide. More than 300,000 Chinese already have a net worth of more than US$1 million and the mainland’s millionaires control about US$530 billion in assets. The China Brand Association estimated earlier this year that about 13 percent of China’s population, or 170 million people, now buy top-tier brands. One example: British carmaker Bentley sells more Mulliner 728 limousines, the world’s most expensive car at US$1.2 million each, in Beijing than in any other city in the world. The trend is shocking in the world’s best known developing nation.

World’s third-largest luxury market

Asia is the largest target market for luxury brands, accounting for more sales than any other region. According to a report released in September 2005 by Ernst & Young (E&Y), China has become the world’s third-largest consumer of high-end fashions, accessories and other luxury goods. The report, entitled China: The New Lap of Luxury, says the Middle Kingdom now buys 12 percent of worldwide luxury goods, following Japan (41 percent), the United States (17 percent) and European countries (16 percent). 

Martin Roll, global brand strategist and author of Asian Brand Strategy, tells Insight that by 2015, China’s share in the global luxury market is expected to grow to 29 percent, while Japan’s share will fall. According to Goldman Sachs, China will become the second-largest luxury market by 2015.

The E&Y report also notes that the Chinese luxury market currently generates more than US$2 billion in sales per year. It is expected to grow 20 percent annually until 2008 and then 10 percent annually until 2015, when sales are expected to exceed US$11.5 billion. By 2010, China is expected to have 250 million consumers who can afford luxury products, a whopping 17 times the present number.

With this explosive growth, Western brands can enjoy healthy profit margins in China, even more so than in Europe and North America due to lower cost of goods and operations, says Roll.

Click here to download the full story.