Ongoing financial crisis luxury goods industry

Ongoing financial crisis luxury goods industry

Abstract

China has become the country with the strongest purchasing power of luxury cars in the world. Many luxury cars are eager to enter the Chinese market. The latest statistics show, the BMW Group's global sales fell 19%, but its sales in China grew 26%. In addition, while the financial crisis causes demand for luxury brands decline in Europe and the United States, the Chinese luxury market is still getting better. At present, China's luxury consumption accounts for 25% of the global market and for the first time it surpassed the United States to become the world's second-largest luxury goods consumer country. The aim of the paper is to investigate the effect of the crisis on the Chinese luxury market and to forecast the continuation of current trends in the market.

Table of Contents

Abstract2

Chapter I: Introduction4

Luxury Market4

Chapter II: Literature review8

China Retail Stores11

Weakening in Mature Markets23

The China Market29

Chapter III: Methodology32

Data collection32

Individual country's preference using CA33

Methoddology Conclusion36

Chapter IV: Finding and analysis38

Chineese Consumers38

Chinese Brands40

Non-Market Forces42

Method of Using the Case43

Questions for Discussion43

Methods and Theories in the Case44

Chapter V: Conclusion50

References54

Appendix57

Chapter I: Introduction

Luxury Market

Testifying to the growing affluence and consumerism within the country, China has been experiencing a relentless surge in consumer buying in recent years. Driven by the frenzied speculations in the domestic property and shares market, China has been witnessing the growing emergence of billionaires. In 2007, China had the second largest number of billionaires in the world, behind the U.S., where the number of Chinese billionaires totaled at 108, rising about tenfold from the previous year. Meanwhile, there were about 300,000 Chinese millionaires in 2007. (Lee and Kim, 2003 Lee, Y. J., & Kim, H. Y. 2003, 54-67)

Pertinent to the growing economic environment, the presence of a group of strong middle class is also observed to be stronger. Defined broadly based on the level of disposable income, educational levels, as well as purchasing habits and attitudes, this group of consumers have adopted modern purchasing habits. Estimated at 250 million of the population, this group of middle class consumers is fast becoming one of the key drivers behind the growth of most product categories that enjoy high penetration within the country.



Driven by the inclination of an alleviated social status, this group of Chinese consumers has set their sights on the high-end market, where the luxury market is increasingly being sought after by the new urban Chinese consumers. Apart from reflecting a standard of excellence, luxury brands exude the alluring characteristics of premium quality, craftsmanship, and most importantly, exclusivity and reputation. (Lee and Kim, 2003 Lee, Y. J., & Kim, H. Y. 2003, 54-67)

The new generation of Chinese consumers desires status and is unabashed to flaunt their new money. Coupled with the culture of corporate gift-giving for the purpose of building guanxi, spending in the Chinese luxury market has been handsome. Currently, China is the second largest luxury market in the world, after Japan. In 2007, Chinese consumers spent more than ...