China luxury: from Paris with love

It’s becoming something of a cliche to talk about China’s growing economic might in terms of Louis Vuitton handbags and bottles of vintage Lafite Rothschild. But for businesses and investors alike, understanding the luxury goods market is increasingly a must. China is set to become the world’s largest market for high-end goods over the next decade – according to a new report from CLSA, there are already some lessons being learnt already on how to make the most of it. CLSA’s report will no doubt garner headlines with its big prediction – that China will account for 44 per cent of global luxury sales by 2020, and achieve it through an annual growth rate in the sector of a giddy 23 per cent. Small wonder, then, that luxury companies might look to tap Chinese investment – as shown by Prada’s decision to get things moving on a Hong Kong IPO. But, while wealthy mainland Chinese are certainly keen on buying top-of-the-range watches, wallets and waistcoats, they aren’t quite so keen on doing it at home. Mainland sales account for less than half the total, while European sales contribute a surprisingly high 26 per cent, according to CLSA (see chart). Luxury stores abroad – like Selfridges in London – are hiring Mandarin speakers to serve customers spending ‘the Peking Pound‘, and are starting to accept UnionPay (China’s equivalent of Visa) to make purchases easier.