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Luxury Retailing - China - October 2014

"The luxury retail market in China has undergone significant changes in a short period of time, and continues to change rapidly. Growth has slowed down due to the government’s anti-extravagance campaign, forcing luxury brands to adapt their brand and product portfolios to better suit the diversifying needs of consumers."

– Matthew Crabbe, Director of Research, Asia-Pacific

This report covers the foloowing issues:

  • Luxury in China: The cultural context
  • The internet of luxury
  • The Chinese luxury market not just in China
  • Anti-luxury and the shift to "masstige"

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Table of contents

  1. Introduction

      • Definition
        • Report scope
          • Mintel market sizes
            • Defining luxury goods
              • Methodology
                • Abbreviations
                • Executive Summary

                    • The market
                      • Figure 1: China – Luxury retail total market value, 2009-19
                    • Companies and brands
                      • Figure 2: China – Leather goods: Company retail market share, by value (%), 2012 and 2013
                    • The consumer
                      • Key consumer groups
                        • Figure 3: Target groups, June 2014
                      • Definition of luxury
                        • Figure 4: People's definition of what luxury means to them, June 2014 and November 2013
                      • Luxury products and brands bought
                        • Figure 5: What luxury products consumers have bought in the last 18 months, June 2014
                      • Channel of luxury purchases
                        • Figure 6: Which channels consumers have bought luxury branded products in the last 18 months, June 2014
                      • Brand awareness
                        • Figure 7: Consumer awareness of selected leading luxury brands, June 2014
                      • Attitudes towards buying luxury products
                        • Figure 8: Consumer attitudes towards luxury brands, June 2014
                      • Perceptions of luxury
                        • Figure 9: Consumer attitudes towards what luxury means to them, June 2014
                      • Key issues
                        • Luxury in China: The cultural context
                          • The internet of luxury
                            • The Chinese luxury market not just in China
                              • Anti-luxury and the shift to “masstige”
                                • What we think
                                • Issues and Insights

                                  • Luxury in China: The cultural context
                                    • The facts
                                      • The cultural differences
                                        • The luxury development stages
                                          • The luxury consumer development stages
                                            • The rise of Chinese luxury brands
                                              • Drivers of luxury redefinition
                                                • The internet of luxury
                                                  • The facts
                                                    • The brand experience versus the product price
                                                      • The online threat
                                                        • Is online adding to the market, or cannibalising it?
                                                          • Alibaba: the 500lb gorilla in the corner of the luxury room
                                                            • The Chinese luxury market not just in China
                                                              • The facts
                                                                • The luxury of overseas travel
                                                                  • Figure 10: Top 20 outbound destinations by travel agencies in 2013
                                                                • Marketing to Chinese consumers requires a global strategy
                                                                  • Figure 11: Top 10 countries in the luxury market, by sales, 2009-13
                                                                • Anti-luxury and the shift to “masstige”
                                                                  • The facts
                                                                    • Is luxury the “new opium”?
                                                                      • The changing priorities of China’s urban rich
                                                                        • The rise of the “mass affluent”
                                                                        • Trend Application

                                                                            • Prove It
                                                                              • Slow It All Down
                                                                                • Mintel Futures: East Meets West
                                                                                • Market Size and Forecast

                                                                                  • Key points
                                                                                    • Luxury market enduring significant slowdown
                                                                                      • Figure 12: China – Luxury retail total market value, 2009-19
                                                                                    • Future growth likely stronger thanks to more millionaires
                                                                                      • More new luxury department stores enter the market
                                                                                        • Pricing remains high
                                                                                        • Market Segmentation

                                                                                          • Key points
                                                                                            • Growth slowdown affecting sectors in different ways
                                                                                              • Figure 13: China – Luxury retail market value, by broad sector, 2010-14
                                                                                            • Watches show the greatest decline
                                                                                              • High-end alcoholic drink sales weaken
                                                                                                • Figure 14: China – Total spirits and wine and sparkling wine market values and annual growth rates, 2010-14
                                                                                              • Cosmetics, fragrances and the luxury of pampering
                                                                                                  • Figure 15: China – Colour cosmetics and fragrances: Retail market segmentation, by value, 2009-13
                                                                                                • Fashion and leather goods sustain good growth
                                                                                                  • Figure 16: China – Leather goods: Retail market segmentation, by value, 2010-13
                                                                                                  • Figure 17: China – Clothing: Retail market segmentation, by value, 2010-13
                                                                                                  • Figure 18: China – Footwear: Retail market segmentation, by value, 2009-13
                                                                                              • Market Share

                                                                                                • Key points
                                                                                                  • LVMH and Kering lead the leather goods sector
                                                                                                      • Figure 19: China – Leather goods: Company retail market share, by value (%), 2012 and 2013
                                                                                                    • Foreign brands dominate cosmetics…
                                                                                                      • Figure 20: China – Colour cosmetics: Company retail market share, by value (%), 2012 and 2013
                                                                                                    • …and fragrances
                                                                                                      • Figure 21: China – Fragrances: Company retail market share, by value (%), 2012 and 2013
                                                                                                    • Domestic brands cannot be ignored
                                                                                                    • Who’s Innovating?

                                                                                                      • Key points
                                                                                                        • Adapting to the shifts in the luxury market
                                                                                                          • Companies opening more stores, deepening penetration
                                                                                                            • Brands venture into social marketing
                                                                                                              • Turning museums into shop fronts
                                                                                                                • The draw of domestic luxury brands
                                                                                                                  • Burberry “pioneers” Tmall luxury
                                                                                                                    • Armani goes with movie product placement
                                                                                                                    • Companies and Brands

                                                                                                                      • LVMH Moët Hennessy Louis Vuitton
                                                                                                                          • Figure 22: LVMH: Group financial performance, 2009-13
                                                                                                                          • Figure 23: LVMH: Distribution of revenues, by region, 2009-13
                                                                                                                          • Figure 24: LVMH: Significance of other Asia division to segment revenues, 2010-13
                                                                                                                        • Kering Luxury
                                                                                                                            • Figure 25: Kering Luxury: Financial performance, 2009-13
                                                                                                                            • Figure 26: Kering Luxury: Breakdown of revenue, by product category and by region, 2009-13
                                                                                                                            • Figure 27: Kering Luxury: Asia-Pacific excluding Japan division share of key brand revenues, 2009-13
                                                                                                                          • Coach Group
                                                                                                                              • Figure 28: Coach: Group financial performance, 2009/10-2013/14
                                                                                                                              • Figure 29: Coach: Group sectoral performance, 2011/12-2013/14
                                                                                                                            • Hermès Group
                                                                                                                                • Figure 30: Hermès: Financial performance, 2009-13
                                                                                                                                • Figure 31: Hermès: Sales, by product category, 2011-13
                                                                                                                              • L’Oréal Luxe
                                                                                                                                  • Figure 32: L’Oréal Group: Net revenues, by division, 2009-13
                                                                                                                                  • Figure 33: L’Oréal Luxe: Sales, by region and product area, 2010-13
                                                                                                                              • The Consumer – Key Consumer Groups

                                                                                                                                • Key points
                                                                                                                                  • The key consumer groups
                                                                                                                                    • Figure 34: Target groups, June 2014
                                                                                                                                  • Brand Braggers
                                                                                                                                    • Who they are
                                                                                                                                      • What they like
                                                                                                                                          • Figure 35: Brand Braggers’ definition of what luxury means to them, compared to all consumers, June 2014
                                                                                                                                          • Figure 36: Brand Braggers’ attitudes towards what luxury means to them, compared to all consumers, June 2014
                                                                                                                                        • Marketing approach
                                                                                                                                          • Karma Queens
                                                                                                                                            • Who they are
                                                                                                                                              • What they like
                                                                                                                                                • Figure 37: Karma Queens’ definition of what luxury means to them, compared to all consumers, June 2014
                                                                                                                                                • Figure 38: Karma Queens’ attitudes towards what luxury means to them, compared to all consumers, June 2014
                                                                                                                                              • Marketing approach
                                                                                                                                                • Luxury Sceptics
                                                                                                                                                  • Who they are
                                                                                                                                                    • What they like
                                                                                                                                                      • Figure 39: Luxury Sceptics’ definition of what luxury means to them, compared to all consumers, June 2014
                                                                                                                                                      • Figure 40: Luxury Sceptics’ attitudes towards what luxury means to them, compared to all consumers, June 2014
                                                                                                                                                    • Marketing approach
                                                                                                                                                    • The Consumer – Definition of Luxury

                                                                                                                                                      • Key points
                                                                                                                                                        • Changing definitions shaping the market
                                                                                                                                                          • Figure 41: People's definition of what luxury means to them, June 2014 and November 2013
                                                                                                                                                        • Luxury definitions by lifestage
                                                                                                                                                            • Figure 42: People's definition of what luxury means to them, by gender and age, June 2014
                                                                                                                                                          • Luxury definitions change with income group
                                                                                                                                                              • Figure 43: People's definition of what luxury means to them, by monthly household income group, June 2014
                                                                                                                                                            • Luxury definitions change by location
                                                                                                                                                                • Figure 44: People's definition of what luxury means to them, by city, June 2014
                                                                                                                                                                • Figure 45: People's definition of what luxury means to them, by city, June 2014 (continued)
                                                                                                                                                                • Figure 46: People's definition of what luxury means to them, by city tier, June 2014
                                                                                                                                                              • Luxury definitions among the key consumer groups
                                                                                                                                                                  • Figure 47: People's definition of what luxury means to them, by key consumer group, June 2014
                                                                                                                                                                • Luxury definitions differ by sector
                                                                                                                                                                  • Figure 48: People's definition of what luxury means to them, by what luxury products consumers have bought in the last 18 months, June 2014
                                                                                                                                                                  • Figure 49: People's definition of what luxury means to them, by what luxury products consumers have bought in the last 18 months, June 2014 (continued)
                                                                                                                                                              • The Consumer – Luxury Products and Brands Bought

                                                                                                                                                                • Key points
                                                                                                                                                                  • Four out of five consumers have recently bought luxury products
                                                                                                                                                                    • Figure 50: Consumers who have bought luxury products in the last 18 months, June 2014
                                                                                                                                                                    • Figure 51: Consumers who have bought luxury products in the last 18 months, by demographics and location, June 2014
                                                                                                                                                                  • Luxury products bought
                                                                                                                                                                    • Figure 52: What luxury products consumers have bought in the last 18 months, June 2014
                                                                                                                                                                  • Luxury products bought by demographic group
                                                                                                                                                                      • Figure 53: What luxury products consumers have bought in the last 18 months, by gender and age, June 2014
                                                                                                                                                                    • Luxury products bought by income group
                                                                                                                                                                        • Figure 54: What luxury products consumers have bought in the last 18 months, by monthly household income group, June 2014
                                                                                                                                                                      • Luxury products bought by city
                                                                                                                                                                        • Figure 55: What luxury products consumers have bought in the last 18 months, by city, June 2014
                                                                                                                                                                        • Figure 56: What luxury products consumers have bought in the last 18 months, by city, June 2014 (continued)
                                                                                                                                                                      • Luxury products bought by channel
                                                                                                                                                                          • Figure 57: What luxury products consumers have bought in the last 18 months, by which channels consumers have bought luxury branded products in the last 18 months, June 2014
                                                                                                                                                                          • Figure 58: What luxury products consumers have bought in the last 18 months, by which channels consumers have bought luxury branded products in the last 18 months, June 2014 (continued)
                                                                                                                                                                      • The Consumer – Channel of Luxury Purchases

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Department stores, brand websites and duty-free shops dominate
                                                                                                                                                                            • Figure 59: Which channels consumers have bought luxury branded products in the last 18 months, June 2014
                                                                                                                                                                          • Luxury purchase channels by demographic groups
                                                                                                                                                                              • Figure 60: Which channels consumers have bought luxury branded products in the last 18 months, by gender and age, June 2014
                                                                                                                                                                            • Luxury purchase channels by income groups
                                                                                                                                                                                • Figure 61: Which channels consumers have bought luxury branded products in the last 18 months, by monthly household income group, June 2014
                                                                                                                                                                              • Luxury purchase channels by city
                                                                                                                                                                                  • Figure 62: Which channels consumers have bought luxury branded products in the last 18 months, by city, June 2014
                                                                                                                                                                                  • Figure 63: Which channels consumers have bought luxury branded products in the last 18 months, by city, June 2014 (continued)
                                                                                                                                                                                • Repertoire analysis
                                                                                                                                                                                  • Figure 64: Repertoire of which channels consumers have bought luxury branded products in the last 18 months, June 2014
                                                                                                                                                                                • Repertoire analysis by demographic group
                                                                                                                                                                                  • Figure 65: Repertoire of which channels consumers have bought luxury branded products in the last 18 months, by gender and age, June 2014
                                                                                                                                                                                  • Figure 66: Repertoire of which channels consumers have bought luxury branded products in the last 18 months, by monthly household income group, June 2014
                                                                                                                                                                                  • Figure 67: Repertoire of which channels consumers have bought luxury branded products in the last 18 months, by city tier, June 2014
                                                                                                                                                                              • The Consumer – Brand Awareness

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Chanel tops the chart of brands consumers are aware of
                                                                                                                                                                                    • Figure 68: Consumer awareness of selected leading luxury brands, June 2014
                                                                                                                                                                                  • Consumer brand awareness by demographic group
                                                                                                                                                                                      • Figure 69: Consumer awareness of selected leading luxury brands, by gender and age, June 2014
                                                                                                                                                                                    • Consumers brand awareness by income group
                                                                                                                                                                                        • Figure 70: Consumer awareness of selected leading luxury brands, by monthly household income group, June 2014
                                                                                                                                                                                      • Consumers brand awareness by location
                                                                                                                                                                                          • Figure 71: Consumer awareness of selected leading luxury brands, by city, June 2014
                                                                                                                                                                                          • Figure 72: Consumer awareness of selected leading luxury brands, by city, June 2014 (continued)
                                                                                                                                                                                          • Figure 73: Consumer awareness of selected leading luxury brands, by city tier, June 2014
                                                                                                                                                                                      • The Consumer – Attitudes Towards Buying Luxury Products

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Image enhancement remains the key lure of luxury
                                                                                                                                                                                            • Figure 74: Consumer attitudes towards luxury brands, June 2014
                                                                                                                                                                                          • Attitudes towards luxury by demographic group
                                                                                                                                                                                              • Figure 75: Consumer attitudes towards luxury brands, by gender and age, June 2014
                                                                                                                                                                                            • Attitudes towards luxury by income group
                                                                                                                                                                                                • Figure 76: Consumer attitudes towards luxury brands, by monthly household income group, June 2014
                                                                                                                                                                                              • Attitudes towards luxury by location
                                                                                                                                                                                                • Figure 77: Consumer attitudes towards luxury brands, by city, June 2014
                                                                                                                                                                                                • Figure 78: Consumer attitudes towards luxury brands, by city, June 2014 (continued)
                                                                                                                                                                                                • Figure 79: Consumer attitudes towards luxury brands, by city tier, June 2014
                                                                                                                                                                                            • The Consumer – Perceptions of Luxury

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • Craftsmanship and design lead perceptions of what luxury is
                                                                                                                                                                                                  • Figure 80: Consumer attitudes towards what luxury means to them, June 2014
                                                                                                                                                                                                • Perceptions of luxury are shifting
                                                                                                                                                                                                  • Figure 81: Consumer attitudes towards what luxury means to them, June 2014 and November 2013
                                                                                                                                                                                                • Perceptions of luxury by demographic group
                                                                                                                                                                                                    • Figure 82: Consumer attitudes towards what luxury means to them, by gender and age, June 2014
                                                                                                                                                                                                  • Perceptions of luxury by income group
                                                                                                                                                                                                    • Figure 83: Consumer attitudes towards what luxury means to them, by monthly household income group, June 2014
                                                                                                                                                                                                  • Perceptions of luxury by location
                                                                                                                                                                                                      • Figure 84: Consumer attitudes towards what luxury means to them, by city, June 2014
                                                                                                                                                                                                      • Figure 85: Consumer attitudes towards what luxury means to them, by city, June 2014 (continued)
                                                                                                                                                                                                  • Appendix – Market Size and Forecast

                                                                                                                                                                                                      • Figure 86: China – Total historical and forecast luxury market value, 2009-19
                                                                                                                                                                                                  • Appendix – The Consumer – Definition of Luxury

                                                                                                                                                                                                      • Figure 87: People's definition of what luxury means to them, June 2014
                                                                                                                                                                                                      • Figure 88: Most popular people's definition of what luxury means to them, by demographics, June 2014
                                                                                                                                                                                                      • Figure 89: Next most popular people's definition of what luxury means to them, by demographics, June 2014
                                                                                                                                                                                                      • Figure 90: Other people's definition of what luxury means to them, by demographics, June 2014
                                                                                                                                                                                                  • Appendix – The Consumer – Luxury Products and Brands Bought

                                                                                                                                                                                                      • Figure 91: Consumers who have bought luxury products in the last 18 months, June 2014
                                                                                                                                                                                                      • Figure 92: Consumers who have bought luxury products in the last 18 months, by demographics, June 2014
                                                                                                                                                                                                      • Figure 93: What luxury products consumers have bought in the last 18 months, June 2014
                                                                                                                                                                                                      • Figure 94: Most popular what luxury products consumers have bought in the last 18 months, by demographics, June 2014
                                                                                                                                                                                                      • Figure 95: Next most popular what luxury products consumers have bought in the last 18 months, by demographics, June 2014
                                                                                                                                                                                                      • Figure 96: Other what luxury products consumers have bought in the last 18 months, by demographics, June 2014
                                                                                                                                                                                                  • Appendix – The Consumer – Channel of Luxury Purchases

                                                                                                                                                                                                      • Figure 97: Which channels consumers have bought luxury branded products in the last 18 months, June 2014
                                                                                                                                                                                                      • Figure 98: Which channels consumers have bought luxury branded products in the last 18 months – Bought online, by demographics, June 2014
                                                                                                                                                                                                      • Figure 99: Which channels consumers have bought luxury branded products in the last 18 months – Bought in China (including Hong Kong, Taiwan, Macao), by demographics, June 2014
                                                                                                                                                                                                      • Figure 100: Which channels consumers have bought luxury branded products in the last 18 months – Bought in another country, by demographics, June 2014
                                                                                                                                                                                                    • Repertoire analysis
                                                                                                                                                                                                      • Figure 101: Repertoire of which channels consumers have bought luxury branded products in the last 18 months, June 2014
                                                                                                                                                                                                      • Figure 102: Repertoire of which channels consumers have bought luxury branded products in the last 18 months, by demographics, June 2014
                                                                                                                                                                                                  • Appendix – The Consumer – Brand Awareness

                                                                                                                                                                                                      • Figure 103: Consumer awareness of selected leading luxury brands, June 2014
                                                                                                                                                                                                      • Figure 104: Most popular consumer awareness of selected leading luxury brands, by demographics, June 2014
                                                                                                                                                                                                      • Figure 105: Next most popular consumer awareness of selected leading luxury brands, by demographics, June 2014
                                                                                                                                                                                                      • Figure 106: Other consumer awareness of selected leading luxury brands, by demographics, June 2014
                                                                                                                                                                                                  • Appendix – The Consumer – Attitudes Towards Buying Luxury Products

                                                                                                                                                                                                      • Figure 107: Consumer attitudes towards luxury brands, June 2014
                                                                                                                                                                                                      • Figure 108: Most popular consumer attitudes towards luxury brands, by demographics, June 2014
                                                                                                                                                                                                      • Figure 109: Next most popular consumer attitudes towards luxury brands, by demographics, June 2014
                                                                                                                                                                                                      • Figure 110: Other consumer attitudes towards luxury brands, by demographics, June 2014
                                                                                                                                                                                                  • Appendix – The Consumer – Perceptions of Luxury

                                                                                                                                                                                                      • Figure 111: Consumer attitudes towards what luxury means to them, June 2014
                                                                                                                                                                                                      • Figure 112: Agreement with the statement ‘Luxury is more about expressing individuality rather than fitting in’, by demographics, June 2014
                                                                                                                                                                                                      • Figure 113: Agreement with the statement ‘Luxury is about having the freedom of choice’, by demographics, June 2014
                                                                                                                                                                                                      • Figure 114: Agreement with the statement ‘Having luxury products shows that I have achieved a certain social status’, by demographics, June 2014
                                                                                                                                                                                                      • Figure 115: Agreement with the statement ‘Having space to myself is more of a luxury than having expensive things’, by demographics, June 2014
                                                                                                                                                                                                      • Figure 116: Agreement with the statement ‘I like other people to see that I can afford to buy luxury products’, by demographics, June 2014
                                                                                                                                                                                                      • Figure 117: Agreement with the statement ‘Peace and quiet are luxuries to me’, by demographics, June 2014
                                                                                                                                                                                                      • Figure 118: Agreement with the statement ‘I identify my lifestyle with luxury brands’, by demographics, June 2014
                                                                                                                                                                                                      • Figure 119: Agreement with the statement ‘Knowing that I can afford luxury goods is more important than using them to show my status’, by demographics, June 2014
                                                                                                                                                                                                      • Figure 120: Agreement with the statement ‘I would like to have the best things money can buy’, by demographics, June 2014
                                                                                                                                                                                                      • Figure 121: Agreement with the statement ‘Only brands providing craftsmanship in production and design can be identified as luxury’, by demographics, June 2014
                                                                                                                                                                                                  • Appendix – Further Analysis

                                                                                                                                                                                                      • Figure 122: Target groups, by demographics, June 2014
                                                                                                                                                                                                      • Figure 123: People's definition of what luxury means to them, by target groups, June 2014
                                                                                                                                                                                                      • Figure 124: Consumer attitudes towards what luxury means to them, by target groups, June 2014

                                                                                                                                                                                                  Companies Covered

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                                                                                                                                                                                                  Luxury Retailing - China - October 2014

                                                                                                                                                                                                  £3,195.84 (Excl.Tax)