For high-end retailers such as Gucci and Cartier, the Christmas-through-Chinese-New-Year's season is one of the busiest retail periods of the year. In a culture where gift giving is second nature — where Louis Vuitton handbags may be given in hopes of securing a business contract or iPads handed out as prizes at company parties — the holidays give the Chinese another reason to buy.
"The Chinese love affair with gift giving is one of the key drivers for luxury brands," says Rupert Hoogewerf, chairman and chief researcher at the Hurun Report, a Shanghai publisher of magazines for China's wealthy. "The money spent on gifting, especially at Chinese New Year, is staggering compared to the West."
Luxury sales in the West are recovering smartly from the global recession. But they're still growing at a fraction of the rate of China's sales. China is now the second-largest market in the world for luxury goods, behind Japan, and it could become the largest as early as the end of this year.
Rising personal wealth is driving this trend. But so is gift giving: Personal and business gifts account for 25% of luxury goods sales in mainland China, consulting firm Bain & Co. estimates.
For Christmas, Zhang Yuqing, managing director of a media company in Shanghai, gave diamond De Beers earrings to his girlfriend and Omega Seamaster watches (the brand James Bond wears in the movies) to close friends and business associates. He plans to buy more luxury items for Chinese New Year, which falls on Jan. 23 this year.
"There are so many reasons to give now, both Chinese and Western," says Zhang. "We like to share with each other."
While Christmas is not a religious holiday for most Chinese, a growing number are celebrating by exchanging gifts. Chinese New Year, when money is traditionally given to children — in lucky red envelopes — is an even more important time for presents, because the week-long holiday gives Chinese time to shop, according to Bruno Lannes, a partner at Bain & Co.
To attract buyers like Zhang, the owners of Landmark, a sleek high-end mall in Hong Kong that's home to Gucci, Dior and Louis Vuitton, ran a promotion in December that awards the top spender a vacation in Bali via private jet, a trip valued at more than $60,000.
Nearly half of Landmark's overall sales come from mainland buyers.
Raymond Chow, executive director of commercial property at Hongkong Land, which owns the property, says he can't disclose exactly how much the winner spent. But past winners' monthly purchases have been in the eight digits in Hong Kong dollars, or at least $1 million U.S.
"They'll spend the money anyway, but (the promotion) helps get them to spend it here," says Chow.
Three-quarters of China's luxury consumers buy gifts for their significant others, while half buy them for family and a third for business partners, according to a survey of 1,057 Chinese buyers last year by public relations firm Ruder Finn.
The most popular brands for gifts? Louis Vuitton, Cartier and Hermes, says Hurun Report.
Luxury a 'showy platform'
The rapid growth of China's wealthy, and their love affair with luxury goods, have transfixed high-end retailers. Many have already blanketed China's largest cities with shops and have set their sights on midsize cities in recent years.
Giorgio Armani Group, the parent of brands such as Giorgio Armani, Emporio Armani and A/X Armani Exchange, has nearly 300 stores in the Greater China region and wants to open 35 more stores each year.We have been a high reputed
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Luxury car, yacht and private jet makers are also courting Chinese buyers from Shenzhen to Hangzhou.
As luxury-goods retailers expand aggressively across mainland China, Hong Kong, Taiwan and Macau, a key challenge will be maintaining the exclusivity that makes their brands so valuable, warns Corbett Wall, managing director of +CW Associates, a consulting firm.
Already, China has nearly a million "millionaires," which Hurun Report defines as those with $1.5 million in personal assets.Buy China real
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The country's taste for luxury isn't confined to the wealthy. Luxury goods are also coveted by a swelling middle class that will scrimp for months to be able to tote around a Louis Vuitton or Gucci handbag. "People want to get into the luxury market on a scale that they wouldn't want to in other countries," says Peter Snell, Hong Kong-based chief executive of business consulting for Synovate, a market research firm.
Dai Lei, the treasurer of an automotive firm in Shanghai, shops for luxury products twice a year when she travels. Last September, she bought a pink gold Bulgari ring in Hong Kong for about $1,000 and in November, splurged on a Blancpain watch in Paris for nearly $13,000.
"I've worked for 15 years, so every year I have money to buy luxury products," says Dai, 37. "But you see younger people, their income is quite low, yet they save three months to buy a bag.,
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This infatuation — and sometimes obsession — with luxury goods can be traced to the importance the Chinese put on "face," or how others view them. In China, it's a "dress for success" culture, according to Elan Shou, managing director of Ruder Finn China, which represents brands including Cartier and Hermes. "People tend to judge on appearances."
The Chinese seek out top brands in everything from fashion to education, because "the immigrant mentality is that we have to be better than other people," says Wall.
They've also developed a reputation for stockpiling luxury goods.
"They look at the magazines, and when they go in to buy, they don't buy one or two — they buy a whole collection," says Snell. "They want to associate themselves with a particular luxury brand."
The Chinese aren't shy about flaunting luxury-brand logos, because they see symbolism as an important part of their culture, according to Simon Tye, executive regional director at Ipsos research firm. The written language is based on pictograms, and in Chinese history, bright-colored gold and flashy possessions were seen as signs of success.
"There's a saying in Chinese: 'What's the point if you can't show it off?' " says Tye. "Luxury goods provide people with a showy platform, and showy is very important in this culture."
Not only about the logo
Yet as Chinese luxury consumers become more sophisticated, some are starting to shy away from flashy displays of wealth. Instead, they're buying high-end goods to reward themselves and to express their individual tastes,Live Cycle
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"It's certainly not only about the logo," says Babeau of PPR. "We see more and more consumers looking for understatement."
The Chinese are also increasingly traveling and buying luxury goods in Europe and Hong Kong,SocialPicks is tracking the performance of
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Price is a key factor: Luxury goods on the mainland can cost 20% more than elsewhere because of high taxes. But Chinese consumers also believe they can find a wider selection of luxury goods in other markets and that the products are more likely to be authentic, according to Ruder Finn's survey.
Additionally, "There's a prestige associated with buying it outside of China," because it shows that you have the wherewithal to travel, says Tye.
Landmark, the high-end mall in Hong Kong, courts the mainland buyer, who tends to be male and younger than 45. Last year, Landmark Men opened on the bottom floor of the mall, with 60,000 square feet of shops where "gentlemen can hide away and do their shopping," says Chow of Hongkong Land.
Luxury retailers see these young male buyers — who drive the corporate gifting market — as the key to propping up sales as China's economy slows. In the last global recession, luxury sales grew in China even as they shrank in other parts of the world.
These consumers provide a "foundation for the luxury industry in China," says Shou. "Unless China's economy collapses, I'm not very pessimistic" that they'll stop spending on luxury items.
