HONG KONG — Chinese consumer loyalty to luxury brands remains high despite the economic downturn, according to a report released Wednesday by KPMG.
This story first appeared in the May 27, 2010 issue of WWD. Subscribe Today.
The report is based on a survey of consumers in 15 cities across China, which was conducted by market research group TNS in the third quarter of 2009.
Of the consumers surveyed, 72 percent said they felt little or no impact from the recession, while 62 percent said they would continue to maintain their luxury goods spending this year. The survey also found that self-reward and pampering are now top motivating factors for people purchasing premium products, as cited by 54 percent and 44 percent, respectively.
The 927 luxury consumers surveyed were between the ages of 20 and 44.
Those from third- and fourth-tier cities — such as Nanjing, Xi’an and Chongqing — earned upward of 4,500 yuan, or $659 at current exchange, a month. Participants from Beijing, Shanghai, Guangzhou and Shenzhen earned a minimum of 6,500 yuan, or $952, a month.
The report also notes that there is a strong potential for outlet malls in China, as retailers and brands develop new ways to monetize overstock. Though awareness of outlets is relatively small, Nick Debnam, head of consumer markets at KPMG China, said the size of the Chinese market means brands can employ a range of strategies and retail formats.
“Brands will naturally be vigilant to any negative impact on their brand perception arising from reliance on outlets, but with the tax framework not favoring repatriation of surplus stock to other markets, we do expect this to be looked at seriously,” he said.
The report also highlighted the potential for greater use of technology to reach consumers with increasing mobile-phone usage across the country and the introduction of 3G technology. Fifty-seven percent of respondents said they were interested in receiving updates on new arrivals or limited edition goods via SMS technologies, which should prompt luxury brands to revise their marketing strategies for the most competitive advantage.